Explained: What Is Meant by AMC Regulation?

AMC Regulation: If you are new to investing, you may have heard the term “AMC” a number of times. AMCs are one of the most important parts of the investment market, with a substantial market influence.
Let’s understand what AMCs are, what they actually do, and how they are regulated.

What is AMC?

In exchange for a fee, an Asset Management Company (AMC) invests funds pooled from individual investors in various asset classes with the goal of maximising returns for investors.

AMCs provide more diversification and investment opportunities to retail investors since they have a bigger pool of resources than an individual investor could access on their own. Buying for so many clients helps AMCs benefit from economies of scale, typically resulting in a price reduction on their purchases.

The money is invested in a variety of assets, such as stocks, real estate, bonds, loans, cryptocurrency, and so on. Asset management firms employ specialists known as fund managers to oversee investments, while the research team identifies the best opportunities.

Regulation of AMCs

Every country’s government imposes rules and regulations on AMCs in order to protect the interests of retail investors.

In the United States, the asset management sector is primarily supervised by two organisations: the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Although they are distinct, there is an overlap between these agencies.

The SEC regulates investment advisors that handle more than $110 million in assets (AUM). Advisors who manage assets below this threshold also need to register with their respective states.

According to the SEC, registration does not imply endorsement of any particular investment manager or adviser. Instead, it just implies that the company has made certain disclosures and has agreed to follow SEC laws. Companies regulated by the SEC are subject to unscheduled audits.

Apart from the SEC, AMCs in America can be regulated by the Financial Industry Regulatory Authority (FIRA), the Federal Reserve, the U.S. Treasury Department, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) according to context and their jurisdictions.

In India, AMC operates under the supervision of the trustee board, which reports to India’s capital market regulator, the Securities and Exchange Board of India (SEBI). The RBI is also important in regulating AMCs. Finally, the Ministry of Finance serves as the central authority for all of these regulators. According to regulations, the AMC’s net worth should be less than ₹10 crore.

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