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

Which of the following is a condition SEBI requires for a sponsor to be eligible to set up a mutual fund in India?

A sponsor must have a sound track record and a general reputation of fairness and integrity in all its business dealings. SEBI does not require the sponsor to be a bank or a foreign company, and a 40% stake in the AMC suffices rather than 100%.

  1. AThe sponsor must have a sound track record and a general reputation of fairness and integrity in all business transactionsCorrect
  2. BThe sponsor must be a scheduled commercial bank
  3. CThe sponsor must hold 100% of the net worth of the AMC
  4. DThe sponsor must be an entity incorporated outside India

Explanation

SEBI regulations require the sponsor to have a sound track record, fairness and integrity, and profits in the past years as specified. There is no requirement that the sponsor be a bank or a foreign entity. Sponsors need to hold at least 40% of the AMC's net worth, not 100%.

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