SEBI proposes changes to AMC salary disclosures: What mutual fund investors should know

The proposal is part of a consultation paper released by the market regulator, which has invited public comments until June 30.

What are the current disclosure requirements?

Currently, AMCs are required to disclose on their websites the remuneration of chief executive officers (CEOs), chief investment officers (CIOs), chief operating officers (COOs), the top 10 highest-paid employees, and all employees earning at least ₹1.02 crore annually or ₹8.5 lakh per month if employed for part of the year.

These disclosures are made on an individual basis.

What has SEBI proposed?

Under the proposed framework, AMCs would disclose aggregate remuneration paid to CEOs, CIOs and COOs, aggregate remuneration paid to the top 10 employees, and aggregate remuneration paid to employees earning above the prescribed thresholds, along with the number of employees covered under each category.

According to SEBI, this would provide "a holistic and structured view of senior management compensation, enabling unitholders to assess the overall quantum of remuneration at the senior management level, while aligning the level of disclosure with considerations of materiality and proportionality."

Why is SEBI considering the change?

The regulator said the proposal follows feedback from the mutual fund industry.

According to the consultation paper, industry participants argued that detailed employee-level remuneration disclosures are more relevant for listed companies, where shareholders exercise ownership rights, than for mutual funds, where investors are unitholders and do not have direct ownership of the AMC.

Industry participants also raised concerns over privacy and data protection, stating that public disclosure of individual remuneration could expose employees to misuse of personal information and place AMCs at a disadvantage in competing for talent with portfolio management services (PMS) and alternative investment funds (AIFs), where similar disclosure norms do not apply.

SEBI also noted that listed AMCs are already subject to detailed remuneration disclosures under the SEBI (Listing Obligations and Disclosure Requirements) Regulations and the Companies Act, while unlisted AMCs operate under a different regulatory framework and ownership structure.

What about fund manager remuneration?

Separately, SEBI has proposed a framework for disclosure of fund managers' remuneration.

The regulator noted that remuneration of fund managers is currently not disclosed separately and is only captured indirectly through existing top-employee or threshold-based disclosures.

Since investment decision-making for each scheme rests primarily with the respective fund manager, SEBI said there may be merit in providing visibility into their remuneration.

However, instead of mandating public disclosure, the regulator has proposed that scheme-level consolidated disclosure of total remuneration paid to fund manager(s) be made available upon specific request of unitholders and be limited to the scheme(s) in which the investor requesting such details is invested.

Commenting on the proposal, Abhishek Paliwal, Partner, King Stubb & Kasiva, Advocates and Attorneys, said the move represents "a notable shift in the regulatory approach to transparency and governance in the mutual fund sector."

"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," he said.

Paliwal noted that such disclosures also facilitate scrutiny of incentive arrangements and help identify potential governance concerns relating to disproportionate pay or misaligned compensation practices.

At the same time, he said the move towards aggregated disclosures reflects a growing recognition of employee privacy and data protection considerations.

"However, it also raises important questions regarding the extent to which investors can effectively evaluate management accountability without visibility into the remuneration of key decision-makers who directly influence investment outcomes and operational strategy," he said.

For investors, particularly retail investors, transparency is a cornerstone of trust in the mutual fund ecosystem, Paliwal added.

"While consolidated disclosures may continue to provide an overall picture of compensation expenditure, they may limit the ability of stakeholders to independently assess whether executive incentives are appropriately structured and aligned with fiduciary responsibilities owed to unit holders," he said.

"The challenge for the regulator will be to strike a balance between legitimate privacy concerns and the market's expectation of transparency. Any revised framework should ensure that the reduction in individual-level disclosures does not inadvertently weaken governance standards or diminish investor confidence."

What happens next?

SEBI has sought public comments on the proposals until June 30, following which it will decide whether to amend the existing disclosure framework for AMCs.