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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Legal Structure of Mutual Funds in India

A mutual fund trust has trustees. Which of the following statements about trustees of a mutual fund is correct under the SEBI Mutual Fund Regulations?

At least two-thirds of the trustees must be independent persons not associated with the sponsor. This lets the trustees supervise the AMC objectively and protect unit holders, so a smaller independent share, or all sponsor associates, would breach the SEBI regulations.

  1. AAt least two-thirds of the trustees must be independent persons not associated with the sponsor in any mannerCorrect
  2. BAll trustees must be associates of the sponsor
  3. COnly one-fourth of the trustees need be independent
  4. DTrustees have no duty to review the AMC's compliance with regulations

Explanation

At least two-thirds of the directors of the trustee company or the board of trustees must be independent of the sponsor. Trustees also review the AMC's functioning and ensure compliance and fairness to unit holders. A quarter independent would fall short of the requirement, and trustees do have a supervisory duty.

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