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SEBI (Securities and Exchange Board of India) can be compared to the legal authority responsible for regulating and overseeing the mutual fund industry, much like RBI (Reserve Bank of India) polices banks.
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AMFI (Association of Mutual Funds in India) can be likened to a group of mutual funds coming together for their collective interests, somewhat similar to a neighborhood association.
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SEBI has the authority to establish rules and regulations for the mutual fund industry and can audit mutual funds to identify and penalize any discrepancies in their operations.
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AMFI, on the other hand, primarily focuses on the interests of mutual funds and may resist certain changes proposed by SEBI if they believe it doesn’t align with their interests. For instance, the introduction of direct funds.
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The analogy of approaching local authorities for road repair highlights that different entities may have varying opinions on the quality and scope of regulations in the mutual fund industry, just as different people may have differing views on road repair needs.
AMFI is like a rule-making group for Indian mutual funds, founded in 1995 to make sure the industry grows in a good and ethical way. Every company that manages mutual funds in India is part of AMFI.
SEBI is like the boss in charge of overseeing the stock market and mutual funds in India. It started in 1992 because of a law called the Securities and Exchange Board of India Act, 1992.
AMFI Self-regulatory organization (SRO) To develop the Indian mutual fund industry on professional, healthy and ethical lines.
SEBI Statutory - To regulate the securities market in India, including the mutual fund industry
Other key differences:
AMFI is a voluntary organization, while SEBI is a statutory body.
AMFI’s members are AMCs, while SEBI regulates all participants in the securities market, including AMCs, stock exchanges, brokers, and investors.
AMFI’s primary function is to promote the growth and development of the mutual fund industry, while SEBI’s primary function is to protect the interests of investors and ensure fair and orderly trading in the securities market.
Relationship between AMFI and SEBI:
SEBI is the apex regulatory body for the Indian securities market, including the mutual fund industry. AMFI works under the guidance of SEBI to promote the growth and development of the mutual fund industry in a fair and transparent manner.
Examples of AMFI’s activities:
AMFI conducts investor education and awareness programs to help investors understand mutual funds and make informed investment decisions.
AMFI develops and enforces codes of conduct for AMCs and other intermediaries in the mutual fund industry.
AMFI provides a forum for AMCs to discuss and resolve common issues.
AMFI represents the Indian mutual fund industry to the government and other regulatory bodies.
Examples of SEBI’s activities:
SEBI frames regulations and guidelines for the mutual fund industry.
SEBI registers and supervises AMCs and other intermediaries in the mutual fund industry.
SEBI investigates and prosecutes cases of fraud and other violations in the mutual fund industry.
SEBI redresses investor grievances.
Conclusion:
AMFI and SEBI play complementary roles in regulating and developing the Indian mutual fund industry. AMFI is a self-regulatory organization that promotes the growth and development of the industry, while SEBI is a statutory body that protects the interests of investors and ensures fair and orderly trading in the securities market.