INDIA Law and Practice Contributed by: Tejesh Chitlangi, Sushreet Pattanayak, Pooja Mehta and Anita Jain, IC Universal Legal
3.3.11 Approach of the Regulator Domestic Mutual Funds
ties, such as bonds, corporate debentures, government securities and money market instruments; a balanced/hybrid scheme, investing in equities and fixed income secu - rities in the proportion indicated in its offer documents; a gilt fund, which exclusively invests in government securities; or index funds, which replicate the portfolio of a par - ticular index, such as the BSE Sensitive index (Sensex), the NSE 50 index (Nifty), etc, based on its investment objective. Asset Protection The mutual fund is mandated to appoint a SEBI- registered custodian to hold the securities in which the mutual fund schemes will invest. The SEBI must be informed of the appointment of the custodian within 15 days of the appointment date. The trustees are responsible for the funds and property of the schemes and must hold them in trust for the unitholders, in accordance Some of the key policies and frameworks adopt - ed by a Mutual Fund to ensure effective man - agement of the schemes are as follows. • Risk Management Framework – introduced by the MF Regulation, which must be adopted by Mutual Funds. The framework lays down a set of principles or standards which, inter alia, comprise the policies, procedures, risk man - agement functions and roles and responsibili - ties of the AMC and trustee company for bal - ancing risks, in the operation of the schemes, affecting the interests of the investors. The elements of the framework have been split into mandatory sections, which must be implemented by the AMCs, and recommend - ed elements, which can be considered for implementation. The AMCs must assess their with MF Regulations. Policy requirements
The SEBI is known for its approachability and proactive engagement with investors and market participants. During the process of evaluating mutual fund applications, SEBI officials actively liaise with a designated contact from the applicant organisa - tion to address queries, request additional infor - mation, and ensure a smooth application pro - cess. This approach reflects SEBI’s commitment to transparency and effective communication. The SEBI also offers an Informal Guidance Scheme under which market intermediaries or other entities can seek its written guidance by paying a prescribed fee on any regulatory mat - ters. Retail Schemes Under GIFT Funds See 2.3.11 Approach of the Regulator 3.4 Operational Requirements Domestic Mutual Funds Categories of mutual fund schemes The schemes of a mutual fund can be split into two categories, as follows: • According to maturity period – a mutual fund scheme can be open-ended, without any fixed-maturity period, or close-ended, where investors can subscribe only during a speci - fied period and thereafter, they can buy or sell the units of the scheme on the stock exchanges where the units are listed) based on maturity period. • According to investment objective – a scheme can be classified as a growth-/equity-oriented scheme, which invests a large part of its corpus in equities; an income/debt scheme, which generally invest in fixed income securi -
226 CHAMBERS.COM
Powered by FlippingBook