Who are Mutual Fund Trustees?

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Who are Mutual Fund Trustees? Blog Image

Overview:

The capital markets regulator Securities and Exchange Board of India (SEBI), recently proposed to review the role and accountability of trustees of mutual funds with an aim to protect unitholders’ interests.

About Mutual Fund Trustees:

  • The trustees serve as an independent body to protect the interests of the investors and ensure compliance with the SEBI Mutual Fund regulations.
  • Powers and Functions:
    • The Board of trustees or trustee company holds the property of the mutual fund in trust for the benefit of the unit holders.
    • They appoint an Asset Management Company (AMC) to float schemes for the mutual fund and manage the funds mobilized under various schemes.
    • The trustee will set the responsibilities of the AMC and monitor any new scheme that is introduced.
    • The trust also ensures that all the key personnel of a mutual fund is appointed with adequate qualifications and skills.
    • It has the authority to request any information from the AMC pertaining to the operations of the fund.
    • The trustee is also authorized to initiate action against the AMC or even penalize the AMC if SEBI regulations are not complied with or if the interests of the unit holders are not protected. 
  • Structure:

Every mutual fund must have a minimum of 4 trustees, or they can appoint a trustee company with a minimum of 4 directors. 

Two-thirds of the trustees will have to be independent.

Trustees cannot be appointed from within the same group to which the AMC belongs.

What is an Asset Management Company (AMC)?

  • The AMC is the investment manager of the trust.
  • It takes care of the day-to-day operation of the mutual fund and manages the investors' money as well.
  • The AMC consists of the Chief Investment Officer, the fund managers and analysts, who are together responsible for managing the various schemes launched.  

 


Q1) What are Mutual Funds?

A mutual fund is a financial vehicle that pools assets from shareholders to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors.

Source: Why has SEBI proposed tightening responsibilities of mutual funds trustees?​​​​​​​