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

Which statement about the role of the custodian of a mutual fund in India is correct?

The custodian safekeeps the securities of mutual fund schemes and attends to related settlement and corporate action work. Under SEBI rules it must be independent of the sponsor. Investment decisions are made by the AMC, not the custodian.

  1. AIt decides which securities the scheme should buy and sell
  2. BIt safekeeps the securities of the schemes and must be independent of the sponsorCorrect
  3. CIt markets the units to investors and pays commission to distributors
  4. DIt declares dividends and fixes the exit load of the scheme

Explanation

The custodian holds the securities of the schemes in safe custody and handles settlement and delivery-related work. Under SEBI rules it must be independent of the sponsor. Investment decisions belong to the AMC, and marketing is done through distributors and the AMC.

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