The Securities and Exchange Board of India (Sebi) has proposed a significant overhaul of executive remuneration disclosures by mutual fund asset management companies (AMCs), seeking to replace individual name-wise disclosures with consolidated compensation data.
The proposal, outlined in a consultation paper released on Tuesday, comes after industry participants raised concerns around privacy, data protection and the limited relevance of individual remuneration disclosures for investors.
Under the existing framework, AMCs are required to disclose the names, designations and remuneration of the chief executive officer (CEO), chief investment officer (CIO) and chief operating officer (COO), the top 10 employees by remuneration, and all employees earning above prescribed remuneration thresholds. Sebi has now proposed replacing these individual disclosures with consolidated remuneration figures and employee counts across categories.
The regulator said analysis of industry data showed that employees covered under the current disclosure framework account for only a small proportion of the overall workforce at most AMCs. Industry participants have also argued that public disclosure of individual remuneration could expose employees to privacy risks and place mutual funds at a disadvantage in competing for talent with portfolio management services (PMS) and alternative investment funds (AIFs), which are not subject to similar requirements.
Sebi has proposed that AMCs disclose aggregate remuneration paid to senior executives, top-paid employees and employees crossing salary thresholds, along with the number of employees covered under each category. It has also proposed that scheme-level remuneration of fund managers be made available only upon request by investors in the respective schemes.
However, legal experts cautioned that reducing individual-level disclosures could weaken an important governance tool.
“Individual remuneration disclosures have historically served as an important accountability mechanism, enabling investors and stakeholders to assess whether compensation structures are aligned with fund performance, risk-management objectives and long-term investor interests. Such disclosures also facilitate scrutiny of incentive arrangements and help identify potential governance concerns relating to disproportionate pay or misaligned compensation practices,” said Abhishek Paliwal, Partner, King Stubb & Kasiva, Advocates and Attorneys.
Paliwal added that while privacy concerns are legitimate, the regulator would need to ensure that any dilution of disclosure norms does not come at the cost of transparency, accountability and investor confidence.
Sebi has invited public comments on the proposals until June 30.
