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Learn About Structure of Mutual Fund as SEBI

 15 Jun 2020

Before starting why is it important to know the organisation structure of mutual fund? As it is the only source to understand how a mutual fund works, or who controls the mutual fund.

Also, if the investors know the hierarchy of a mutual fund, they will know whom to escalate the problem if necessary.

What is "Mutual Fund"? It is termed as a type of business where there are 30-40 no’s fund houses. The fund house is the number of companies approved by SEBI to operate mutual fund schemes. This are the schemes which the common people buy and sell as investment products.

To have a clearer picture regarding mutual fund operates, we should know in-depth about the organization structure of a typical mutual fund house in India.

Three-tier structure of Fund House are listed below:

  • Sponsor
  • Trustee
  • AMC

The SEBI is responsible for creating these above mention tires of Mutual funds. All Mutual funds in India are carried out with SEBI guidelines.

1. Sponsor - The sponsors or also called as promotors are the first who conceptualizes the starting of the mutual fund business. Before starting the business, they must approach the SEBI for registration of the business. If the sponsor has all the necessary documents required, the SEBI will issue the "Certification of Registration" to sponsor. The requirements of the sponsor include

  • The sponsor must have 5 years of financial services.
  • There must be a profit-making company (3 out of 5).
  • The net worth of the company for the last five years must be positive.

2.Trustee - The promotors of mutual fund form a trust. This trust must have a "Board of Trustees"(like a board of directors). They must act like a (BOT) Board of Trustees. There are specific rules and conditions of SEBI which must be followed in the BOT. The minimum strength of the board should be four members.

From the board of members, there must be "Independent Directors". The members who don't have a direct relationship with the sponsors in any way.

SEBI has stipulated such strict rules and regulations related to the Board of Trustees because generally corporate houses are the sponsors of mutual fund schemes. SEBI follows the strict norms to ensure that the pooled money is not used by the sponsors in their group companies.

3. AMC - The Manager of Mutual Fund companies is formed as per the "Companies Act 1956". The AMC should be registered with the Governm3nt of India accordingly. This is the only reason why we see the following types of AMC's in India.

  • Private Limited Company.
  • Wholly Owned Subsidiary of an already Public Limited Co.
  • Joint Venture (Indian or Overseas Companies).


The time the mutual fund house has structured its 3 tiers as per the SEBI's guidelines, the AMC is ready to launch its new schemes. This is the only stage where the mutual fund house is ready to appoint a competent fund manager.



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