What are the broad guidelines issued for a MF?
SEBI is the regulatory authority of MFs. SEBI has the following broad guidelines pertaining to mutual funds : (1) MFs should be formed as a Trust under Indian Trust Act and should be operated by Asset Management Companies (AMCs). (2) MFs need to set up a Board of Trustees and Trustee Companies. They should also have their Board of Directors. (3) The net worth of the AMCs should be at least Rs.5 crore. (4) AMCs and Trustees of a MF should be two separate and distinct legal entities. (5) The AMC or any of its companies cannot act as managers for any other fund. (6) AMCs have to get the approval of SEBI for its Articles and Memorandum of Association. (7) All MF schemes should be registered with SEBI. (8) MFs should distribute minimum of 90% of their profits among the investors. (9) There are other guidelines also that govern investment strategy, disclosure norms and advertising code for mutual funds.
