Chapter 4: Legal and Regulatory Framework
Which schedule of the SEBI (Mutual Funds) Regulations, 1996 prescribes the contents of the Scheme Information Document (SID)?
EXPLANATION
Schedule IV of the SEBI (Mutual Funds) Regulations, 1996 prescribes the mandatory contents that must be included in the Scheme Information Document (SID) of a mutual fund scheme.
What is the minimum net worth requirement for an Asset Management Company (AMC) under SEBI (Mutual Funds) Regulations, 1996?
EXPLANATION
As per SEBI (Mutual Funds) Regulations, 1996, an AMC must have a minimum net worth of ₹50 crore at all times. This ensures financial soundness and investor protection.
How many independent trustees must a mutual fund's Board of Trustees have as per SEBI regulations?
EXPLANATION
SEBI (Mutual Funds) Regulations, 1996 require that at least two-thirds of the members of the Board of Trustees must be independent — i.e., they should not be associated with the sponsor or its associates.
A mutual fund sponsor must contribute a minimum of what percentage to the net worth of the AMC?
EXPLANATION
The sponsor must contribute at least 40% to the net worth of the AMC as per SEBI (Mutual Funds) Regulations, 1996. This ensures that the sponsor has meaningful skin in the game.
Which of the following statements about the Trust Deed of a mutual fund is correct?
EXPLANATION
The Trust Deed is executed between the sponsor and the trustees (Board of Trustees or Trustee Company). It defines the terms under which the mutual fund is established and the obligations of the trustees.
Which of the following is NOT a mandatory disclosure in the Statement of Additional Information (SAI)?
EXPLANATION
Daily NAV is not disclosed in the SAI. The SAI contains details of the fund house — sponsor, trustees, AMC, legal structure, investor rights, and taxation. NAV is published daily on the AMC website and AMFI portal.
SEBI's circular on categorisation and rationalisation of mutual fund schemes was issued in which year?
EXPLANATION
SEBI issued the landmark circular on categorisation and rationalisation of mutual fund schemes in October 2017. This circular defined 36 categories of schemes across equity, debt, hybrid, solution-oriented, and other funds.
What is the minimum number of trustees required for a mutual fund under SEBI regulations?
EXPLANATION
SEBI (Mutual Funds) Regulations, 1996 require a minimum of 4 trustees for a mutual fund. At least two-thirds of them must be independent of the sponsor.
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About this chapter
Chapter 4 covers the regulatory infrastructure governing mutual funds in India, centered on SEBI's role as the primary regulator. This chapter is critical for understanding compliance requirements and legal obligations fund houses must meet. You must grasp three foundational concepts: first, SEBI Mutual Fund Regulations, 1996, which establish operational standards, disclosure norms, and investor protection frameworks; second, the role of custodians, depositories, and trustees in safeguarding investor assets and ensuring transparent fund management; third, statutory obligations including registration requirements, prospectus filing, and periodic disclosures mandated under the Companies Act and SEBI rules. The chapter also covers investor rights, grievance redressal mechanisms, and regulatory penalties for violations. Understanding SEBI's supervisory powers, inspection procedures, and enforcement actions is essential. Exam questions frequently test your knowledge of regulatory compliance deadlines, prohibited practices, and the legal consequences of non-compliance. Strong command of this chapter ensures you can advise clients on legitimate fund structures and help your organization maintain regulatory standing in India's highly supervised mutual fund ecosystem.
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