MBA (Finance)III – Semester, Merchant Banking and Financial Services, Unit 4.1
Define SEBI Regulations
The following rules and regulations of Securities Exchange of Board of India (SEBI) are related to the establishment and issue of schemes of Mutual Fund.
SEBI
Regulations
The following rules and
regulations of Securities Exchange of Board of India (SEBI) are related to the
establishment and issue of schemes of Mutual Fund.
Mutual fund shall be
established in the form of trusts under the Indian Trust Act and managed by
separately formed Asset Management Company.
In the Board of directors of
AMC must be 50% members are independent without the influence of sponsoring
organization and they should have at least 10 years experience in the field of
portfolio management.
A minimum of ` 10 crores must have AMC as net worth
An AMC can function for only
one mutual fund and it is prohibited to work for another.
AMCs are also allowed to do
other fund based businesses such as providing investment management services to
offshore funds, venture capital funds and insurance companies.
Minimum issue of fund for
closed-end scheme and open end scheme should be ` 20 crores and ` 50 crores respectively.
The maximum period for
subscription is 45 days in case of close-end schemes, but no such limitation in
case of open – end scheme.
The entire subscription has
to be returned to the investors when the minimum amount or 60% of the target
amount is not raised.
There should be a separate
and responsible fund manager for each scheme.
To protect the small
investors, SEBI restrict the portfolio investment of Mutual Fund in a single
company by 10% of Net Assets Value of a scheme.
The issue expenses are
restricted to 6% of raising funds under each scheme.
A minimum of 90% of the
profits must distribute to the unit holders in any given year.
Accounting and Auditing of
Mutual funds are mandatory and furnish the audited Annual statements to SEBI.
SEBI has power to impose
penalty on mutual funds for violation of SEBI guidelines.
