Legal And Regulatory Environment Quiz (India)

SEBI (Mutual Funds) Regulation, 1996 mandates that all Asset Management Companies and Trustees must follow the Code of Conduct outlined in the Fifth Schedule to the Regulation. This implies that these entities are legally obligated to adhere to the specified standards and guidelines mentioned in the Code of Conduct. Therefore, the statement "True" accurately reflects this requirement.

The AMFI Code of Ethics is indeed designed to complement the Fifth Schedule to the SEBI (Mutual Funds) Regulation, 1996. This code serves as a set of guidelines and principles that mutual fund professionals and entities must adhere to in order to maintain ethical standards and promote investor protection. It provides a framework for responsible conduct, transparency, and fair practices within the mutual fund industry. Therefore, the statement is true.

The statement is true because one of the main objectives of AMFI (Association of Mutual Funds in India) is indeed to define and maintain high professional and ethical standards in all areas of operation of the mutual fund industry. AMFI plays a crucial role in regulating and promoting the mutual fund industry in India, ensuring that investors' interests are protected and that industry participants adhere to ethical practices.

Self-Regulatory Organizations (SROs) are established to oversee and regulate their own members within a specific industry or profession. They are responsible for setting and enforcing standards, rules, and regulations to ensure compliance and maintain the integrity of the industry. By self-regulating, SROs aim to protect consumers, promote fair competition, and maintain ethical practices within their respective industries. Therefore, the statement that the prime responsibility of SROs is to regulate their own members is true.

SEBI (Securities and Exchange Board of India) has indeed made it mandatory for intermediaries to follow the AMFI (Association of Mutual Funds in India) Code of Conduct. This means that intermediaries involved in the mutual fund industry must adhere to the guidelines and principles outlined by AMFI, which include ethical practices, transparency, and investor protection. This measure ensures that intermediaries maintain a high standard of professionalism and integrity while dealing with mutual fund investments, ultimately safeguarding the interests of investors. Therefore, the statement is true.

AMCs in India are indeed members of AMFI, which stands for Association of Mutual Funds in India. AMFI is an industry body that represents the mutual fund industry in India. Being a member of AMFI signifies that the Asset Management Companies (AMCs) are regulated and adhere to the guidelines and standards set by the association. Therefore, the statement "AMCs in India are members of AMFI which is an industry body" is true.

Open-ended schemes, other than ELSS, have to re-open for ongoing sale/re-purchase within 5 business days of allotment. This means that after the initial allotment of units in an open-ended scheme, the scheme has to allow investors to continue buying or selling units within 5 business days. ELSS (Equity Linked Saving Scheme) is an exception to this rule. This statement is true as it accurately reflects the requirement for open-ended schemes, excluding ELSS, to re-open for ongoing sale/re-purchase within 5 business days of allotment.

During the process of empanelling distributors and throughout the duration of mutual funds/AMCs, a due diligence process is necessary to ensure that the distributors meet the 'fit and proper' criteria. This means that the distributors must be deemed suitable and trustworthy to carry out their responsibilities. This due diligence process helps to maintain the integrity and credibility of the mutual funds/AMCs and ensures that the distributors are capable of fulfilling their duties effectively. Therefore, the statement is true.

The applicable guidelines for mutual funds are set out in the SEBI (Mutual Funds) Regulations, 1996. These regulations are specifically designed to govern the functioning and operations of mutual funds in India. They provide a framework for the establishment, management, and operation of mutual funds, ensuring transparency, investor protection, and proper governance. The regulations cover various aspects such as registration requirements, investment restrictions, disclosure norms, valuation norms, and the role of asset management companies. Compliance with these regulations is mandatory for all mutual funds operating in India.

SEBI, the Securities and Exchange Board of India, has imposed a requirement for Asset Management Companies (AMCs) to establish a due diligence process in order to regulate distributors who have multiple points of presence. This means that AMCs are obligated to thoroughly assess and monitor distributors who operate through various locations. By implementing this measure, SEBI aims to ensure that distributors adhere to regulatory guidelines and maintain transparency in their operations. Therefore, the statement "True" accurately reflects SEBI's mandate.

SEBI, or the Securities and Exchange Board of India, regulates mutual funds, depositories, custodians, and registrars & transfer agents in the country. SEBI is the regulatory authority for the securities market in India and is responsible for protecting the interests of investors and ensuring the smooth functioning of the market. It formulates policies and regulations, monitors market activities, and enforces compliance by market participants. Therefore, SEBI is the correct answer to the question.

Mutual funds are required to comply with the regulations set by the Reserve Bank of India (RBI) regarding various aspects of their investments. These regulations include guidelines on investing in the money market, investing outside of India, accepting investments from non-resident Indians, and managing remittances of foreign currency. Therefore, the statement that mutual funds need to comply with RBI's regulations is true.

Mutual funds are financial vehicles that pool money from multiple investors to invest in a diversified portfolio of securities. In order to operate and trade on exchanges, mutual funds must adhere to the rules and regulations set by those exchanges. These rules ensure fair and transparent trading practices, protect investors' interests, and maintain market integrity. Therefore, it is true that mutual funds need to comply with the rules of the exchanges with which they choose to have a business relationship.

