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

An AMC of a mutual fund in India has a board of directors. Which of the following is consistent with the SEBI (Mutual Funds) Regulations on the AMC's board and net worth?

At least half of an AMC's directors must be independent of the sponsor or trustees, and the AMC must satisfy minimum net worth norms. The AMC cannot freely pursue other businesses such as lending, and its directors cannot be mere sponsor nominees or doubling as trustees.

  1. AAt least 50% of the directors must be independent of the sponsor, and the AMC must meet minimum net worth requirementsCorrect
  2. BAll directors of the AMC must be nominees of the sponsor
  3. CThe AMC may undertake any business activity, including lending for profit, without restrictions
  4. DThe AMC's chairman must be a trustee of the same mutual fund

Explanation

At least 50% of AMC directors must not be associated with the sponsor or trustees. AMCs must satisfy minimum net worth norms. They can only carry on limited activities such as portfolio management and advisory services subject to rules, cannot freely lend, and the same person cannot be both trustee and AMC director.

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