Value Added Program: Amfi Unit Ii

VALUE ADDED PROGRAM AMFI Unit II

LEGAL STRUCTURE OF MUTUAL FUNDS 

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All mutual funds are constituted as ‘unit-trusts’ All funds are governed by SEBI .

FUND SPONSOR 

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Any person who establishes a mutual fund. Like ‘promoter’ of a company, contributes to initial capital Gets fund registered with SEBI. Forms a ‘trust’, appoints board of trustees Usually appoints (along with trustees) Asset Management Company (AMC) – as fund managers

TRUSTS     

Created under the Indian Trusts Act, 1882 Appointed by sponsor Holds assets for benefit of ‘unit-holders’ (beneficiaries of the trust) ‘Pass- through’ vehicle. Has no independent legal capacity (trustees have it)

TRUSTEES 

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Manage the trust, protector of unit holders’ interest. Board of trustees may be – body of individuals or a corporate body. Board of trustees is governed by the Indian Trusts Act Trustee corporate body also complies with Companies Act 1956. Do not directly manage investment, appoint AMC.

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RIGHTS & OBLIGATIONS OF TRUSTEES

Approve schemes of fund Ensure management of funds according to SEBI regulations Compliance with Trust Deed Furnish reports on funds’ activities to SEBI, on a half-yearly basis. Safeguard interests of unit-holders

SEBI SPECIFIESTrustees’ obligations as –   

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General Due Diligence: protecting trust properties regular functioning Specific Due Diligence: appoint internal auditors & obtain audit reports

AMC  

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investment manager of the trust Appointed by sponsor/trustees, approved by SEBI. As per SEBI’s mandate, 50% of the directors should be independent. Must protect interest of investors Reports to trustees. Total net worth must be atleast Rs 10 crores

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Update each day’s NAV on AMFI’s website by 8.00 pm on the relevant day & the month-end AUM figure on the first working day of next month.

INDEPENDENT DIRECTORS & TRUSTEES 

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Pay attention to investment management & compensation paid under it.’ Ensure higher than market –level fees has not been charged to the fund Oversee selection of other independent directors

CUSTODIANS 

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Ownership of units is in ‘dematerialized’ form, held by a depository. A fund’s physical securities are held by a custodian. Deliveries of fund’s securities take place at the instruction of the AMC.

REGISTRARS & TRANSFER AGENTS 

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Prepare transfer documents & update investor records. May be done in-house or outsourced. Includes buying/repurchase of units, switching schemes, systematic investment/withdrawals, bank details etc (tasks apart from investment management)

DISTRIBUTORS 

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Sell units to individual investors on behalf of the fund. A distributor usually acts on behalf of several MF’s Has several sub-brokers Includes individuals – agents; in terms of number-largest distributor segment. Banks, NBFC’s, distribution companies account for bulk of volume.

FUND MERGERS & TAKEOVERS  

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No special guidelines But merger is viewed as changes in fundamental attributes How may a MF change? Merger of two AMC’s AMC takeover by new sponsors Scheme takeover (by another AMC)

THANK YOU !!