Schemes other than ELSS and RGESS cannot remain open for subscription for a maximum of 21 days.

SEBI, or the Securities and Exchange Board of India, is the regulatory authority for securities markets in India. It was established in 1988 and operates under the jurisdiction of the Ministry of Finance. SEBI's main objective is to protect the interests of investors and promote the development and regulation of the securities market in India. It regulates various participants in the market, such as stock exchanges, brokers, and listed companies, and ensures fair and transparent trading practices.

Mutual Funds in India do not have a self-regulatory organization (SRO) established for themselves. As a result, they are directly regulated by the Securities and Exchange Board of India (SEBI). This means that SEBI is responsible for overseeing and monitoring the operations and activities of mutual funds in the country. Therefore, the statement "Mutual Funds in India have not constituted any SRO for themselves. Therefore, they are directly regulated by SEBI" is true.

In the case of post-NFO investment, it is required to send the statement of accounts to investors within 10 working days of the investment. This means that after an investor has made an investment, the investment company or institution is obligated to provide the investor with a statement of their accounts within 10 working days. This statement will typically include details such as the amount invested, any returns or gains, and any fees or charges incurred. Therefore, the statement is sent to investors within the specified timeframe.

AMFI is the correct answer because it stands for Association of Mutual Funds in India, which is not an SRO (Self-Regulatory Organization). SROs are organizations that regulate and oversee specific industries or professions. BSE (Bombay Stock Exchange), NSE (National Stock Exchange), and ICAI (Institute of Chartered Accountants of India) are all examples of SROs in their respective fields.

The Asset Management Companies are required to follow the standards of good practices spelled out by the AMFI Code of Ethics. This means that they must adhere to the ethical guidelines and principles set by the Association of Mutual Funds in India (AMFI) while conducting their business operations and managing the mutual funds. These standards ensure transparency, fairness, and integrity in the dealings of the Asset Management Companies with their investors and other stakeholders.

The statement suggests that the investment objective is decided more frequently than the investment strategy and investment policy, which is incorrect. In reality, the investment objective is typically established at the outset of the investment and remains relatively stable, while the investment strategy and policy may be adjusted more frequently based on market conditions and other factors. Therefore, the correct answer is False.

AMFI, or the Association of Mutual Funds in India, is an industry body created to promote the interests of the mutual funds industry. It is a self-regulatory organization (SRO) that was established by the mutual funds industry in 1995, under the guidance of the Securities and Exchange Board of India (SEBI). AMFI plays a crucial role in the development and regulation of the mutual funds industry in India, by setting ethical and professional standards, promoting investor education, and advocating for the interests of its members.

The correct answer is the Fifth Schedule to the SEBI regulations for mutual funds. The AMFI Code of ethics complements and supplements the regulations mentioned in the Fifth Schedule to the SEBI regulations for mutual funds. This code of ethics provides additional guidelines and principles that mutual fund entities should adhere to in order to maintain ethical practices and protect the interests of investors. It helps in promoting transparency, integrity, and professionalism in the mutual fund industry.

SEBI has not mandated AMCs to put in place a due diligence process to regulate distributors who received commission of over Rs. 25 Lakhs from a single mutual fund. Therefore, the correct answer is False.

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AMFI, or the Association of Mutual Funds in India, is the correct answer. AMFI is an industry association that aims to promote the understanding and awareness of mutual funds among investors in India. They undertake nationwide investor awareness programs to educate people about the concept and functioning of mutual funds, with the objective of increasing investor participation in this investment avenue.

The correct answer states that at least 65% of the scheme's corpus will be invested in a particular kind of security or sector. This suggests that the scheme has a specific focus or specialization, and the majority of its investments will be concentrated in that area. This investment policy implies a higher level of commitment and concentration in a particular security or sector compared to the other options.

If a second violation by any intermediary is proved under the AMFI guidelines and norms, the consequence will be the cancellation of the registration of that intermediary. Additionally, intimation of this cancellation will be sent to all AMC (Asset Management Companies).

Mutual funds need to comply with the regulations of the RBI regarding investment in the money market, investments outside the country, and investments from people other than Indians resident in India. The RBI is responsible for overseeing and regulating the financial system in India, including the money market and foreign investments. Therefore, it is the correct answer in this context.

The correct answer is the Securities Appellate Tribunal. The Securities Appellate Tribunal is the designated authority to hear appeals against rulings made by SEBI (Securities and Exchange Board of India). It is an independent body established under the SEBI Act, 1992, and has the power to adjudicate on matters related to securities and capital markets. Therefore, if someone wants to file an appeal against a ruling of SEBI, they should approach the Securities Appellate Tribunal.

Statement of Account should be sent to all investors, regardless of their activity or inactivity. It is important for investors to receive regular updates on their investments, even if they have not transacted in the past 6 months. This helps them stay informed about their holdings and any changes in their investment value. Therefore, the statement that dormant investors do not require a Statement of Account is false.

