SEBI proposes ending name-wise pay disclosures at mutual fund firms, seeks views on consolidated reporting

The Securities and Exchange Board of India (SEBI) has proposed a major overhaul of remuneration disclosure norms for mutual fund asset management companies (AMCs), suggesting a shift away from public disclosure of individual executive salaries towards a consolidated reporting framework aimed at balancing transparency with employee privacy.

In a consultation paper released on Wednesday, the market regulator sought public comments on proposals to rationalise existing disclosure requirements relating to remuneration of AMC executives and high-earning employees while continuing to provide meaningful information to investors.

At present, AMCs are required to publicly disclose the names, designations and remuneration of their chief executive officer (CEO), chief investment officer (CIO), chief operations officer (COO), the top 10 highest-paid employees, and employees earning at least ₹1.02 crore annually.

Under the proposed framework, these disclosures would no longer be made on an individual basis. Instead, AMCs would report the total remuneration paid to such categories of employees along with the number of employees covered.

SEBI cites need for 'meaningful transparency'

"The objective of this consultation paper is to seek public comments/suggestions on the proposed rationalization of the existing disclosure framework relating to remuneration of employees of AMCs, with a view to enhancing meaningful transparency while balancing investor interest," SEBI said.

The regulator noted that industry participants, including the Association of Mutual Funds in India (AMFI), had raised concerns regarding the scope, granularity and relevance of the current disclosure regime. According to the consultation paper, AMFI proposed streamlining remuneration disclosures and making fund manager compensation information available only upon investor request.

SEBI's analysis found that the current disclosure framework covers only a limited section of AMC employees. In 36 out of 51 AMCs analysed, the proportion of employees covered under the existing disclosure norms ranged from approximately 2% to 10% of the total workforce.

The regulator said the current disclosures are made on a "granular, name-wise basis" and questioned whether "the level of detail in disclosure is proportionate."

Fund manager pay disclosure proposed on request basis

While proposing to reduce public disclosure of individual salaries, SEBI has also suggested a new framework under which investors could seek remuneration details of fund managers managing schemes in which they are invested.

"Considering that investment decision-making for each scheme rests primarily with the respective Fund Manager(s), there may be merit in providing visibility into their remuneration," the regulator said.

Under the proposal, scheme-level consolidated remuneration paid to fund managers would be disclosed upon specific request from investors and limited to schemes in which they hold investments.

Experts flag transparency concerns

Legal experts, however, cautioned that the move could reduce an important layer of accountability in the mutual fund industry.

"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," Abhishek Paliwal, partner at King Stubb & Kasiva, Advocates and Attorneys, told Fortune India.

Paliwal said that while the proposal reflects growing recognition of privacy and data protection concerns, it also raises questions about whether investors would retain adequate visibility into the compensation of key decision-makers.

"The challenge for the regulator will be to strike a balance between legitimate privacy concerns and the market's expectation of transparency," he said, adding that any revised framework should ensure that lower levels of disclosure do not weaken governance standards or erode investor confidence.

The consultation paper is open for public comments until June 30, with SEBI seeking stakeholder feedback on whether remuneration disclosures should move from individual name-wise reporting to consolidated disclosures and whether additional safeguards may be required.