Mutual Fund Regulation Violations in India

Security market regulation violations should be dealt seriously because it involves public money and deviations will lead to large scale economic repercussion. Mutual Fund (MF) stakeholders such as Asset Management Companies (AMC) have the duty and responsibility to adhere and comply with the rules and regulatory stipulated by the regulators, run in accordance to governance standards, maintain transparency and make money and wealth for its investors. However, at times, they are found to be deviating norms and causing loss to investors and putting investor trust and confidence to test. This paper examines and documents some deviations found in the mutual fund industry and now regulators dealt with them. We study several deviations that got unearthed from the famous 2003 US Mutual Fund Scandal and later from the 2010 front-running episodes in India. We also examine several incidents as observed in the Indian mutual fund industry and how SEBI dealt with them. This study is significant in the Indian context because it is witnessing increased inflow of money, mostly from small retail investors. Strong regulations act as essential foundation and the architectural plan of an investment building which investors build by pooling up their hard-earned money as bricks with the help of a mason called the fund manager. This paper gives some suggestions to regulators to make the foundation much stronger and everlasting.