The Securities and Exchange Board of India on 27th September 2021 has published the revised Risk Management Framework (RMF) which provides a set of principles or standards, which inter alia comprise the policies, procedures, risk management functions and roles & responsibilities of the management, the Board of AMC and the Board of Trustees.
The framework will be effective from January 01, 2022, and asset management companies (AMCs) must perform a self-assessment of their RMF and practices and come up with a roadmap for implementation of the framework.
The elements of RMF, wherever applicable, have been segregated into ‘mandatory elements’ which should be implemented by the AMCs and ‘recommendatory elements’ which address other leading industry practices that can be considered for implementation by the AMCs, to the extent relevant to them.
There shall be an approved policy on the RMF both at AMC and scheme level. Risk Management shall be an independent and specific function of the AMC.
Further there shall be at least one CXO level officer identified to be responsible for the risk management of specific functions of the AMC/Mutual Fund. For instance, there should be dedicated risk officers for various key risks such as Investment Risk (by Chief Investment Officer), Compliance Risk (by Chief Compliance Officer), Operational Risk (by Chief Operating Officer or similar functionary responsible for the respective functions overseen), Cyber Security (by Chief Information Security Officer), etc.