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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Concept and Role of a Mutual Fund

Which of the following correctly describes the roles of the sponsor and the trustees in the structure of a mutual fund in India?

The sponsor establishes the mutual fund and appoints the trustees. The trustees hold the fund's property in trust for unit holders and oversee the asset management company, which manages the investments. The sponsor does not run the portfolio day to day.

  1. AThe sponsor manages the portfolio daily while trustees only market the units
  2. BThe sponsor sets up the fund and appoints the trustees, while trustees hold the fund property in trust for unit holders and oversee the AMCCorrect
  3. CThe trustees are appointed by the AMC to supervise the sponsor
  4. DThe sponsor and the trustees are the same entity, and the AMC is the custodian

Explanation

The sponsor establishes the mutual fund and, with SEBI approval, creates the trust and appoints trustees. Trustees hold the property for unit holders' benefit and supervise the AMC. The AMC, not the sponsor, manages the investments, and the custodian is a separate entity.

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