Saturday, November 2, 2024
Saturday, November 2, 2024

How to Start Mutual Fund Company in India?

by Swati Raghuwanshi
Mutual Fund Company

To start a mutual fund company is not an easy task. It needs a lot of research, investment, smartwork and most importantly the knowledge of finance and finance market. In order to establish such entities one needs to have a proper business plan and a firm idea to implement the same. Such companies are a good plan to invest in. They also offer handsome returns if they are done with proper care and caution, but if one is not cautious about the same they can pull you in the loss as well. Hence in order to start your company of mutual funds you must be extra careful and do the business with utmost care. If you are thinking about starting such a company but you do not have much knowledge about the same, you don’t need to worry. The current blogs are all about the companies of mutual funds. You can read it till the end and can easily understand the concept of such companies in easy language. 

What are Mutual Fund Companies? 

Mutual fund company is a type of  financial firm. It collects the money from the different investors in the market. That is how such companies get their funds and they further pool these funds to buy various types of stocks, bonds, or other assets. These companies manage the investments on behalf of the investors. Each investor in a company of mutual funds must be owning a portion of the holdings proportionate to the amount they’ve invested. The companies have professional managers who make decisions on where to invest the pooled money in different financial instruments. The aim is to grow the investors’ money over time and offer them returns based on the fund’s performance in the market.

Mutual Fund Registration 

Under the Securities Exchange Board of India (mutual fund) Regulation that came in the year of 1996, it is mandatory to take registration from the Securities Exchange Board of India in order to start a mutual fund company in India. This registration is known as the Mutual Fund Registration. Such kind of entities are mostly started after registering themselves as the trust. For which they need to do trust registration. These entities involve a lot of technical knowledge, hence must be started with full care and precaution.  

Key Steps to Start Mutual Fund Companies in India 

Some of the basic but important aspect of starting a mutual fund company are mentioned below: 

Proper Research 

This point is not just limited to Mutual Fund Companies but for all types of businesses. Whenever one starts any kind of business they must do proper research about the business, business place, business market and the consumers of the business. Similarly in order to start a company for mutual funds the very first thing you must do is market research. 

Business Plan 

This business of Mutual Fund Companies is not a child play. One who wants to enter in this business must have proper idea and clarity with respect to the business. For the same purpose you must have a well drafted business plan. This will help you out while implementing the business and also gives you a proper direction towards which you need to proceed. 

Approval From SEBI 

In order to start a Mutual Fund Company in India you need to obtain the approval to do the same from the Securities and Exchange Board of India. As per the law without obtaining this approval or we can say permission from the Securities and Exchange Board of India one cannot start companies of mutual funds in india. Hence one must fulfill this requirement in order to start such kinds of companies in India. 

Investment Management Approval 

The next approval one needs to take in order to start a mutual fund is investment management approval. Just like the above approval it is also mandatory to obtain. One cannot ignore obtaining this approval. This investment management approval needs to be taken by the Securities and Exchange Commission. This can be obtained by using Form ADV

Eligibility Criteria to Start a Mutual Fund Company

In order to start a mutual fund company one must fulfill the following eligibility criteria:

  • One who wants to do this business must have prior experience in the field of mutual funds. 
  • Must have the minimum net worth 
  • Must have a skilled team of employees 
  • Compliance with SEBI regulations is essential.
  • The company should adhere to the guidelines and rules set by SEBI for mutual fund operation.
  • The company should be incorporated as a Trust under the Indian Trusts Act, 1882.
  • It should also be approved as a mutual fund under SEBI regulations.
  • Having the necessary technological infrastructure for fund management, customer service, and operations is crucial.
  • Sound knowledge and expertise in financial markets, investment management, and regulatory compliance are imperative for successful mutual fund operations.

Mutual Fund Company Registration Process 

Key steps in order to register your company of mutual funds are given below. One can follow these steps and register their company of mutual funds. 

  • Ensure your company meets the eligibility criteria set by the SEBI whose full form is Securities and Exchange Board of India for establishing a company of mutual funds.
  • Incorporate a trust and a company structure for managing the mutual fund.
  • Create a trust deed and an Asset Management Company (AMC) with the necessary infrastructure and a team of professionals.
  • Prepare all the required documents
  • Submit an application to SEBI for approval of your company of mutual funds.
  • SEBI will review the application and documentation submitted.
  •  If additional information or clarifications are needed, the concerned authorities may request them.
  • Once the application is reviewed and meets all regulatory requirements, SEBI will issue an approval certificate for establishing the company of mutual funds.

Conclusion

Starting a mutual fund company in India requires extensive research, stringent qualifications, and compliance with regulatory procedures. With the need for thorough market research, a well-drafted business plan, and necessary approvals from the SEBI, commonly known as the name of the Securities and Exchange Board of India, it’s a complex but rewarding endeavor. The steps encompass incorporation as a trust, meticulous document preparation, and the engagement of a skilled team to manage the operations effectively.To navigate the registration process successfully, aspiring mutual fund companies must meet eligibility criteria, fulfill investment management prerequisites, and ensure strict compliance with SEBI regulations. Overall, initiating a mutual fund company demands a blend of expertise, meticulous planning, and adherence to the legal requisites for a seamless and legally compliant establishment in India.

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