SEBI to ‘name and shame’ reckless fund managers

The Securities and Exchange Board of India (SEBI) may seek to ‘name and shame’ mutual fund (MF) managers for reckless investments. The market regulator will set out stringent norms for fund managers who want to make use of the recently announced scheme of ‘side pocketing,’ which is nothing but segregating bad assets into a separate folio. Further, SEBI will ask the MF trustees or board of the holding company to form a policy for withholding the fund managers’ bonus for availing ‘side pocketing,’ sources told. But SEBI does not want fund managers to use the scheme to cover up poor investment decisions. As per the criteria for ‘side-pocketing’, which will soon be announced by SEBI, fund managers will have to take prior permission from the board of trustees of MFs or their holding company before segregating bad assets. The fund manager who invested in assets that turned bad will have to give the rationale for the decision and will be named by the board in their written permission. The fund manager responsible may also stand to lose, either fully or partially, his annual bonus as per the board’s decision. SEBI does not want fund managers, responsible for their reckless investment, to hide in the wake of the new scheme. Stringent norms to avail ‘side-pocketing’ should ensure rational behaviour on the part of fund managers and promoters of MFs, said a source aware of SEBI’s motive.

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