INDIA Law and Practice Contributed by: Tejesh Chitlangi, Sushreet Pattanayak, Pooja Mehta and Anita Jain, IC Universal Legal
accordance with the MF Regulations. The sponsor is also required to incorporate a new trustee company with at least two-thirds inde - pendent directors. A final application in the prescribed format is then filed with the SEBI providing the relevant details on the AMC and the trustee company. These details cover various write-ups from the AMC, including the business plan, details of their physical and information technology systems, details about their directors and personnel and strategy to sustain operations during the start-up phase if the AMC does not make a profit. The SEBI evaluates the sponsor’s eligibility based on the application filed, responses made to the SEBI’s questions and an on-site visit to evalu - ate the preparedness of the AMC to under - take mutual fund business. Final approval from the SEBI for registration of the mutual fund can take another four to six months. The sponsor is also required to pay INR5 lakhs plus taxes at the time of filing the application for in-principal approval, and a fee of INR25 lakhs plus taxes after final approval is granted. To sum up, it generally takes 15 to 20 months for the SEBI to analyse and satisfy itself that a sponsor, AMC and trustee company are fit to launch and manage a mutual fund, and for the entire mutual fund application to be approved. Launch of mutual fund Schemes: After seeking registration as a mutual fund, the AMC can launch mutual fund schemes by filing the relevant documents – ie, a Scheme Informa - tion Document (SID), providing the key features of the scheme of a mutual fund; a Statement of Additional Information (SAI), which provides standard terms of engagement of the AMC with respect to mutual funds, as well as other terms and conditions with respect to investments,
redemptions and restrictions; and a Key Infor - mation Memorandum (KIM), which provides a brief snapshot of the scheme, and the details for various entities, fund managers and key invest - ment personnel involved in the operations of the mutual fund. The first mutual fund scheme must be launched within six months of the date of receipt of mutual fund registration. Any subsequent schemes, on which SEBI obser - vation letter has been issued, can be launched by filing a draft SID with the SEBI at least 8 work - ing days prior to launch of the new mutual fund schemes for public comments. During this peri - od public comments are invited on the adequacy of disclosures made in the document. Retail Schemes Under GIFT Funds See 2.1.2 Common Process for Setting Up Investment Funds 3.1.3 Limited Liability Domestic Mutual Funds Liability of the investors is limited to the number of units they hold in the schemes of the Mutual Fund, and they do not have any personal liability. Retail Schemes under GIFT Funds See 2.1.3 Limited Liability . 3.1.4 Disclosure Requirements Domestic Mutual Funds Disclosures made under fund documents Mutual funds are required to make disclosures through various fund documents such as the aforementioned SID, SAI and KIM which should be filed with the SEBI and circulated among investors.
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