A mutual fund is set up in the form of a trust, which includes trustees, AMC and custodian. The trust is established by a sponsor or more than one sponsor who is like the promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Either the sponsor should appoint four trustees or establish a trustee company with at least four independent directors. Additionally, at least two thirds of the trustees or the directors should be independent and not associated with the sponsor in any way. All the schemes launched by the AMC have to be approved by the trustees prior to launch. The trustees will be reviewing all the transactions of the AMC on a quarterly basis while filing reports to SEBI on a half yearly basis.

Asset Management Company (AMC) is approved by SEBI and is responsible for managing funds by making investments in various types of securities. The Custodian is registered with SEBI and holds the securities of various schemes of the fund in its custody. All mutual funds are required to be registered with SEBI before they launch any scheme. The detailed working of above stated entities will be discussed in latter parts of the module.