Sebi Reviews Mutual Fund Executive Pay Disclosure Rules

The Securities and Exchange Board of India (Sebi) has embarked upon a revision of the rules related to remuneration disclosures pertaining to mutual fund executives from employee-based salary disclosures to more comprehensive reports.

In a consultation paper released on Wednesday, the market regulator invited public comments on measures aimed at simplifying disclosure norms while preserving transparency for investors. The proposal comes after representations from the mutual fund industry, which argued that the existing rules require disclosure of highly granular compensation details that offer limited value to investors.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

At present, asset management companies (AMCs) are required to disclose the names, designations and remuneration of their chief executive officer (CEO), chief investment officer (CIO) and chief operating officer (COO). They must also publish compensation details of the 10 highest-paid employees and employees whose remuneration exceeds prescribed thresholds.

Under the proposed framework, SEBI is considering replacing individual-level disclosures with aggregate remuneration reporting. AMCs may also be required to disclose the ratio of the CEO’s remuneration to the median salary of employees within the organisation.

Focus on Fund Manager Compensation

Alongside the broader disclosure review, Sebi has proposed introducing scheme-level disclosure of total remuneration paid to fund managers associated with specific mutual funds.

In the consultation paper, the regulator noted that fund managers play a central role in investment decisions and, therefore, investors may benefit from greater visibility into compensation linked to scheme management.

However, Sebi has suggested that such information may be shared only when requested by investors of a particular scheme, citing sensitivity around compensation data.

Currently, fund manager remuneration is not disclosed separately and is only reflected indirectly through disclosures relating to top-paid employees or those crossing prescribed salary thresholds.

Industry Feedback Prompted Review

The review follows recommendations from the Association of Mutual Funds in India (AMFI), which urged the regulator to reassess the scope and relevance of existing remuneration disclosure requirements.

According to Sebi’s analysis, compensation disclosures typically cover only 2% to 10% of employees across 36 of the 51 AMCs examined. Higher disclosure coverage was observed mainly among firms with smaller employee bases due to mandatory reporting of the top 10 earners.

Industry participants have argued that mutual fund investors are unitholders rather than shareholders and do not exercise ownership rights over AMCs. As a result, they contend that detailed employee-level salary disclosures may not serve the same purpose as similar requirements applicable to listed companies.

Sebi also highlighted that the mutual fund industry already operates under multiple governance and oversight mechanisms, including trustee supervision, independent directors, nomination and remuneration committees, audit processes and mandatory investment requirements for key personnel.

The consultation process will determine whether the regulator moves ahead with the proposed changes, which could reshape how compensation information is disclosed across India’s mutual fund industry while balancing transparency with privacy considerations.