One of the common questions in minds of many investors is –who regulates mutual fund industry in India. There is a growing trend and awareness in India about investing in mutual funds. The expanding size of the AUM (Assets Under Management) of the mutual fund industry is proof of its growing popularity. The fund houses and others incorporated within the industry have performed a vital role in making them famous. However, there is one entity that has been dedicated to securing investors’ interests by regulating mutual funds. It is nothing but the SEBI (Securities and Exchange Board of India). If you are confused about who regulates mutual fund industry in India then the following section will help you.
1) Why and Who Regulates Mutual Fund Industry in India?
If you are unaware of who regulates mutual funds in India, SEBI (Securities and Exchange Board of India) regulates mutual funds to secure the investors’ interests and capital. It is responsible for retaining the investor’s interest at the highest level. SEBI (Mutual Funds) Regulations, 1996 contains all the rules governing the mutual fund industry in India.
This regulation defines the rules controlling the registration of mutual funds. It also describes the structure and management of mutual funds, and the roles of the AMC/trustees/custodian. Furthermore, it also contains procedures for scheme launch, setting out investment objectives, and highlighting the valuation process.
The regulations are important to make sure the mutual fund industry works consistently and without operational flaws. As a result, investors get clarity on where they need to invest. Mutual funds have a clear mindset on what they need to offer to investors conforming to the regulatory requirements. With the streamlining of regulations, the investor’s involvement is increased and fair practices are promoted in the industry.
2) Who Regulates Mutual Fund Industry in India?
The answer to who regulates mutual fund industry in India is SEBI. Here’s an overview of its roles and responsibilities in the context of India’s mutual fund industry.
- To frame rules for mutual funds considering the safety of the investor
- To track the mutual fund market to uphold its integrity
- To encourage the development of the mutual funds sector
Now let’s review the key roles and responsibilities of SEBI’s mutual fund regulations.
i. Registration of Mutual Funds
A sponsor has to give an application to the Board in Form A to register a mutual fund. The applicant must fulfill all eligibility criteria; otherwise, SEBI reserves the right to reject the application.
ii. Assessment of Mutual Funds
The SEBI board can employ an inspecting officer or a team to inspect the books of account, systems, procedures, and documents to assess the operations of a mutual fund. They can also evaluate the working of a trustee and AMC for any listed matters.
iii. Categorization of Mutual Funds
SEBI categorizes mutual funds depending on the types of funds –debt fund, equity fund, or hybrid fund. In each of these scheme types, the SEBI has specified the amount that must be invested in various instruments along with the time duration.
3) Structure of Mutual Funds According to SEBI Guidelines
Being the regulator of mutual funds in India, SEBI has framed the rules for the structure of mutual funds. The following members are listed in its three-tier structure of mutual funds.
i. Sponsor:
A sponsor should establish a Trust under the Indian Trust Act, of 1882. It must make sure it is registered with SEBI. The sponsor establishes a mutual fund and works as a promoter of a company.
ii. Trustees:
The trust/trustees hold the mutual funds’ property and ensure the mutual fund is not carrying out any illicit and follows an accurate allocation according to the scheme rules.
iii. AMC:
An AMC (Asset Management Company) works as a fund manager and handles the fund daily. It manages the money of the investors.
Conclusion:
Knowing who regulates the mutual fund industry in India will keep you abreast about the corresponding rules to follow to ensure profitable investment. Considering these guidelines from SEBI, investors are ensured with safe investments in mutual funds.You can contact BeWealthy to obtain more details on mutual fund investment.
FAQs:
1. When did mutual funds originate in India?
The Unit Trust of India (UTI) first launched the mutual fund industry in the year 1963 in India. it was established by the RBI.
2. What is the duty of the Registrar and Transfer Agents (RTAs)?
RTAs oversee the back-end operations of investor transactions and record-keeping on behalf of the AMCs.
3. Is AMFI a regulator?
AMFI stands for Association of Mutual Funds in India. It is a body registered with SEBI, issues licenses to mutual funds distributors, and allocates an AMFI Registration number (ARN). When conducting a comprehensive review of who regulates mutual funds,you must know about AMFI’s role.