Impact of new risk management framework of mutual funds

Key highlights of the publication

  • The Mutual Funds Advisory Committee (MFAC) reviewed the erstwhile risk management framework basis the inputs received from various industry players, such as the Association of Mutual Funds of India (AMFI), and their recommendations were incorporated in the new risk management framework (RMF) issued by the regulator in September 2021, replacing decades old guidelines issued in September 2002. The new rules came into effect from April 2022.
  • Laying down a detailed framework, SEBI has segregated certain elements of RMF into ‚Äėmandatory elements‚Äô that should be implemented by the asset management companies (AMCs) and ‚Äėrecommendatory elements‚Äô that address other leading industry practices that can be considered for implementation.
  • The risk management framework should assist the management and board of directors of both the AMC and trustee in early identification of the key risks, measure the risks, and take action for its proactive management to ensure that the risks are within the tolerance limits defined in the RMF.

This publication discusses the need for the new framework, its characteristics and its four components.

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