Constitution and Management of Mutual Funds

The Constituents of every Mutual Fund consist of Sponsor, Trustee, Asset Management Company (AMC), Custodian and Register and Transfer Agents as per the Rules and Regulations of Securities and Exchange Board of India (SEBI).

Sponsor:

Every Mutual Fund has Sponsors who invests capital.  As per the rules and regulations of SEBI, the Sponsors must be in the financial field for five years.  They have to have positive Net worth for those five years.  Their latest Net worth should be more than the money they invest in Asset Management Company (AMC) and they should have profit for three years of out of the five previous years including the latest year. 

Sponsors should have more than 40% of the capital share in AMC and whoever holds more than 40% of share capital are considered as Sponsors as per SEBI.  Sponsors form the Trust and appoint Trustees and Fund Manager for the AMC.

Trustee:

Trustees are appointed by the Sponsors.  Trustees ensure compliance of the rules and regulations of SEBI and are responsible for protecting the interest of the Unit holders.  The Trust must have at least four trustees.  If the trustee is the company it has to have four directors.  Two third of the Trustees/Directors should be independent and not associated with the Sponsor in any way.

What is Asset Management Company (AMC):

Sponsors appoint AMC and Fund Manager who looks after all the day to day operations of the Fund, setting up of offices, recruitment of Employees, Distributors, Advertisement and Sale promotion of the Funds’ Schemes.

Custodian:

Custodians are appointed by Trustees and they keep the physical securities and physical Gold held by the Mutual Funds safe.

Who is Registrar and Transfer Agents (RTA):

                

RTA is responsible for day to day operations of the transactions like processing documents for purchase, sale, switch operations, issuing statement of accounts and resolve the Investors’ queries.