Who is the Mutual Fund Regulator in India?
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- Updated On:04-Feb-2021
- Replies:5
Short Answer
Mutual funds are regulated by SEBI ( Securities and Exchange Board of India). SEBI regulates mutual funds as 1996 Mutual fund regulation. SEBI is also the regulator for wider capital and securities market in India. SEBI was formed in 1988 as a statutory body and drives it powers from SEBI act 1992.
Detailed Answer
There are a lot of options to invest your money in India. Mutual funds, however, are considered one of the best and highest yielding long-term investment plan. In simple terms, Mutual Funds can be described as a basket of securities in which a pool of investors with common financial goals invests their money. These investments are diversified in different sectors like shares, debt securities, and money market securities or all combined.
Mutual funds regulated by the Security and Exchange Board of India (SEBI) provide secure saving option managed by professional account managers.
The regulatory authority of Mutual Funds
SEBI, the government body who regulates mutual funds in India, issued guidelines for the mutual funds for the first time in 1993. The regulations were fully revised in 1996. The main aim of the Mutual Fund regulatory body in India is to protect the interests of the investors. SEBI often issues guidelines for the Mutual Funds, depending on the situation in the market. The Mutual Funds are prompted by either public or private sector entities including the foreign entities are governed by the regulations issued by SEBI.
The regulations stated in the 1996 guidelines
As per the Mutual Funds regulations 1996, all mutual funds must register as trusts under the Indian Trust Act 1882. In order to run the Mutual Fund, the company has to set up a separate asset management company commonly known as AMC. The regulations state that the net worth of the parent company of the AMC must be more or equal to Rs.50, 000,000/-
If the Mutual Fund is dealing with money market exclusively, it has to register with the RBI as well. SEBI has the authority to penalize a mutual fund founded a guilty of not following the norms. All the mutual funds should be registered with SEBI and the government has also set up a separate regulatory agency for Mutual Funds as well which is known as the Association of Mutual Funds in India or AMFI.
The basic structure of a Mutual Fund
The very first person or company in the hierarchy is the sponsor. The sponsor must contribute a minimum of 40% of the total value of the investment managed by the mutual fund. It should be registered with SEBI as well. The Trust is the next level in the hierarchy. A mutual fund is registered as a trust as mentioned above. Every trust should have a board of Trustees who are responsible for safekeeping the interests of the investors. It is the duty of the Trustees to appoint the AMC. The AMC has to get an approval from SEBI to start its functions.
At any given time, AMC’s net worth should remain equal to or above 10 Crores. The hierarchy continues with custodian which is basically a trust company, bank or a financial institution that is responsible for holding and safeguarding the securities owned by the Mutual Fund. The Custodian may also act as a transfer agent. It is the responsibility of the registrar and transfer agent to handle communication with the investor. They also update the investment records regularly.
Investment in mutual funds is mostly secure, but it is in the investors’ interest to check the track record of the mutual fund before investing in it. Also, the investor should prefer a diversified mutual fund to gain long term benefits.
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Discussion (4)
Hi, I have heard of Association of Mutual Funds in India (AMFI) also. SEBI is the regulatory body or the mutual fund regulator, as we say, that looks after investor's interest. What's the function of AMFI in general? Can you please clarify a bit.
Yes, SEBI actively performs its duties. It regulates stock markets and mutual funds industry. Over the past few years, the investing process has become much simpler and reliable due to the constant check by regulatory authorities. Traditional offline trading is being replaced by modern online trading techniques. Mutual funds are getting very popular these days. But, there are so many risks involved in such asset classes. There surely needs to be someone to check and encourage fair practices and provide transparency to investors.
SEBI is quite active and strictly monitors the mutual fund industry and stock markets. Its guidelines have been designed to actively protect the interest of investors. Really good to see that we have a powerful regulator safeguarding the interest of investors.
Karvy has gradually grown as one of the largest Mutual Fund RTA companies after being established in 1982. One of the main strengths of a Mutual Fund RTA is the facility to offer a wide range of Mutual Funds to the investors in one place.
NRIs living in the United States can invest in Indian Mutual Funds, but there are some hassles that have to be overcome. You will require an NRE, NRO, or FCRN account in order to convert the foreign currency into Indian rupees, post which you can complete the KYC and begin investing in Indian Mutual Funds.
Yes, any NRI can invest in mutual funds in India, if they follow some certain conditions under Foreign Exchange Management Act or FEMA Act 1999.
We all look to earn good returns on the money we invest. Putting money in High return investments is one way of generating better income. The different places to get good returns are mutual funds, equity, and gold investment in India.
A KRA is mandated to collect and maintain KYC records of investors on behalf of financial market participants registered with SEBI. Computer Age Management System (CAMS) is a registered entity with the SEBI was setup in 1993 as a registrar to Mutual Fund companies and now serves almost close to 60 percent of the industry. Foreign Account Tax Compliance Act is an agreement between India and United states to achieve greater tax compliance between both countries.
Yes, Overseas Citizens of India (OCI) can invest in Indian mutual funds. Checkout ways how an OCI can start investing in the Indian mutual fund industry.
Zerodha as well as Groww, both allow investors to invest in Mutual funds. Groww does not charge any Account opening fees or Annual maintenance Charges but Zerodha charges Rs 200 for Account opening and Rs 300 for AMC. This makes Groww a cheaper and better option when it comes to investing in mutual funds.
No, a Demat account is not required to invest in mutual funds in India. Instead, there are a number of other options, such as Asset Management Companies (AMCs) or offline distributors through which you can directly invest in mutual funds without opening a demat account.
Exchange traded fund is a freely marketable security which tracks a particular index, commodity, bonds or combination of assets. they aren't popular as there is no additional tax incentives, not enough liquidity, under performs most of the time, lack of choices, lack of institutional interest, costs are low but not enough and lack of awareness.
Investing in abroad markets has become quite easy these days. One can get direct and indirect exposure into the U.S. market through various methods. Investing in foreign markets like the U.S provides many benefits like Diversification into the top companies of the world, Benefit of Currency Depreciation, etc. Apart from directly purchasing the stocks listed on the U.S. stock exchanges, there are some different methods as well. Know the best methods of getting exposure to the U.S. stock markets.
Harshil Patel
SEBI is the mutual fund regulatory body in India. It is the Securities and Exchange Board in India which is the main regulator of securities market. Hence it is also the regulator for mutual fund investments in the Indian market. AMFI however is a nodal association of mutual funds across India. It contains details on all the registered asset management companies in the country.