MUMBAI: Sebi Whole Time Member Amarjeet Singh today warned the mutual fund industry that, beyond market-linked risks, operational threats—such as fraudulent redemptions by impersonators—pose a growing risk to investor confidence.
He emphasized the need for heightened vigilance, urging asset management companies (AMCs) to respond promptly and track evolving fraud patterns as perpetrators become increasingly sophisticated.
While advocating diversification beyond blue-chip stocks, Singh advised caution when investing in micro-cap or bespoke debt instruments. He stressed that proper documentation of such investment decisions ensures transparency and sound due diligence.
Speaking at an event organised by the Association of Mutual Funds in India (Amfi), Singh called on the industry to pursue responsible growth while upholding governance, transparency, and ethical conduct.
“I firmly believe that adherence to governance, accountability, transparency, and ethics will ensure mutual funds continue to grow as a trusted investment vehicle for Indians,” he said.
Reiterating the importance of vigilance, he noted: “Operational risks, such as fraudulent redemptions, can undermine investor confidence. As fraudsters become more creative, AMCs must act swiftly and monitor evolving patterns. Sharing such information across AMCs and qualified Registrars and Transfer Agents (QRTAs) can help prevent recurrence.”
Highlighting opportunities for expansion, Singh pointed to new products like Specialised Investment Funds and deeper digital penetration as avenues to broaden the investor base. At the same time, he cautioned against pursuing scale at any cost.
“We must scale responsibly. A strong culture of ethical behaviour is the best safeguard against the lure of quick wins,” he said, stressing that AMCs must demonstrate commitment to fair practices to maintain the trust of regulators and stakeholders.
Singh also underlined the importance of internal self-regulation alongside regulatory oversight. “A self-disciplined, ethical culture complements the broader efforts to grow this industry,” he said.
Acknowledging rising competition in the mutual fund sector, he observed that pressures to innovate, increase assets under management (AUM), and deliver superior returns can tempt firms to chase growth indiscriminately. “Rules and regulations provide vital guardrails to protect investors and ensure discipline,” Singh said.
He concluded by emphasizing that investor interests must remain central to industry practices, ensuring that short-term gains do not overshadow long-term value creation.
