Chapter 10: NISM-XV Exam Prep
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Day 48: NISM-XV Module 7 — Mutual Fund Regulations
AMC, AUM, TER, Direct vs Regular — all the official details the exam loves
2 min read
📖 Victor's Exam Stumble
Victor had invested in mutual funds for 2 years. He knew NAV, SIP, and fund types. But the exam asked: "What is the maximum TER allowed for an equity fund under SEBI regulations?"
Victor stared blankly. He'd never looked it up. He'd understood the concept but missed the regulatory detail.
Don't be Victor. The exam loves these specific regulatory numbers. Let's learn them properly. 📋
Victor had invested in mutual funds for 2 years. He knew NAV, SIP, and fund types. But the exam asked: "What is the maximum TER allowed for an equity fund under SEBI regulations?"
Victor stared blankly. He'd never looked it up. He'd understood the concept but missed the regulatory detail.
Don't be Victor. The exam loves these specific regulatory numbers. Let's learn them properly. 📋
Mutual Fund Legal Structure
Three-Entity Structure:
🏛️ Sponsor: Company that sets up the MF. Must hold minimum 40% in AMC. Example: State Bank of India (Sponsor of SBI MF).
🏢 AMC (Asset Management Company): Actually manages funds. Must be SEBI registered. Example: SBI Mutual Fund AMC Ltd.
🔒 Trustee Company: Independent oversight of AMC on behalf of investors. Majority must be independent trustees.
🏛️ Sponsor: Company that sets up the MF. Must hold minimum 40% in AMC. Example: State Bank of India (Sponsor of SBI MF).
🏢 AMC (Asset Management Company): Actually manages funds. Must be SEBI registered. Example: SBI Mutual Fund AMC Ltd.
🔒 Trustee Company: Independent oversight of AMC on behalf of investors. Majority must be independent trustees.
Direct vs Regular Plan — Know the Difference!
✅ Direct Plan
Invest directly with AMC — no distributor. Lower expense ratio (0.3–0.5% cheaper annually). Higher NAV over time. Use AMC website or Zerodha Coin.
💰 Regular Plan
Through distributor/agent. Higher expense ratio (distributor commission included). Lower NAV. Over 20 years, Direct Plan meaningfully outperforms Regular Plan!
SEBI MF Regulations — Numbers the Exam Tests!
| Rule | Details |
|---|---|
| Max TER — Equity Funds | 2.5% (for smaller AUM), scales down as AUM increases |
| Max TER — Debt Funds | 2.0% |
| Exit Load | Redemption charge if exiting before specified period. ELSS: 3-year lock-in. |
| KIM | Key Information Memorandum — mandatory document for investors before investing |
| SID | Scheme Information Document — full details of fund, risks, investment objective |
| Riskometer | Mandatory risk labelling: Low / Low-Medium / Medium / High / Very High |
AMFI — The Industry Body
AMFI = Association of Mutual Funds in India
Self-regulatory body for India's MF industry under SEBI guidelines.
Key functions:
✅ Issues ARN (AMFI Registration Number) to mutual fund distributors
✅ Publishes industry AUM and flow data monthly
✅ Runs investor education campaigns ("Mutual Funds Sahi Hai!")
Without ARN → distributing MFs is illegal. Exam loves asking this.
Self-regulatory body for India's MF industry under SEBI guidelines.
Key functions:
✅ Issues ARN (AMFI Registration Number) to mutual fund distributors
✅ Publishes industry AUM and flow data monthly
✅ Runs investor education campaigns ("Mutual Funds Sahi Hai!")
Without ARN → distributing MFs is illegal. Exam loves asking this.
🎯 Takeaway:
MF structure: Sponsor → AMC → Trustee. Direct = lower cost. Max TER: Equity 2.5%, Debt 2.0%. SID + KIM = mandatory investor documents. Riskometer is mandatory labelling. AMFI issues ARN to distributors. Tomorrow: Commodities, REITs & more!
MF structure: Sponsor → AMC → Trustee. Direct = lower cost. Max TER: Equity 2.5%, Debt 2.0%. SID + KIM = mandatory investor documents. Riskometer is mandatory labelling. AMFI issues ARN to distributors. Tomorrow: Commodities, REITs & more!