Formation of board of amc and restrictions on directors, Financial Management

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Formation of Board of AMC and Restrictions on Directors

Having regard to the significant role of the Board of Directors of the AMC in rendering the company's operations efficiently, the Government has prescribed stringent qualifications for the members of the Board. According to the Guidelines, AMC should have persons on its Board of high repute and adequate professional experience in the relevant fields such as portfolio management, investment analysis, financial administration, etc. At least 50% of the directors on its Board should be independent persons not connected with the sponsoring organizations. The names of the directors and any subsequent changes must be intimated to SEBI. A director on the Board of AMC shall not be director on the Board of any other AMC. Further, a person who is a director of an AMC shall not hold the position of a trustee or director in a trust company of a fund operated by the same AMC. No person should be a Director/Trustee of more than one Trust Company/Board of Trustees.

SBI Mutual Funds and Canara Bank Mutual Funds have already incorporated their respective asset management companies. The asset management should have a networth of not less than Rs.10 crore.

Custodians for Mutual Funds

Mutual Funds run by the subsidiaries of the nationalized banks had their respective sponsor banks as custodians like, Canara Bank, SBI, PNB, etc. Foreign banks with higher degree of automation in handling the securities had assumed the role of custodians for Mutual Funds. Citibank has been a very prominent bank in this regard and acts as a custodian for UTI and SBI's funds. The Stock Holding Corporation of India (SHCI) is the custodian for various Mutual Funds. A few other foreign banks are also eager to act as custodians as they are well equipped with a network of telecommunication facilities and software support systems essential for efficient discharge of the role of the custodian. It is only because of this quality, the Indian Growth Fund (promoted by UTI Merrill Lynch) was shifted from SHCI to Citibank. Now SHCI is also fully equipped with the software support system and acts as a Custodian for Mutual Funds for SBI and other Mutual Funds schemes. Automation eliminates manual handling and reduces requisition and delivery time and brings efficiency in operations of a custodian.

 


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