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Ch.2 · Advantages and Limitations of Mutual Funds · medium

Can the AMC and the Custodian be associates of each other?

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EXPLANATION

SEBI regulations specifically require that the AMC and the Custodian must not be associates of each other. This independence ensures that asset safekeeping is not compromised by any conflict of interest with the entity making investment decisions.

A.Yes, as long as SEBI approves the arrangement

B.No, SEBI regulations require that the AMC and Custodian must be independent of each other [✓ Correct]

C.Yes, if the AMC discloses this conflict in the SAI

D.Yes, only if the AMC has more than ₹1,000 crore AUM

EXPLANATION

SEBI regulations specifically require that the AMC and the Custodian must not be associates of each other. This independence ensures that asset safekeeping is not compromised by any conflict of interest with the entity making investment decisions.

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