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18. ''Trustee of a Fund are its front-line regulators , empowered by SEBI, inter alia, to ensure the smooth working of the AMC. '' In this context , explain the relatioship between the Trustee and the AMC.
A Mutual Fund can float any number of schemes. Regulation require that the trustee of the Fund should approve each scheme and must file the offer document of each scheme with the SEBI. The AMC and trustees are required to ensure that statements made in the Offer Documents are true and correct . Disclosures made in the document must provide adequate information on returns and risks to enable investors to make informed investment decision . Trustees of a Fund are its front -line regulators, empowered by SEBI inter alia, to ensure the smooth working of the AMC . They must appoint the auditors , the registrars and all other key personnel prior to the launch of any scheme. They are required to ascertain that the management of one scheme does not compromise on the management of its other schemes . Mutual Fund regulation mandate them to prevent conflict of interest between the AMC and unit holders, the regulation futher prevent the trustee from making any changes to a fund's attributes , trust , fees, and expenses payable , or any other change that modifies the scheme, without written communication to every unit holders of a scheme.
Ans: The Trustee, as the investment Manager of the Mutual Fund , appoints the AMC . The main responsibility of the Trustee is to act as supervisors in safeguarding the interests of the unit holders, and the inter alia, ensure that the AMC functions in the interest of investors . The Trustees and the AMC can enter into an investment management agreement with the prior approval of the SEBI. The Trustee has the right to obtain information from AMC concering the opertaions of various schemes the latter manages and any other information the Trustee considers necessary.They should ensure that the AMC has all the required systems and personnel (like auditors , registrars,etc.) in place before any scheme is launched. The Trustees have to ensure that the AMC enter into only those transcations that conform to the SEBI Regulation and to the specifics of the scheme .The Trustees shall ensure that the AMC has been managing the Mutual Fund scheme independently of other activities and have taken adequate steps to ensure that the interest of investors of one scheme are not being compromised with those of any other scheme or of other activities of the AMC. They have to make sure that the AMC does not benefit any of its associaties at the cost of the unit holders.