NSE IFSC announces launch of international sustainability platform at GIFT City NSE IFSC Ltd, a subsidiary of National Stock Exchange (NSE), on Friday announced the launch of an international sustainability platform, at Gujarat’s GIFT City, which is expected to get operationalised in the second half of the year. This is a first of its kind ESG (environmental, social and governance) platform in India, NSE IFSC said in a statement. Locating it in GIFT City will facilitate international investors to participate in ESG transitions in India and other markets. “It is expected to get operationalised in the second half of 2022 subject to regulatory approvals,” NSE IFSC said. Issuers listing on the platform will be expected to meet a minimum set of ESG standards, besides complying with the specific criteria defined by NSE IFSC for the sustainability products which they may wish to list. The platform expects a range of corporate bodies, including large corporates, small and medium enterprises and startups, as well as non-profits and social impact organizations, and government and quasi-government organizations to leverage and attract capital to achieve their climate and ESG goals. The sustainability platform will use Distributed Ledger Technology (DLT) or Blockchain to ensure integrity, speed, tracking and traceability of transactions. “We are committed to establish the international sustainability platform at GIFT City. Such a trading platform can play an important role in channelizing capital that will be required in ESG and sustainability transitions across the globe,” Vikram Limaye, Managing Director and CEO at NSE said. According to him, the platform will encourage the issuance of new sustainability-linked financial products by a diverse group of organizations from around the world, including corporates, governments and social enterprises, and this represents an important response to the challenge of resolving global environmental issues like climate change. The move would encourage responsible conduct of business and enable corporates, government bodies and social enterprises to raise sustainable finance from such a platform, Injeti Srinivas, Chairman, IFSCA said. ECube Investment Advisors, an ESG-focused platform and Chainflux, a Blockchain products firm are working closely with NSE IFSC. NSE IFSC is located at Gujarat’s GIFT City, which is India’s first International Financial Services Centre (IFSC).
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In its consultation paper, Sebi has suggested that trustees of mutual funds should focus on market abuse by AMC, its employees and mis-selling by the AMC to increase the asset base.
Also, trustees should be responsible for fairness of fees and expenses charged by the AMC, compare its performance with peers and ensure that AMC’s sponsor is not getting any undue advantage.
In addition to the core areas, the trustees should be responsible for periodically reviewing the steps taken by AMCs for the folios which do not contain all KYC attributes with bank details.
Further, Sebi has suggested that trustees and their resource persons should independently evaluate the extent of compliance by AMC and not merely rely on AMC’s assurances.
To facilitate trustees’ supervision, AMCs should provide them with analytical information.
Presently, the trustees primarily rely on the AMCs for ensuring compliance with the applicable rules.
Under the rules, trustees hold the property of the mutual fund in trust for the benefit of the unitholders. The trustees appoint an AMC to float schemes for the mutual fund and manage the funds mobilised under various schemes, in accordance with the investment objectives.
“In view of the increasing scale and reach of the mutual fund industry, trustees’ role in respect of unitholders’ protection assumes even greater significance,” Sebi said on Friday.
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Over the past decade there has been a five-fold increase in the size of the mutual fund industry. The assets under management (AUM) has surged from Rs 7.93 lakh crore in November 2012 to Rs 39.89 lakh crore in December 2022.
To ensure that trustees devote time and attention to their core responsibilities, Sebi has suggested that for fulfilling other responsibilities, trustees may rely on professional firms such as audit firms, legal firms, merchant bankers for carrying out due diligence on their behalf.
The Sebi also listed some duties trustees can delegate to AMCs. This include ensuring that all systems are in place prior to the launch of any scheme by the AMC, and calculating any income in the mutual fund due to the fund and any income received in the mutual fund for unitholders.
The regulator has proposed to provide a one year time to existing trustees with board of trustee structure to convert into a trustee company, from governance point of view.
Presently, two structures for trustees are permitted — corporate and board of trustees structure. Moreover, there are a few mutual funds which have the board of trustees structure while the trustees of all other mutual funds have adopted the structure of a trustee company.
Considering the enhanced role of trustees over the period of time, Sebi has suggested to increase the minimum number of trustees to adequately perform their functions. Presently, the minimum number of trustees prescribed is four.
Also, it has been proposed that the chairperson of the trustee company should be an independent director.
Sebi has suggested that apart from the meeting of the audit committee of AMCs and trustees (which mostly comprises of independent directors), the board of AMCs and the board of trustees may be mandated to meet at least once a year to discuss the issues concerning the mutual funds.
The regulator proposed that the existing MF Regulations on AMC and its obligations may be amended to include additional clauses with respect to the obligations of the board of AMC.
The proposed amendment may include a clause which casts an obligation on the board of AMC to ensure that all the activities of the asset management company are in accordance with the provisions of these regulations.
The Securities and Exchange Board of India (Sebi) has sought comments from public till February 24 on these proposals.