Legal and Regulatory Framework

NISM Series V-D | 7 marks | Official workbook pages 81-99

What this chapter is about

Study SEBI's regulatory role, investment and disclosure controls, distributor due diligence, investor rights, grievance handling and the AMFI code of conduct.

Core concepts

• SEBI is the primary regulator for mutual funds in India. RBI, the Ministry of Finance, MCA and other authorities may govern connected activities or entities.
• Mutual fund regulations cover scheme launch, investment restrictions, valuation, expenses, disclosure, governance and investor protection.
• Trustees and the AMC must act in unitholder interests and comply with the scheme's stated mandate and applicable limits.
• Investor communications must be fair, balanced and not misleading. Performance, risk and scheme information must use prescribed disclosures.
• Celebrity endorsement is permitted only within the regulatory conditions described in the workbook; it must not be treated as proof of scheme suitability or returns.
• Grievances first go to the AMC or intermediary and may then move through SEBI's complaint and dispute-resolution mechanisms.
• The distributor code emphasises suitability, disclosure of material conflicts, fair conduct, confidentiality and avoidance of mis-selling.

Exam focus

• SEBI regulates mutual funds; AMFI does not replace SEBI.
• Read qualifiers such as industry-level awareness versus endorsement of an individual scheme.
• Know investor rights, nomination rules and grievance escalation in the workbook version.
• Due diligence and code-of-conduct questions often test the responsible entity and the permitted sequence.

Quick revision - 60 second scan

• Regulator: SEBI.
• Oversight: trustees.
• Execution: AMC.
• Conduct: suitability, disclosure, fairness and records.
• Complaints: entity first, then formal escalation channels.