Under the Eased Norms, MF Employees Drawing Less Than Rs 25 Lakh CTC Have Been Exempt from Skin-in-the-Game Regulations
Mutual funds (MFs) have become an integral part of the Indian financial market, providing investors with a diverse range of investment options. These funds are managed by professionals who are responsible for making investment decisions on behalf of the investors. However, with great responsibility comes great accountability. In order to ensure that these professionals are aligned with the interests of the investors, the Securities and Exchange Board of India (SEBI) had introduced the skin-in-the-game regulations in 2018. These regulations required the key employees of MFs to have a certain percentage of their salary invested in the schemes they manage. However, in a recent move, SEBI has eased these norms and exempted employees drawing less than Rs 25 lakh CTC from the skin-in-the-game regulations. This decision has been welcomed by the industry and is expected to have a positive impact on the mutual fund industry.
The skin-in-the-game regulations were introduced with the aim of aligning the interests of the key employees of MFs with those of the investors. It was believed that if the employees have their own money invested in the schemes, they would be more cautious and responsible while making investment decisions. However, the industry raised concerns about the practicality of these regulations, especially for the employees who are not in the senior management and are not drawing high salaries. The industry argued that these regulations would discourage talented professionals from joining the mutual fund industry and would also lead to a talent drain. Taking these concerns into consideration, SEBI has decided to exempt employees drawing less than Rs 25 lakh CTC from the skin-in-the-game regulations.
This move by SEBI has been welcomed by the mutual fund industry as it addresses the concerns raised by them. The exemption of employees drawing less than Rs 25 lakh CTC from the skin-in-the-game regulations is expected to have a positive impact on the industry in multiple ways. Firstly, it will encourage talented professionals to join the mutual fund industry without the fear of having to invest a significant portion of their salary in the schemes. This will lead to a more diverse pool of talent and will also help in attracting young professionals to the industry. Secondly, this move will also help in retaining the existing talent in the industry. Many employees were considering leaving the industry due to the burden of having to invest a portion of their salary in the schemes. With the exemption, they can continue to work in the industry without any financial burden.
Moreover, this move will also help in promoting a more inclusive work culture in the mutual fund industry. The skin-in-the-game regulations were seen as discriminatory towards employees who were not in the senior management and were not drawing high salaries. With the exemption, all employees will be treated equally, regardless of their salary. This will not only promote a more inclusive work culture but will also boost the morale of the employees.
Another positive impact of this move is that it will lead to a better risk management system in the mutual fund industry. The skin-in-the-game regulations were introduced with the aim of aligning the interests of the employees with those of the investors. However, it was argued that these regulations could also lead to a conflict of interest. With the exemption, the employees will be able to make investment decisions without any personal financial burden, which will lead to a more unbiased approach towards risk management.
It is important to note that the exemption of employees drawing less than Rs 25 lakh CTC from the skin-in-the-game regulations does not mean that they are exempt from any responsibility towards the investors. The key employees of MFs are still required to disclose their investments in the schemes they manage and are also accountable for their investment decisions. This move by SEBI is not a dilution of the regulations, but rather a practical approach towards addressing the concerns raised by the industry.
In conclusion, the decision of SEBI to exempt employees drawing less than Rs 25 lakh CTC from the skin-in-the-game regulations is a step in the right direction. It not only addresses the concerns raised by the industry but also promotes a more inclusive work culture and better risk management practices in the mutual fund industry. This move is expected to have a positive impact on the industry and will help in attracting and retaining talented professionals. With this, SEBI has once again shown its commitment towards creating a conducive environment for the growth of the mutual fund industry
