Mutual Funds

To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. MF either promoted by public or by private sector entities including one promoted by foreign entities are governed by these Regulations.

SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody. The general power of superintendence and direction over AMC is vested with the trustees.

According to SEBI Regulations, two thirds of the directors of trustee company or board of trustees must be independent . They should not be associated with the sponsors. 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme.

Increase of load more than the level mentioned in the offer document is applicable only to prospective investments by the MFs. For original investments, the offer documents has to be amended to make investors aware of loads at the time of investments.

Click Here to check list of SEBI registered MFs

FAQs Mutual Funds

• Can a mutual fund change the asset allocation while deploying funds of investors?
• How long will it take for transfer of units after purchase from stock markets in case of close-ended schemes?
• Can a mutual fund change the nature of the scheme from the one specified in the offer document?
• If mutual fund scheme is wound up, what happens to money invested?
• How can the investors redress their complaints?
• What is the procedure for registering a mutual fund with SEBI ?
• What is the procedure for redressal of investor grievances?

Can a mutual fund change the asset allocation while deploying funds of investors?
Considering the market trends, any prudent fund managers can change the asset allocation i.e. he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the offer document. It can be done on a short term basis on defensive considerations i.e. to protect the NAV. Hence the fund managers are allowed certain flexibility in altering the asset allocation considering the interest of the investors. In case the mutual fund wants to change the asset allocation on a permanent basis, they are required to inform the unitholders and giving them option to exit the scheme at prevailing NAV without any load.

How long will it take for transfer of units after purchase from stock markets in case of close-ended schemes?
According to SEBI Regulations, transfer of units is required to be done within thirty days from the date of lodgment of certificates with the mutual fund.

Can a mutual fund change the nature of the scheme from the one specified in the offer document?
Yes. However, no change in the nature or terms of the scheme, known as fundamental attributes of the scheme e.g.structure, investment pattern, etc. can be carried out unless a written communication is sent to each unitholder and an advertisement is given in one English daily having nationwide circulation and in a newspaper published in the language of the region where the head office of the mutual fund is situated. The unitholders have the right to exit the scheme at the prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual funds are also required to follow similar procedure while converting the scheme form close-ended to open-ended scheme and in case of change in sponsor.

If mutual fund scheme is wound up, what happens to money invested?
In case of winding up of a scheme, the mutual funds pay a sum based on prevailing NAV after adjustment of expenses. Unitholders are entitled to receive a report on winding up from the mutual funds which gives all necessary details.

How can the investors redress their complaints?
Investors would find the name of contact person in the offer document of the mutual fund scheme whom they may approach in case of any query, complaints or grievances. Trustees of a mutual fund monitor the activities of the mutual fund. The names of the directors of asset management company and trustees are also given in the offer documents. Investors can also approach SEBI for redressal of their complaints. On receipt of complaints, SEBI takes up the matter with the concerned mutual fund and follows up with them till the matter is resolved. Investors may send their complaints to:

Securities and Exchange Board of India
Mutual Funds Department
Mittal Court 'B' wing, First Floor,
224, Nariman Point,
Mumbai - 400 021.
Phone: 2850451-56, 2880962-70

What is the procedure for registering a mutual fund with SEBI ?
An applicant proposing to sponsor a mutual fund in India must apply in Form A with a fee of Rs.25,000. The application is examined and once the sponsor satisfies certain conditions such as being in the financial services business and possessing positive net worth for the last five years, having net profit in three out of the last five years and possessing the general reputation of fairness and integrity in all business transactions, it is required to complete the remaining formalities for setting up a mutual fund. These include inter alia, executing the trust deed and investment management agreement, setting up a trustee company/board of trustees comprising two- thirds independent trustees, incorporating the asset management company (AMC), contributing to at least 40% of the net worth of the AMC and appointing a custodian. Upon satisfying these conditions, the registration certificate is issued subject to the payment of registration fees of Rs.25.00 lacs For details, see the SEBI (Mutual Funds) Regulations, 1996.

What is the procedure for redressal of investor grievances?
When investors send complaints to SEBI, SEBI takes up the matter with the concerned mutual funds and follows up with them till they are resolved.
In case of complaints, investors may write to :

Securites And Exchange Board of India,
Mutual Fund Dept.,
Mittal Court 'B' Wing,
Nariman Point,
Mumbai 400 021