The details of the portfolio that the mutual fund scheme shall maintain are described in the investment policy. This policy outlines the guidelines and rules for the fund's investment activities, including the types of securities it can invest in, the risk tolerance, diversification requirements, and any other specific restrictions or requirements. The investment policy helps investors understand how the fund will manage their money and make investment decisions to achieve its objectives.

Statutory regulatory bodies, when they exist, hand over the responsibility of micro regulation to the SRO (Self-Regulatory Organization) and focus on establishing the broad policy framework. This means that the government bodies delegate the detailed regulation and oversight of specific industries or sectors to the SRO, allowing them to manage and enforce the regulations within their domain. The government bodies still maintain their role in setting the overall policy direction and framework within which the SRO operates.

Open-ended schemes, other than ELSS, have to re-open for ongoing sale/re-purchase within 5 business days of allotment. This means that once the initial allotment of units is made to investors, the scheme must be made available for further investment or redemption within 5 business days. This allows investors to continue buying or selling units of the scheme after the initial allotment period.

The AMC is bound to issue unit certificates within 30 days from the date of receipt of the request from a unit-holder. This means that if a unit-holder requests for unit certificates, the AMC is legally obligated to provide them within a maximum period of 30 days.

The statement is false because the investment objective of a diversified equity scheme is solely focused on achieving growth by investing in equity and equity related investments. It does not include any mention of income generation through debt and money market instruments.

Market players in a developed world commonly create Self Regulatory Organizations (SROs) to regulate their own members. SROs are independent bodies established by industry participants to set and enforce rules and regulations for their members. These organizations help maintain ethical standards, ensure fair practices, and protect the interests of both the market participants and the general public. By creating SROs, market players can effectively self-regulate their industry and maintain transparency and accountability within their own community.

A mutual fund scheme decides on its investment strategy more frequently compared to other factors such as investment restrictions, investment objective, and investment policy. Investment strategy refers to the approach or plan that the mutual fund scheme follows to achieve its investment objectives. This strategy can be adjusted or modified more frequently based on market conditions, risk factors, and other relevant factors. On the other hand, investment restrictions, investment objective, and investment policy are typically established at the inception of the scheme and may undergo changes less frequently.

Schemes, other than ELSS, are required to allot units or refund money to the unitholders within 5 business days of the closure of the NFO. This means that once the new fund offer (NFO) period is over, the scheme has a maximum of 5 business days to complete the allotment or refund process. This ensures that investors receive their units or money in a timely manner and helps maintain transparency and efficiency in the mutual fund industry.

Mutual funds are required to publish their Net Asset Value (NAV) in newspapers to provide transparency to investors. The correct answer states that mutual funds have to publish their NAV in at least 2 newspapers. This means that they must choose a minimum of 2 newspapers to disclose their NAV information, but they can choose to publish it in more than 2 newspapers if they wish.

The correct answer is "Once every calendar quarter within 10 working days of the end of the quarter". This means that the statement account for an ongoing SIP (Systematic Investment Plan) is sent to the investor once every calendar quarter (every three months) within 10 working days of the end of the quarter. This allows the investor to review their investment activity and the performance of their SIP on a regular basis.

The statement is false. In the event of a breach of the Code of Conduct by an intermediary, the registration is not cancelled immediately. Instead, an investigation is conducted to determine the extent of the breach and appropriate actions are taken based on the findings. Intimation may be sent to all AMCs if necessary, but the cancellation of registration is not an immediate consequence of the breach.

The statement is false because in the case of RGESS (Rajiv Gandhi Equity Savings Scheme) schemes, the offering period is required to be open for a minimum of 90 days, not thirty days. This allows investors enough time to consider and make informed decisions about investing in the scheme.

The correct answer is "Within 10 working days of the investment." After an investor makes an investment in NFO (New Fund Offer), the statement of accounts should be sent to them within 10 working days. This allows investors to have a clear understanding of their investments and track their performance. It is important for investors to receive these statements in a timely manner to make informed decisions regarding their investments.

The correct answer is within 5 business days of the closure of the NFO. After the New Fund Offer (NFO) is closed, the period within which the statement of accounts should be sent to investors is within 5 business days. This allows investors to receive a detailed report of their investments and helps them keep track of their portfolio.

The broad investment charter of a mutual fund scheme is defined by its investment objective. This objective outlines the fund's overall goal and purpose, such as generating income, achieving capital appreciation, or balancing risk and return. It guides the fund manager in making investment decisions and determines the types of assets the fund will invest in. The investment objective is a crucial factor for investors to consider when choosing a mutual fund, as it aligns with their own investment goals and risk tolerance.

The investment policy of a mutual fund scheme does not describe the kind of portfolio that will be maintained by the scheme in greater detail. The investment policy outlines the general investment objectives and strategies of the scheme, but it does not provide specific details about the portfolio composition. The portfolio composition is typically determined by the fund manager based on the investment policy and market conditions. Therefore, the statement is false.

The statement is false because AMFI has not issued guidelines to all market intermediaries relating to the circulation of unauthenticated news through various modes of communication.