The Securities and Exchange Board of India is asking all mutual funds to submit to the regulator comprehensive accounts of their gilt schemes. This quasi-audit is in order to ascertain whether there has been any case of gilt schemes flouting regulations.
Sources familiar with the development said the audit would cover the last one year's accounts, since the chances of irregularities taking place had risen ever since the share market boom started. A meeting of mutual funds and the trustees of asset management companies was also on the cards, sources said.
Sebi's inspections of the accounts of asset management companies in the past have revealed minor irregularities and so far Sebi has only had to issue warnings to funds.
Sebi officials said, while their immediate priority would be to minutely track the provident fund money entrusted to asset managers, it would also be looking at other schemes later to find whether the investors' mandate was indeed being adhered to by fund houses or whether the latter "were taking liberties with the money in their fiduciary charge."
Sebi's move to audit mutual funds is a direct fall-out of Prudential-ICICI Mutual Fund reporting misconduct at its Kanpur branch to the regulator.
The branch allegedly switched funds invested by a Kanpur-based provident fund from gilt schemes to equity schemes in order to enhance returns. This is against the regulations, not only of mutual funds but also of provident funds, which have to restrict their investments to gilts.