Sebi Chief Warns MF Industry of Rising Risks; Stresses on Women's Financial Inclusion

By: WE Staff | Monday, 25 August 2025

• Tuhin Kanta Pandey, the chairman of Sebi', cautioned the mutual fund industry about the operational risks/state risks in addition to market risks
• Commented that fraud redemptions using impersonation is emerging as a new risk to shareholder trust
• Emphasised monitoring and keeping up with changing trends of fraud as the fraudsters become increasingly sophisticated

Market regulator, Tuhin Kanta Pandey, warned on Friday the mutual fund industry that, in addition to the market risks, operational risks, such as fraudulent mimicity rescues, are emerging as a serious threat to investor confidence.

Speaking of an event organized by the Association of Mutual Funds in India (AMFI), Tuhin asked for increased surveillance, asking the ASSIVE MANAGEMENT COMPANIES (AMCs) to quickly act and accompany evolving fraud standards as the authors become increasingly sophisticated.

"In addition to the investment risks, we should also be aware of the operational risks that can undermine investor's confidence.

 Fraudulent redemptions by imitators are a great concern, and as fraudsters become more creative, AMCs should readily act and monitor these standards," he said.

Tuhin also suggested that these cases and methods should be shared between AMCs and qualified registrars and transfer agents (QUVES) to avoid recurrence.

Regarding the investment strategy, Tuhin emphasized the importance of diversification, but warned mutual funds against excessive exposure to actions of microphases or tailored debt documents, highlighting the need for adequate documentation to ensure transparency and Due Diligence.

Promoting financial inclusion, he revealed the Sebi plan to introduce additional incentives for investment by beginner investors.

"Financial inclusion will remain incomplete unless women are equally represented," Tuhin said, adding that distributors that encourage start-up investments in cities B30 (level 2 and 3 cities) would also receive incentives to expand the base of retail investors in sub-reported regions.

He also reported that Sebi is reviewing the categorization of mutual fund schemes to improve flexibility, reduce overlap and encourage product innovation, with the aim of making the industry more transparent and favorable to investor.

As part of its ease of business unit, SEBI has already ruled out more than 52 reports for AMCs and is working on a broader simplification of mutual background regulations in the coming months.

At the same event, Amarjeet Singh, a member of the whole Sebi, asked the industry to seek responsible growth while maintaining ethical conduct. "We must scale responsibly and correctly.

A strong culture of ethical behavior is the best safeguarding against the attraction of quick victories," he said, emphasizing that AMCs must demonstrate transparency to maintain confidence.

Amarjeet also noted that the growing competition intensified the pressure to innovate, expand the AUM and provide high returns.

"In such an environment, it can be tempting to pursue growth at any cost. Rules and regulations, therefore, serve as critical guard to protect investors and maintain discipline," he added.