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    Q. How is a mutual fund set up?

    The trust is established by one or more sponsor who acts as company promoter. The mutual fund’s assets are held by the trustees for the benefit of the unit holders. SEBI-approved Asset Management Companies (AMCs) manage the funds by investing in various types of securities. The securities of the various fund’s schemes are held in custody by a SEBI registered custodian. The trustees have general supervision and management authority over AMC. They monitor the mutual fund’s performance and compliance with SEBI regulations.

    According to SEBI regulations, at least two-thirds of the trustee company’s or board of trustees’ directors must be independent. Furthermore, at least half of AMC’s directors must be independent. Before launching any scheme, all mutual funds must register with SEBI.