STRUCTURE

  1. A Fund established in the form of a trust to raise monies through the sale of Units to public or a section of public under one or more schemes for investing in securities including money market instruments or Gold or Gold related instruments or Real Estate Assets
  2. As defined in the SEBI (mutual Funds) Regulation Act,1996, a mutual fund is to be constituted as a Trust.
  3. Mutual Funds are Governed as per the provisions of Indian Trusts Act since they are constituted as Trusts.
  4. Investors are the Beneficiary of a Mutual Fund Trust.

SPONSORS

  1. A Trust Deed is to be executed between the Trustees and the Sponsors For formation of a Mutual Fund Trust.
  2. In a Mutual Fund, The sponsors need to appoint at least Four Trustees or can appoint a Trustee Company with at least Four Directors on its Board .
  3. The Sponsors apply to SEBI for registration of Mutual Fund and subsequently invest in the capital of AMC.
  4. Anybody holding 40% or more of the net worth of AMC is considered to be a Sponsor and hence required to comply with the qualification criteria.
  5. To be eligible, sponsor should possess a good track record and reputation in the business of financial services for a minimum period of five years. They should have a positive net worth in all immediately preceding five years.
  6. A sum of Rs. 1 Lac is to be deposited by the sponsor with the corpus of Mutual Fund as initial contribution.

TRUSTEES

  1. Prior approval of SEBI is required before appointment of any person as Trustee who should be an able person with standing and integrity. Any person guilty of moral turpitude/convicted of any economic offence or violation of securities law is disqualified to be appointed as trustee
  2. Trustee of one Mutual Fund is not eligible to become trustee of any other mutual fund.
  3. Trustees are responsible to ensure all transaction entered into by AMC are in line with Scheme objectives and are compliant with related regulations.
  4. Before any scheme is launched, Trustees need to ensure that all key agencies like fund managers, R&T Agent, Compliance officer etc. have been appointed and the systems are in place.
  5. No change will be allowed by the Trustees in the fundamentals of scheme or any other change which may compromise the interest of investors unless communication is done with investors and an option is given to them for exit at NAV without any exit load.
  6. Trustees of a Mutual Fund Trust are responsible for protecting the interest of its beneficiaries i.e. the investors.
  7. If an investor feels that the trustees have not fulfilled their obligations, then he can file a suit against the trustees for breach of trust.

ASSET MANAGEMENT COMPANY (AMC)

  1. An Investment Management Agreement is to be executed between The Trustees and the AMC.
  2. A minimum of 50% of the directors on the Board of AMC should be independent directors i.e. not associated with sponsor or its subsidiaries or trustees.
  3. An Asset management Company is to be appointed by Either the Sponsors or by Trustees.
  4. An AMC needs to have a minimum net worth of Rs. 50 crores. Any change in controlling interest of AMC is possible only with prior approval of SEBI and Trustees. Such change needs to be communicated to all unitholders in writing as specified. Unitholders have to be given an option to exit at NAV without any exit load.
  5. AMCs are generally headed by a Managing Director, Executive Director or Chief Executive Officer and generally comprises of Chief Investment officer, Chief marketing Officer, Chief Operations Officer, Securities Analysts, Securities Dealers and Compliance officer.
  6. A seed capital of 1% of amount mobilised subject to a maximum of Rs. 50 lacs is required to be invested by AMCs in all open ended growth option mutual fund schemes till the end of the scheme.

CUSTODIAN

  1. The Custodian of a Mutual Fund is appointed by Trustees and is responsible for Acceptance and delivery of securities for the purposes of sale/purchase transactions of various schemes of the Fund.
  2. Custodian monitors and tracks corporate actions like dividend, Bonus and Rights issues of companies where the scheme has invested.

REGISTRAR & TRANSFER AGENTS

  1. Maintaining the records of Mutual Fund Scheme investors is the responsibility of a Registrar & Transfer Agent.
  2. An Asset management Company can appoint a Registrar & Transfer Agent (RTA) to maintain the record of Unit Holders or can maintain the same itself.
  3. The Stock Exchanges provide facilities for Mutual Fund trading but do not do the functions of Mutual Fund RTA.

ACCOUNTANT, AUDITORS ,BANKERS & PAYMENT AGGREGATORS

  1. Fund accountant calculates and updates the NAV and maintains the accounts of the Fund schemes whereas Auditors are responsible for the audit of Fund
  2. Scheme auditor is appointed by Trustees, AMC auditor is appointed by AMC.
  3. The auditor appointed to audit the scheme accounts has to be different from the auditor of the AMC accounts.
  4. Mutual Fund houses are allowed to accept Credit Card and Bank Transfers without setting up a merchant account with banks. The Aggregator facilitates the payment from customer through credit cards or bank transfers to the mutual funds. It is the Aggregator who pays to the Mutual Fund.
  5. AMCs appoint Collecting bankers who maintain the bank account of the scheme in which the investors money goes against the investment they have made.
  6. Payment aggregators like Bill Desk etc. are the service providers who facilitate online payment processing.
  7. Mutual Fund houses are allowed to accept Credit Card and Bank Transfers without setting up a merchant account with banks. The Aggregator facilitates the payment from customer through credit cards or bank transfers to the mutual funds. It is the Aggregator who pays to the Mutual Fund.

DISTRIBUTORS

  1. No permission from SEBI is required for appointment of Bankers or the Stock brokers as the distributors of Mutual Fund Schemes.
  2. Distributors are required to pass the certification test (NISM-Series-VA) and register with AMFI. They need to get empanelled with any number of Mutual Funds/AMC to perform the distribution function.

CENTRAL KYC (C-KYC)

  1. The initiative of the cKYC is aimed at a system which allows investors to complete their KYC only once before dealing with various entities across the financial sector.
  2. cKYC is managed by CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) which is authorised by Government of India to function as Central KYC Registry (cKYCR).

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