Legal Structure of Mutual Funds in India

NISM Series V-D | 3 marks | Official workbook pages 67-80

What this chapter is about

Map the trust structure and the responsibilities of the sponsor, trustees, AMC, custodian, RTA, auditors, valuation agencies and AMFI.

Core concepts

• A mutual fund in India is constituted as a trust. The unitholders are the beneficiaries of the trust.
• The sponsor establishes the mutual fund and appoints the trustees, subject to the regulatory framework.
• Trustees hold oversight responsibility and protect unitholder interests. They supervise the AMC rather than manage the portfolio day to day.
• The AMC takes investment decisions, runs scheme operations and manages the pooled money within the scheme mandate.
• The custodian safekeeps securities and tracks corporate actions such as dividends, bonus issues and rights issues.
• The registrar and transfer agent maintains investor records and processes subscriptions, redemptions and service requests.
• AMFI is the industry association of mutual fund AMCs. It is not the statutory regulator.

Exam focus

• Unitholders, not AMC employees or distributors, are the trust beneficiaries.
• AMC manages investments; trustees oversee; custodian safekeeps assets; RTA maintains investor records.
• Corporate-action tracking belongs to the custodian.
• AMFI is an industry association, not SEBI and not an SRO unless formally recognised as such.

Quick revision - 60 second scan

• Sponsor creates.
• Trustees oversee.
• AMC manages.
• Custodian holds assets.
• RTA maintains records.
• SEBI regulates; AMFI represents the industry.