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

Under the SEBI (Mutual Funds) Regulations, which statement about the sponsor's eligibility to set up a mutual fund is correct?

A sponsor must have a sound track record, a reputation for fairness and integrity, and positive net worth in the preceding five years. Being a bank, a foreign entity, or a majority unit holder is not required by the SEBI Mutual Funds Regulations.

  1. AThe sponsor must have a sound track record and general reputation of fairness and integrity, with positive net worth in the preceding five yearsCorrect
  2. BThe sponsor must be a bank regulated by the RBI
  3. CThe sponsor must hold at least 75 percent of the units of every scheme
  4. DThe sponsor must be a foreign entity with a presence in at least five countries

Explanation

SEBI requires a sponsor to have a sound track record, at least five years of business in financial services, positive net worth in all of the five preceding years, and a positive net profit in three of them. A bank status is not required, and sponsors do not hold the majority of units.

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