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

As per SEBI (Mutual Funds) Regulations, which of the following is a condition for a sponsor to be eligible to set up a mutual fund?

A sponsor must have a track record of at least five years in the financial services business along with positive net worth in the preceding years and profitability in specified years. It need not be a bank, a foreign entity, or hold liquid assets in the AMC.

  1. ASponsor must have a track record of at least 5 years in financial services and positive net worth in all of the immediately preceding five yearsCorrect
  2. BSponsor must be a bank regulated by the RBI
  3. CSponsor must hold at least 75% of the AMC's net worth in liquid assets
  4. DSponsor must be a foreign entity with a global fund business

Explanation

The regulations require the sponsor to have a sound track record of at least five years in financial services business, positive net worth in all five preceding years, and positive net worth in the immediately preceding year, along with net profit after depreciation, interest and tax in three of the five years. Being a bank or foreign entity is not required.

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