SEBI chairman D R Mehta said that trustees were the first line regulators for mutual funds operations and the directors of the trustees should be made more accountable in respect to their powers and actions. ``The trustees should not be held liable for acts done in good faith and if they have exercised adequate due diligence honestly,'' Mehta said.

``This is a vague statement. How will you measure the good faith and honesty? SEBI is saying both. On the one hand it says they should be more accountable. However, SEBI also says trustees should not be held liable for acts done in good faith. I don't understand this,'' said an investor. Mutual fundtrustees can get away with wrong decisions by saying that they acted in good faith, said another investor.

As per the committee recommendations, the minimum number of trustees should be four and it would be upto the mutual fund to decide the maximum number of trustees and also appointment of independent auditors or to have separate full fledged administrative set up to provide support to the trustees in discharging their duties.

SEBI had constituted the committee under the chairmanship of the former cabinet secretary P K Kaul to recommend the manner of discharging responsibilities by the trustees as envisaged in the SEBI regulations.

The Kaul committee felt that each trustee should file the details of his transactions of buy or sell of securities with the trust on a quarterly basis. All information and documents relating to the compliance process should be authenticated and adopted by the board of directors of the asset management company (AMC) who are entrusted with the primary responsibility in thisregard. In like manner, the board of directors of the trustee company would review all information and documents to be received from the AMC as required under the compliance process. ``The manner in which due diligence should be carried out by the trustees in fulfillment of the various obligations as required under the regulations has been specified,'' he said.