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

Which statement about the board of an Asset Management Company (AMC) under SEBI regulations is correct?

At least 50% of an AMC's directors must be independent, meaning not associated with the sponsor, trustees or their associates. This ensures the AMC board carries independent oversight in the interest of unitholders rather than being controlled entirely by the sponsor.

  1. AAt least 50% of the directors of the AMC must be independent of the sponsor and trusteesCorrect
  2. BAll directors of the AMC must be nominees of the sponsor
  3. CThe AMC may have the same persons as its trustees' directors without restriction
  4. DThe AMC board need not have any independent directors

Explanation

SEBI requires that at least 50% of the AMC's directors are not associated with the sponsor or trustees. So the claim that all directors are sponsor nominees is wrong, and independent directors are mandatory. A person cannot act as a trustee of one mutual fund and also as a director of the AMC of the same fund in a way that breaks independence.

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