A regulatory framework for mutual funds

Abstract

One major change that has taken place in the financial services industry is the establishment of a large number of mutual funds. Though only nationalised banks and financial institutions are permitted to set up these funds there is increasing pressure to allow such funds to be set up in the private sector. It is time therefore to introduce appropriate legislation to govern the functioning of mutual funds. This paper discusses the various issues connected with the operation of mutual funds and proposes a set of regulations to ensure that they are effective. The proposed regulations draw heavily on the Investment Company Act of 1940, the US legislation on operation of investment companies.