The Hindu Business Line : Trustees ‘fiduciary responsibility’ to be highlighted in non-govt PF norms

Trustees of non-government provident funds, superannuation and gratuity funds may not be able to hold the Government responsible for their investments in equity shares going awry.

As part of the draft revised pattern of investment, which would soon be released again for comments, the Finance Ministry plans to make it clear that the trustees have the “fiduciary responsibility” for their investment decisions within the overall investment guidelines prescribed by the Government.

Official sources said that this would be explicitly mentioned to ensure that trustees own up their investment decisions.

The Finance Ministry plans to this time round come up with draft revised investment guidelines in such a manner that it is easy to understand.

“A lot of effort has gone into making it simple and easy to understand,” sources said. The draft would be released after getting the nod of the Finance Minister, Mr P. Chidambaram.

Under the revised investment pattern, the Government proposes to allow the non-government provident funds, superannuation and gratuity funds greater exposure in the stock markets.

It is proposed to allow these funds to invest up to 10 per cent of their portfolio in shares of companies that have an investment grade debt rating from a credit rating agency.

Moreover, the investment can also take place in shares of BSE Sensex and NSE nifty companies and Equity Linked Schemes of mutual funds.

Also they will be allowed to invest in rupee bonds issued by multilateral agencies such as the World Bank and Asian Development Bank and in term deposits of even private scheduled commercial banks, subject to certain conditions.

Currently, these funds can invest up to 5 per cent of their portfolio in shares of companies that have an investment grade debt rating from two credit rating agencies.

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