Mutual Funds:
Context:
The Securities and Exchange Board of India (SEBI) has proposed major changes to mutual fund regulations to reduce investor costs and to make them simpler.
The markets regulator said that the proposals contained provisions to do away with old rules, simplify the language, and rationalise fee structures.
What is a Mutual Fund?
It is a Common pool of funds contributed by investors.
It pools money from many investors and invests that money into a portfolio of securities such as:
stocks(equities),
bonds or debts
Money Market Instruments (Short-term)
The investments are legally held in a trust
The investors alone are the joint beneficial owners of the assets held by the trust.
Mutual funds can operate both in the money market and in the capital market, depending on the type of mutual fund scheme. For example,
short-term debt or money market instruments like treasury bills, commercial papers.
shares, bonds, and long-term debt instruments operate in the capital market
How a Mutual Fund Works?
The fund is called mutual because there is mutuality in the contribution and the benefit
Regulator:
The primary regulator for mutual funds in India is the Securities and Exchange Board of India (SEBI).
It sets and reviews mutual fund regulations to make them simpler and reduce investor costs.
It approves the appointment of the Asset Management Company (AMC) by the trustees.
It provides investor education and awareness, maintains an investor website (investor.sebi.gov.in) a mobile app (Saathi), and a grievance redressal platform (SCORES).