SEBI Registration

Procedure for Mutual Funds Registration in India

Mutual Fund registration in India must submit an application in Form A.

What is the Procedure for Mutual Fund Registration in India?

Mutual Fund act as trusts which pool the savings of investors, reinvest them in funds to earn profits and then distribute the dividend earned amongst the investors. In return, the Asset Management Companies (AMC’s) charge a certain amount as fees for this service. It is regulated by the SEBI (Mutual Fund) Regulations, 1996.

Types of Mutual Fund:

• Open-Ended- Debt Income, Money market/Liquid, Equity/Growth funds, Index Scheme, Sectorial scheme, Tax Saving schemes, Balanced.
• Close Ended- Capital Protection, Fixed Maturity Plans.
• Interval Mutual Funds- It allows investors to trade units at pre-defined intervals.

Example: HDFC Mutual Fund, ICICI Mutual Fund, IDFC Mutual Fund etc.

The investments are in accordance with the investment objectives as disclosed in offer document. An applicant intending to register a Mutual Fund in India must submit an application in Form A under Schedule I of the relevant regulations along with a non-refundable fee of Rs. 5 Lakhs.

It has to get registered itself at Securities & Exchange Board of India (SEBI) before proceeding to collect funds from the public.

Key Points for Mutual Funds Registration:

• All the Mutual funds should get registered as Trust under the Indian Trust Act, 1882^[1];
• A separate AMC should be registered. The net worth of the AMC must be 5 Crore.
• Investors of Mutual Funds are called Unit Holders.
• Basket of securities is called as Portfolio
• Managed by the fund manager
• Value of each unit is called as Net Asset Value (NAV)
• An organization that manages the investments is called an Asset Management Company
• The sponsor should contribute at least 40% to the Net Worth of the AMC.
• Appointment of Custodian in order to keep custody of Gold & Gold related Instruments is in terms of the regulations prescribed
• Should be carrying on business in financial services for a period of not less than 5 years & the net worth should be positive.
• Applicant has to be a fit & proper person with a soundtrack
• The Main Objects of the MOA of the sponsor company should permit the Mutual Fund Activities.

Costs Involved in Mutual Funds Registration:

• Expense Ratio
• Exit Load
• Entry Load (This expense has been dispensed with)
• Distributor’s Commission

Pre-Requisites for Investing In a Mutual Fund Plan:

• Bank Account
• Demat Account with Broker
• Documents or KYC to be enclosed
• Aadhaar Linkage of the Accounts

How Does It Work 

Document Checklist for Mutual Fund Registration

• A complete list of all the associate companies/group companies/subsidiaries registered with SEBI in any capacity along with their Registration Numbers.

Also whether any of its sponsors, group or associated companies are listed on any Recognized Stock Exchange.

• List of instances of violation / non-adherence to any securities-related regulations enforced by any regulatory agency in India or abroad & whether any measure has been taken by you in this regard.
• A declaration that the Sponsor Company or the Directors have not been found guilty of fraud, misconduct etc.
• Details of Registration of any of the companies with RBI as NBFC or any other capacity.
• Two sets of MOA & AOA of AMC & Trustee Company (i.e. one for SEBI & another set of ROC records)
• A detailed Business Plan.
• A detailed note on the infrastructure employed by the AMC.
• Auditor’s Certificate certifying that:
  1. Sponsor has contributed 40% to AMC’s Net worth
  2. AMC has a Net worth of not less than 5 Crores

• RBI/ other Regulator’ approval for the purpose of sponsoring mutual funds.
• Executed copies of Trust Deed & Investment Management Agreement.
• Undertaking from the Sponsor to provide Additional capital to AMC, till its operations breakeven in order to protect the interest of unitholders.

Applicant has to provide all the required information within 30 days from the receipt of a communication from SEBI, failing which the case me be considered as closed.

Scheme Offer Document (SID)

The scheme should be launched within 6 months from the date of issuance of observations by SEBI. If this time lag is extended then it has to be filed again.

The Filing Fee for an Offer Document is 0.0005% of the amount raised in the new fund offer or by way of Private Placement subject to Min 2 Lakhs & Max 50 Lakhs. 

Annual Fees Payable by an MF/AMC?

A Mutual Fund shall pay before 15^th April each year an Annual Fee for every Financial Year from the year of registration:

• AUM up to INR 10000 Cr: 0.0015% of the AUM i.e. Average Assets under Management
• AUM above INR 10000 Cr: 0.0010% of the portion in excess of INR 10,000 Cr.

Subject to a Min of 2,50,000 & a Max of INR 100,00,000. 

Fees:

All the Documents duly executed & vetted along with a NON – REFUNDABLE FEE OF 5 LACS & REGISTRATION FEES OF 25 LACS.

*Risk Disclaimer i.e. Mutual Fund investments are subject to market risks, read all scheme related documents carefully it is mandatory incorporate advertisements that form a part of brand promotion as mentioned in the 6^th Schedule of SEBI (MF’s) Regulations, 1996 Advertisement Code.