Ch.3 · Custodian and RTA Functions · medium
What is the significance of mutual fund assets being held 'in trust' rather than by the AMC directly?
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EXPLANATION
Holding assets in trust is a critical investor protection feature. The scheme's securities are legally owned by the trust (held by the custodian on the trust's behalf), not by the AMC. If the AMC goes bankrupt or is liquidated, AMC creditors cannot claim scheme assets. This ring-fencing protects unit holders from AMC-level insolvency risk.
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