SEBI to implement project on automation of inspection, surveillance of Mutual Funds

SEBI is eyeing a major technological leap in its surveillance and investigation functions. This can be said because it is in the process of implementing a project on automation of inspections and surveillance of mutual funds, a move that will help in reducing the lag in recognition of violations, its chief Ajay Tyagi said.

'SEBI is also in the process of implementing a project on automation of inspections and surveillance of mutual fund,' Tyagi said in the regulator's annual report for 2019-20.

Under the project, mutual fund related data would be ingested in SEBI database and use of algorithms in order to generate instances of breaches of regulatory guidelines by mutual funds in respect of several important guidelines where quantitative analysis is possible.

Successful implementation of this project will enable Sebi to leverage technology to move towards automation of inspections of mutual funds, 100 per cent inspection of data in place of samples and to reduce the lag in recognition of violation, according to the annual report.

In addition, SEBI has taken several measures to strengthen the regulatory framework for debt oriented schemes of mutual fund and is ready to initiate more reforms if required.

The steps taken by SEBI for debt mutual funds include mandating minimum investments in liquid assets and introduction of exit load for liquid schemes, placing restrictions on investment in unlisted and unrated debt securities and review of the sectoral limits on investments.

In addition, steps have been taken to improve the robustness of valuation of debt securities by mutual funds. These reforms are aimed at placing mutual funds in a better position to deal with credit events and redemption pressures, strengthening prudential norms for investments and bringing more transparency in their investments, Sebi chief said.

SEBI has already developed an in-house automated system by which it is able to do system based reconciliation of client level securities holdings by brokers thus detecting client securities misuse by brokers, if any.