A person can register mutual funds with SEBI by filing an application to the SEBI along with the amount of a non-refundable fee of Rs 5 lakhs.
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What are the mutual funds?
Mutual funds are the capital collected by a number of investors interested in purchasing the company's stocks, shares, or bonds. Shared by several numbers of investors, these funds are managed and monitored by the professional fund manager so that they can earn the highest possible returns. This is how it all works not only in India but also everywhere in the world.
What is the registration of mutual funds with SEBI?
Mutual funds are trusts composed of trustees, sponsors, custodian and Asset Management Company (AMC). The trust is formed by one or more sponsor who also acts as a promoter of the former company. The relative trustee holds his/her property for the profits of the other holder of the company. All the formers perform different functions such as:
AMCs manage the funds of the holder by investing in several types of securities. Whereas the registered custodian holds the custody of the fund's related schemes. The trustee superintends and directs AMCs.
Any individual interested in sponsoring in mutual fund requires to submit an application in a prescribed format in Form A along with a fee of Rs 5 lakh which is non-refundable. The whole process of registration requires a set of formalities related to set up an MF which includes preparing trust deed, setting up a company, incorporation of an asset, etc. Upon fulfilling these conditions the applicant is issued the registration certificate subject to the payment of fees amount of Rs 25 lakh.
How to register mutual funds with SEBI?
There is a specific process for the registration of MF with SEBI that includes filing an application, fulfilling the eligibility criterion, Contribution of 40% to the net worth of the AMC, verification of the application and issuance of the registration certificate. Following is the detailed explanation of these steps:
File the application:
As mentioned above an applicant can register his mutual fund with SEBI by filing an application in the prescribed format of Form A along with the amount of a fee of Rs 5 lakh.
Fulfill the eligibility criteria:
A person can only apply for registration if he/she fulfills the below-given conditions:
The sponsor of the company must have a good reputation and a soundtrack record of integrity and fairness in his/her business transactions. To fulfill this condition the sponsor should follow up below-given conditions:
- He/she must be carrying financial services in business for 5 years or more.
- The net worth of the sponsor must be positive in all the preceding five years and must be more than the capital contributions of the relative sponsor in the company.
- The sponsor shall have profits even after providing for the interest, depreciation in 3 years out of 5 preceding years including those 5 years.
- The applicant shall be a healthy and fit person.
Contribution of 40% to the net worth of the AMC:
In case of existing mutual funds in the form of a trust or trust deed approved by SEBI, the sponsor of the company needs to contribute at least 40% of his net worth of the AMC.
The individual who holds 40% or more of the total worth of an AMC is deemed to be the sponsor of the company and needs to fulfill the conditions as specified below:
- None of the sponsors, directors or the principal officer shall be guilty of fraud in any type of economic offense or moral turpitude.
- The trustees of the company shall be appointed in accordance with the rules and regulations.
- Asset Management Company shall be appointed to manage the MF and operate the schemes related to mutual funds in accordance with the provisions of all the rules and regulations.
- The custodian shall be appointed and authorized by the appointed trustees to keep the custody of asset securities such as gold or other gold-related objects in accordance with terms and conditions of these regulations
Verification of the application:
The application is thoroughly examined and verified by the authorities. They make sure that the sponsors satisfy the eligibility criteria before the issuance of the certificate.
Issuance of the registration certificate:
After the verification, SEBI shall register the trust on receipt and accordingly decide to issue the registration certificate in Form B with payment of registration fees i.e. Rs 25 lakh.
The mutual funds shall be paid before the date of April 15 of each year along with annual fees as mentioned for every financial year. In case the SEBI is not satisfied with the application or the sponsor does not satisfy the eligibility criterion as mentioned above, SEBI may reject the form and application and shall inform the applicant regarding it. So, this is how you can register your mutual fund with SEBI.