The document discusses the structure and legal environment of mutual funds in India. It describes the key constituents of a mutual fund which follow a 3-tier structure including sponsors, trustees, asset management companies (AMCs), custodians and other service providers. The roles and responsibilities of each constituent are explained. Regulatory authorities that oversee mutual funds like SEBI, RBI and AMFI are also summarized along with their functions. The grievance redressal process for investors is outlined.

1. FUND STRUCTURE &
LEGAL ENVIRONMENT

2. Structure of Mutual Fund
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3. Structure of Mutual Fund
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4. Structure Of Mutual Funds In India
 Follow a 3-tier structure
Trustee
Asset Management Company
(AMC)
Sponsor
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5.  Sponsor is the main business entity that creates the mutual fund
 There can be more than one sponsor for a fund
 Role of a Sponsor
 Is the promoter of the mutual fund
 Sets up the trust and the AMC
 Appoints the Board of Trustees and Board of Directors of the AMC
 Seeks regulatory approval
Sponsor
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6.  Eligibility criteria
 At least 5 years experience in the financial services industry
 Positive net worth over the last 5 financial years
 Profits over the last 3 out of 5 years
 At least 40% contribution to the capital of the AMC
Sponsor
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7. Trustees
 Holds assets on behalf of unit holders in trust.
 Trustees are caretakers of unit holders’ money.
 Two third of the trustees shall be independent persons (not associated
with the sponsor).
 Ensure that the system, processes & personnel are in place.
 Resolve unit holders grievances.
 Appoint AMC & Custodian, & ensure that all activities are in
accordance with the SEBI regulation.
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8.  Hold the cash and securities of the mutual fund
 Appointed by the Trustees
 Only constituent NOT directly appointed by the AMC
 Must be independent of the Trustees and its associates
 Functions of the Custodian
 Delivering and accepting securities and cash
 Tracking and completing corporate actions and payouts on the securities
 Coordinating with the DPs
 Custodial functions cannot be done in-house by the AMC.
Custodian
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9.  AMC is the investment manager of the mutual fund
 Investment Management Agreement between the trustees and the AMC
 Required to invest seed capital of 1% of the amount raised subject to a
maximum of Rs.50 lakh in all open ended schemes
Asset Management Company
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10.  AMC is appointed by the trustees, with Sebi approval
 AMC should have a net worth of at least Rs.50 crore at all times
 At least 50% of members of the board of an AMC have to be independent.
 The AMC of one mutual fund cannot be an AMC or trustee of another
fund.
 AMCs cannot engage in any business other than that of financial advisory
and investment management
Asset Management Company
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11.  Mutual fund constituents (except custodians) are appointed by the
AMC with the approval of the trustees.
 They are usually paid fees for their services
 All mutual fund constituents have to be registered with Sebi
Other Fund Constituents
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12. Other Fund Constituents
Constituent Role
Custodian Hold funds and securities
R&T Agent Keep and service investors’ records
Banks Enable collection and payment
Auditor Audit scheme accounts
Distributors Distribute fund products to investors
Brokers Execute transactions in securities
Fund Accountants NAV calculation
KYC Registration Agency (KRA) KYC of investors
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13.  Create, maintain and update investor records.
 Issue and redeeming units and updating the unit capital account.
 Accept and Process investor transactions such as purchase, redemption
and switches.
 Bank the payment instruments given by investors and notifying the
AMC.
 Process pay-outs to investors in the form of dividends and
redemptions.
 Send statutory and periodic information to investors
 Operate Investor Service Centres (ISCs)
Registrars and Transfer Agents
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14.  Distributors are appointed by the AMC in order to sell mutual fund
units to investors
 Enable the reach of mutual fund products across geographical
locations
 Commission is paid to distributors on sale of mutual fund units
 There’s no exclusivity in mutual fund distribution
 Sponsor and its associates may act as the distributors
Distributors
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15. Brokers, Banks and Auditors
 Brokers execute buy and sell transactions of the fund managers
 Banks provide collection and payment services
 Payment instruments are collected in mutual fund scheme accounts
 Carry out redemption and dividend payments
 Auditors audit the books of the mutual fund
 Account of each mutual fund scheme is kept separately
 Auditors of mutual fund are different from auditors of the AMC
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16. Lead Manager
 Selecting and coordinating the activities of intermediaries such as
advertising agency, printers, collection centers.
 Carrying out extensive campaign about the scheme and acting as
marketing associates to attract investors.
 Assisting the AMC to approach potential investors through
meetings, exhibitions, contacts, advertising, publicity and sales
promotion.
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17. Investment Advisors
 Does market and securities analysis
 Advises AMC on its investment strategies
 Paid for their professional advice regarding fund investment on the
average weekly value of the fund’s net assets.
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18. Legal Advisors
 Appointed to offer legal guidance about planning and execution of
different schemes.
 A group of advocates and solicitors may be appointed as legal
advisors.
 Their fee is not associated with net assets of the fund.
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19. Mutual Fund Trust SBI Mutual Fund
Sponsor State Bank of India
Trust SBI Mutual Fund Trustee Company
Private Limited
AMC SBI Funds Management Private
Limited
Custodian HDFC Bank Limited
SBI-SG Global Securities Services
Private Limited
Bank of Nova Scotia (custodian for
Gold)
RTA Computer Age Management
Services Pvt. Ltd
Mutual Fund Structure example
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20. Association Of Mutual Funds In India
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 Association of Mutual Funds in India (AMFI) was incorporated on 22nd
August, 1995.
 Modeled on the lines of a Self Regulating Organization (SRO)
 It follows the principle of both protecting and promoting the interests of
mutual funds as well as their unit holders.

