Why does an MF need a sponsor?
The sponsor is the promoter of the mutual fund. The sponsor brings in capital and creates a mutual fund trust and sets up the AMC.
The sponsor makes an application for registration of the mutual fund and contributes at least 40% of the net worth of the AMC. In other words, every MF needs a sponsor before it can commence operations.
What are the requirements from a sponsor?
Among other requirements, the sponsor should also have a 5-year track record in the financial services business and should have made profit in at least 3 out of the 5 years. The sponsors could be a bank, a corporate or a financial institution.
What are the functions of the board of trustees?
The primary objective of the trustees of the mutual fund is to hold its property for the benefit of the
unit-holders. The board acts as a protector of unit-holders’ interests: it appoints a custodian for safe-keeping of assets and closely monitors the AMC.
The trustees also have to spell out the responsibilities of the AMC, monitor any new scheme introduced and ensure full compliance with regulatory guidelines.
Who appoints the board of trustees?
After SEBI approval, the sponsor has to appoint the board of trustees.
How many trustees does a fund house require?
Every fund house must have at least four trustees.If a trustee company has been appointed, then that company would need to have at least four directors on the board. Two-thirds of the trustees should be independent.
