Enhancing fund governance for Mutual Funds
Summary
This circular mandates that independent trustees and directors of mutual funds serve a maximum of two five-year terms with a three-year cooling-off period. It restricts auditor appointments to two five-year terms and imposes a five-year cooling-off period, including restrictions on affiliated firms. Existing office holders are subject to transitional limits based on their tenure as of the circular's issuance date.
Text
An independent trustee and independent director shall hold office for a maximum of 2 terms with each term not exceeding a period of 5 consecutive years.
No independent trustee or independent director shall hold office for more than two consecutive terms... eligible for re-appointment after a cooling-off period of 3 years. During the cooling-off period, such individuals should not be associated with the concerned MF, AMC & its subsidiaries and / or sponsor of AMC in any manner whatsoever.
Individuals who have held office for less than 9 years (as on date of issuance of this circular) may continue for the residual period of service.
Individuals who have held office for 9 years or more (as on date of issuance of this circular) may continue for a maximum of 1 year from date of issuance of this circular.
The auditor of a MF... shall be a firm, including a limited liability firm, constituted under the LLP Act, 2008.
No MF shall appoint an auditor for more than 2 terms of maximum five consecutive years. Such auditor may be re-appointed after cooling off period of 5 years.
During the cooling-off period of five years, the incoming auditor may not include: Any firm that has common partner(s) with the outgoing audit firm
Any associate / affiliate firm(s) of the outgoing audit firm which are under the same network of audit firms wherein the term “same network” includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control
Auditors who have conducted audit of the Mutual Fund for less than 9 years (as on date of issuance of this circular) may continue for the residual period of service.
Auditors who have conducted audit of the Mutual Fund for 9 years or more (as on date of issuance of this circular) may continue for a maximum of 1 year from date of issuance of this circular.
Source: SecMarx — Enhancing fund governance for Mutual Funds. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.