This is the role of the Asset Management Company (the Third tier).
Trustees appoint the Asset Management Company (AMC), to manage
investor’s money. The AMC in return charges a fee for the services provided
and this fee is borne by the investors as it is deducted from the money
collected from them. The AMC’s Board of Directors must have at least 50% of
Directors who are independent directors. The AMC has to be approved by
SEBI. The AMC functions under the supervision of it’s Board of Directors, and
also under the direction of the Trustees and SEBI. It is the AMC, which in the
name of the Trust, floats new schemes and manage these schemes by buying
and selling securities. In order to do this the AMC needs to follow all rules and
regulations prescribed by SEBI and as per the Investment Management
Agreement it signs with the Trustees.
If any fund manager, analyst intends to buy/ sell some securities, the
permission of the Compliance Officer is a must. A compliance Officer is one of
the most important persons in the AMC. Whenever the fund intends to launch
a new scheme, the AMC has to submit a Draft Offer Document to SEBI. This
draft offer document, after getting SEBI approval becomes the offer
document of the scheme. The Offer Document (OD) is a legal document and
investors rely upon the information provided in the OD for investing in the
mutual fund scheme. The Compliance Officer has to sign the Due Diligence
Certificate in the OD. This certificate says that all the information provided
inside the OD is true and correct. This ensures that there is accountability and
somebody is responsible for the OD. In case there is no compliance officer,
then senior executives like CEO, Chairman of the AMC has to sign the due
diligence certificate. The certificate ensures that the AMC takes responsibility
of the OD and its contents.