asset management company

Asset Management Company In India- Its Working and Roles

Company Law BLOG/ NEWS Corporate Law LAW EXPLAINED

Asset Management Company in simple terms means an organisation that manages the whole affairs of the mutual fund. The clients associated with the AMC have high resources than other investors and want to invest in different portfolios.

The company therefore helps the investors to invest in different avenues which they otherwise would not be in a position to invest by themselves.

AMC is a company registered under Companies Act. It is governed by SEBI (Mutual Funds) Regulations. There are two entities involved in mutual fund, which are sponsor and trustees.

The trustee appoints AMC as Investment Manager of Trust on the recommendation of sponsor. The trustee is authorized to do the same under the trust deed. Trustees then enter into an agreement with AMC which is known as Investment Management Agreement containing all the rights and duties of AMC.

The AMC manages the funds under the mutual fund. The mutual fund then pays fees to the asset management company for managing its fund. The AMC do their work under the supervision of trustees and they are regulated by SEBI.

ELIGIBILITY FOR APPOINTMENT

  • If the asset management company is an existing AMC it must have a sound track record, reputation and fairness.
  • AMC must be a fit and proper person
  • The directors of AMC must have experience in finance or related fields and must not be guilty of moral turpitude and must not be convicted of any economic offence.
  • The board of directors of the company must have 50% of such directors who are not associated with the sponsor or its subsidiaries or with the trustees.
  • Chairman of AMC should not be a trustee of any mutual fund.
  • Net worth of the company must be at least 50 crores

asset management company

WORKING

The AMC basically manage the money of their clients in order to reach certain financial objectives by following certain guidelines wherein a pool of investments is organized.

This pool can be in the form of mutual fund, hedge fund or pension fund. The AMC can invest in a wide range of securities such as equities, derivatives etc.

asset management company

ROLES OF AMC

(a) AMC manages the company and must take all reasonable steps and should apply due diligence so that the investment of funds are not inconsistent with the SEBI regulations.

(b) AMC must obtain an in-principle approval prior from the stock exchanges where the units are proposed to be listed.

(c) AMC shall be responsible for any act of omission or commissions on the part of its employees.

(d) AMC must submit to the trustees quarterly reports of each year describing its activities and the report of the compliance of the SEBI regulations.

(e) AMC can at any time request the trustees to terminate the assignment of AMC

(f) The CEO of AMC must ensure that mutual funds comply with all the provisions of SEBI regulations.

(g) If the AMC enters into any securities transactions with any of its associates then a report for the same must be sent to trustees

REFERENCES
  • SEBI (Mutual Fund) Regulations (Amendment), 2014
  • http://shodhganga.inflibnet.ac.in/bitstream/10603/102693/10/10_chapter%203.pdf
  • https://www.goodreturns.in/classroom/2014/07/what-is-an-asset-management-company-india-282669.html
  • https://www.vskills.in/certification/tutorial/mutual-funds/role-of-the-amc/
  • https://www.slideshare.net/sanoobsidiq/asset-management-company
SEE ALSO : https://lawyersgyan.com/blog/securities-appellate-tribunal-its-structure-power-and-rulings/

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