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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 requirement for a sponsor seeking to set up a mutual fund in India under SEBI regulations?

A sponsor must have a track record of at least five years in financial services, with positive net worth in the preceding years and net profits in at least three of the five years. SEBI wants only financially sound and experienced sponsors to establish a mutual fund.

  1. APositive net worth in all the immediately preceding five years and net profit in at least three of those five yearsCorrect
  2. BNet profit in each of the last ten years
  3. COwnership of at least 51% of the custodian
  4. DRegistration as a stock broker with SEBI

Explanation

The sponsor must have a sound track record of at least five years in financial services business, with positive net worth in all five preceding years, positive net worth in the immediately preceding year and net profit after depreciation, interest and tax in three of the five years. The other options are not conditions.

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