A mutual fund is set up in the form of a trust, which has sponsor, trustees,
asset management company (AMC) and custodian. The trust is established
by a sponsor/s who is like promoter of a company. The trustees of the mutual
fund hold its property for the benefit of the unitholders. Asset Management
Company (AMC) approved by SEBI manages the funds by making investments in
various types of securities. Custodian, who is also registered with SEBI, holds
the securities of various schemes of the fund in its custody. The trustees are
vested with the general power of superintendence and direction over AMC. They
monitor the performance and compliance of SEBI Regulations by the mutual fund.
SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).