Basic structure of mutual fund in India!!

Mutual funds have a special structure unlike a joint stock
company or a partnership firm. All the mutual funds (except
money market mutual funds, foreign financial institutions and
the UTI) are regulated by the Securities and Exchange Board
of India (Mutual Funds) Regulations, 1996, which is given as
Appendix I1 (the annexure part is excluded). As per the
regulations a mutual fund is comprised of four separateparticipants or constituents, namely the sponsor, the mutual
fund trust, the asset management company (AMC) and the
custodian. There are some more additional entities like
depository participant, bankers, brokers and registrars or
transfer agents. The structure of the UTI is quite unique where
the activities of the trustee, the AMC and the custodian are
combined.

• Structure of Mutual fund
  1. Sponsor
  2. Mutual fund
  3. Asset management company
  4. Custodian
  5. Depository Participants
  6. Bankers
  7. Brokers
  8. Registrar/Transfer Agents

Sponsor:-
The sponsor can be any person who, acting alone or in
combination with another body corporate, establishes the
mutual fund and gets it registered with SEBIIO. He must have
a sound track record and genera3 reputation of fairness and
integrity and is required to contribute at least 40% of the net
worth of the asset management company.

Mutual fund:-
The mutual fund shall be constituted in the forrn of a
registered trust under the Indian Trusts Act, 1882. It is the
Board of Trustees who manages the mutual fundll. The Boardof Trustees may be either a body of individual or a corporate
body. Most of the funds in India are managed by Boards of
Trustees. While Board of Trustees are governed by the
provisions of the Indian Trusts Act, where the Trustee is a
corporate body, it is required to comply with the provisions of
the Companies Act, 1956.

Asset Management Company (AMC):-
The Board or the Trustee Company protects the investors’
interests. Instead of managing by them, Trustees appoint an
Asset Management Company (AMC) to manage the portfolio of
securities as per the defmed objectives, Trust Deed and SEBI
Regulations. AMC is required to be approved and registered
with SEBI. Chapter IV of the SEBI (MF) Regulations, 1996
contains the regulations . regarding the appointment,
obligations, and the related aspects of an AMC. The Trust is
created by the execution of the Trust Deed. The sponsor does
the execution of the deed in favour of the Trustees. The Trust
Deed should be stamped and registered under the provisions
of the Indian Registration Act and registered with the SEBI.Trust Deed contains clauses relating to the establishment of
the trust, the appointment of Trustees, their powers, duties
and obligations, etc.

Custodian:-
The custodian is responsible for safe keeping of assets of the
fund, which may mainly be in large volumes of securities. He
has to get a certificate of registration to cany on the business
of custodian of securities under the SEBI (Custodian of
Securities) Regulations, 1996 . The Board of Trustees
appoints the custodian and enters into a custodian
agreement.

Depository Participant:-
Instead of having physical certificates of securities they can be
dematerialised with a depository. It is through a Depository
Participant mutual funds hold its dematerialised securities.

Bankers:-
Financial dealings of mutual hds like buying and selling
units, paying for investments made, receiving the proceeds onsale of investments and paying the operational expenses are
done through banks.

Brokers:-
It is through brokers, agents and distributors the units of
mutual funds are sold. A broker usually acts on behalf of
several mutual funds sirnultaneously and may have several
sub-brokers and agents under him.

Registrar/ transfer agent:-
The registrar/ transfer agent’s duty is to handle the registry
related work of the unit holders. They are responsible for
issuing and redeeming units of mutual funds and other
related services.