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Objectives Of AMFI
 Interacts with SEBI and works according to SEBI’s guidelines in the
mutual fund industry.
 To recommend and promote best business practices and code of conduct
to be followed by members and others engaged in the activities of
mutual fund
 Develops a team of well qualified and trained Agent distributors
 Undertakes all India awareness programme for investors in order to
promote proper understanding of the concept and working of mutual
funds.

22. Objectives Of AMFI
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 AMFI Guidelines & Norms for Intermediaries (AGNI):
 AMFI has also framed a set of guidelines and code of conduct for
intermediaries, consisting of individual agents, brokers, distribution
houses and banks engaged in selling of mutual fund products

23. AMFI Code Of Ethics
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 INTEGRITY
 Members and their key personnel, in the conduct of their business shall
observe high standards of integrity and fairness in all dealings
 DUE DILIGENCE
 Members in the conduct of their Asset Management business shall at all
times
 Render high standards of service.
 Exercise due diligence.
 Exercise independent professional judgment

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AMFI Code Of Ethics
 DISCLOSURES
 Members shall ensure timely dissemination to all unitholders of adequate,
accurate, and explicit information
 Presented in a simple language about the investment objectives, investment
policies, financial position and general affairs of the scheme.
 PROFESSIONAL SELLING PRACTICES
 Members shall not use any unethical means to sell, market or induce any
investor to buy their products and schemes

25.  SEBI is primarily responsible for safeguarding the interests of the
investors.
 Indian mutual funds are supervised and regulated by SEBI (Mutual
Funds) Regulations, 1996
 SEBI was set up by the SEBI Act, 1992 and is supervised by
Ministry of Finance
SEBI as the Regulator
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26.  Regulation of Constituents
 Sebi regulates registrars, custodians, brokers, collecting banks and the like.
 Distributors must clear the mandatory certification prescribed by Sebi
 Constituents must be registered with Sebi
 AMC and Trustee company are also governed by the Companies Act
and Indian Trusts Act respectively
Sebi as the Regulator
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27.  RBI regulates banks in India
 Banks can act as sponsors, custodians, bankers and distributors of
mutual funds
 Mutual funds also invest in money market instruments and g-secs
 Money and debt markets are regulated by RBI
 Subject to regulations laid down by RBI
 Closed-ended funds/ETFs are listed on stock exchanges
 Listing agreement with stock exchanges
 Subject to regulatory and disclosure requirements
RBI and Stock Exchanges
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28.  Amfi is industry association
 It is not a Self Regulating Organisation (SRO). ). An SRO is set up by a
statutory body which sets out policy framework, leaving micro regulation to
SRO.
 Amfi’s functions
 Recommends best business practices and code of conduct for members.
 Represents the industry to regulators and policy makers
 Conducts investor awareness programmes
 Disseminates information
 Amfi Registration Number (ARN)
Association of Mutual Funds in India
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29.  Amfi Code of Ethics (ACE)
 Adapted as a supplement in the Fifth Schedule of the Sebi (Mutual Fund)
Regulation
 Guidelines for mutual fund’s relationship with investors, intermediaries and
the public.
 Amfi Guidelines and Norms for Intermediaries (AGNI)
 Sebi has made it mandatory for distributors to follow the code
 Amfi is authorised by Sebi to seek explanation, issue warnings, or
cancel the registration
Association of Mutual Funds in India
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30.  Investor must first approach the Investor Service Centre (ISC)
 If not resolved, then approach the personnel at senior levels in the
AMC
 If not resolved, then the investor may approach Sebi
 If the investor is not satisfied with the Sebi ruling, the investor may
approach Securities Appellate Tribunal (SAT)
 Mutual funds should annually disclose details of complaints received
from all sources on their website, AMFI website and in annual report
 Compliant can also be initiated through SCORES (SEBI Complaint
Redress System).
Redressal of Investor Complaints
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31.  Centralized web based system for lodging and tracking investor
complaints.
 Complaint against a listed company or against any market intermediary
can be filed using SCORES.
 Complaint is scrutinized by SEBI and forwarded to the concerned
entity
 A written reply to the investor needs to be given by the concerned entity
 An action taken report to be filed in SCORES within 30 days.
SCORES
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32. Thank You