Mutual Funds Structure

Fund Structure of Mutual Funds

1. Fund Sponsor

• Any person or corporate body that establishes the fund and registers it with SEBI.
• Forms a trust and appoints a Board of Trustees.
• Appoints the Custodian and Asset Management Company (AMC) directly or through the trust as per SEBI regulations.
• SEBI regulations require the sponsor to contribute at least 40% of the net worth of the AMC.

2. Trustees

• Created through a legal document called the Trust Deed, executed by the Fund Sponsor and registered with SEBI.
• The mutual fund may be managed by a Board of Trustees, a Trustee Company, or a Corporate Body.
• Act as protectors of unit holders' interests.
• At least 2/3 of the trustees must be independent and not associated with the sponsor. Rights of Trustees
  • Approve each scheme launched by the AMC.
  • Request necessary information from the AMC.
  • Take corrective action if the fund business is not conducted as per SEBI regulations.
  • Dismiss the AMC if required.
  • Ensure that the AMC maintains the required net worth. Obligations of Trustees
  • Enter into an Investment Management Agreement with the AMC.
  • Furnish half-yearly reports to SEBI about fund activities.
  • Ensure no fundamental changes occur in the scheme without informing unit holders.
  • Review investor complaints and ensure proper redressal by the AMC.

3. Asset Management Company (AMC)

• Acts as the principal manager of the fund under the supervision of the Trustees.
• Must be approved and registered with SEBI.
• Manages and launches different investment schemes under the trust’s name as per SEBI regulations.
• Acts as a fiduciary for unit holders and reports to the trustees.
• At least 50% of AMC board members must be independent.

Obligations of the AMC: *

• Launch investment schemes only after SEBI and Trustee approval.
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• Send quarterly reports to trustees.
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• Provide disclosures to investors, including NAV and repurchase price.
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• Maintain a minimum net worth of ₹10 crore.
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• Avoid transactions through brokers exceeding 5% of total transactions.
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• AMC cannot act as a trustee for any other mutual fund.
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• Must not undertake any conflicting business activities.

4. Custodian

• Responsible for the physical handling and safekeeping of securities.
• Must be independent of the sponsor and registered with SEBI.

5. Depository

• Holds dematerialized securities of the mutual fund.
• As Indian capital markets move away from physical certificates, securities are stored electronically.

6. Agents & Distributors

• Agents help sell mutual fund units to investors.
• Distributors act as intermediaries between the AMC and investors.