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AMFI Mutual Fund Legal Structure of Mutual Funds — practice questions

Explore 12 free Legal Structure of Mutual Funds questions in AMFI Mutual Fund Mutualfunds. Open each question or exercise to read its content, reference answers and available explanation.

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Legal Structure of Mutual Funds questions and exercises with answers

Showing questions 1–12 of 12.

The Trust Deed of a mutual fund is executed betweenRead the answer and worked solution →The custody of scheme assets like securities and gold is held byRead the answer and worked solution →The Sponsor of a mutual fund must have been in the financial services business for at leastRead the answer and worked solution →The minimum stake a Sponsor must contribute to the net worth of the AMC isRead the answer and worked solution →The minimum net worth prescribed for an Asset Management Company isRead the answer and worked solution →At least how much of the directors on the Board of an AMC must be independent?Read the answer and worked solution →The appointment of an AMC can be terminated byRead the answer and worked solution →The Compliance Officer of an AMC is required to report directly to theRead the answer and worked solution →The task of the Fund Accountant in a mutual fund is toRead the answer and worked solution →Which of these bodies may sponsor an Infrastructure Debt Fund set up as a Mutual Fund?Read the answer and worked solution →An investor invested Rs. 10,000 in a mutual fund scheme when the NAV was Rs. 20. How many units were allotted, ignoring loads and taxes?Read the answer and worked solution →The prior approval of SEBI is specifically required beforeRead the answer and worked solution →

Worked practice questions

The Trust Deed of a mutual fund is executed between

  1. SEBI and the AMC
  2. AMC and the Registrar
  3. Sponsor and the Trustees
  4. Trustees and the Custodian
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Correct answer: C. Sponsor and the Trustees

1. A mutual fund in India is constituted as a trust under the Indian Trusts Act, 1882. 2. The operations of that trust are governed by a Trust Deed. 3. The Trust Deed is executed between the Sponsors and the Trustees. 4. SEBI prescribes clauses that must appear in the Trust Deed. _Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 3 "Legal Structure of Mutual Funds in India", §3.1_

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The custody of scheme assets like securities and gold is held by

  1. The AMC
  2. The Sponsor
  3. The Registrar and Transfer Agent
  4. The Custodian
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Correct answer: D. The Custodian

1. The AMC manages the scheme but does not hold the assets in its own name. 2. Custody of securities, gold and gold related instruments sits with the Custodian. 3. The Custodian is appointed by the Trustees under SEBI (Custodian) Regulations, 1996. 4. This separation is a core investor-protection control in the mutual fund structure. _Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 3 "Legal Structure of Mutual Funds in India", §3.2.5_

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The Sponsor of a mutual fund must have been in the financial services business for at least

  1. 5 years
  2. 3 years
  3. 1 year
  4. 10 years
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Correct answer: A. 5 years

1. SEBI sets eligibility norms to ensure sponsors have a proven track record. 2. The sponsor must have carried on financial services business for not less than 5 years. 3. It must also show positive net worth in each of the immediately preceding 5 years. 4. It must have earned profits after tax in 3 of the last 5 years, including the fifth year. _Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 3 "Legal Structure of Mutual Funds in India", §3.2.1_

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