Investor services

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Investor Services

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Mutual Fund Investors
• Investors Eligible to Invest in Mutual Fund Schemes
• Individuals
• Hindu Undivided Families (HUFs) through Karta
• Companies & Partnership Firms
• Trusts & Charitable Institutions
• Banks & Financial Institutions
• Non-banking Finance Companies (NBFCs)

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• Insurance Companies, Provident Funds, Mutual Funds
• Foreign Institutional Investors (FIIs)
• Non-Resident Indians (NRIs) / Persons of Indian Origin (PIOs)
• Army / Navy / Air Force, other eligible institutions
• Scientific and Industrial Research Organizations
• Universities and Educational Institutions
• Advisor should check offer document to know the eligibility criteria
Mutual Fund Investors

4. 4
• Following persons can not invest in Mutual Fund Schemes in India
• An individual who is Foreign National unless he is NRI or
PIO/OCI(Overseas Citizenship of India) Card holder
• Any entity that is not an Indian resident as per FEMA except FII
registered with SEBI
• Overseas Corporate Bodies (OCBs) i. e. Societies / Trusts held to
the extent of over 60% by NRIs
• The ‘Who Can Invest’ Section of the Offer Document of a Scheme
specifies the categories of investors eligible to invest in a Mutual
Fund Scheme
Retail and Institutional Investors

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The individual investor category includes retail investors, HNIs, minors and
NRIs
• Retail investors may depend upon the distributor to provide the
information and analysis
• HNIs may demand a better quality of service.
• Minors can invest through a guardian
Institutional Investors
• Approval of management committees and board of directors
• Board’s resolution and charter of the institution are required
authorized signatories
Retail and Institutional Investors

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Investors Information
• An application can have 3 joint holders
• Investments jointly or on either or survivor basis
• Signature is the identity of the investor
• Signatures for all joint holders as per holding pattern
• Address of the investor is to enable physical identification of the
investor’s location
• No post box numbers accepted

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• Bank account detail is a mandatory detail
• Sending dividends and redemption proceeds
• Folio Number is allotted on the first purchase
• Investors can hold units of multiple schemes of a fund house, under
one folio
• Subsequent investments can be made by quoting the existing folio
number
Investors Information

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Know Your Customer(KYC)
• It is compulsory from 1st Jan 2011 that all investments done in mutual
funds has to be compliant with the regulatory requirements.
• Proof of identity of the customer, proof of residence, Permanent
Account Number ( PAN CARD ) and photograph are verified to comply
with KYC norms
• Identified service provider: CSDL Ventures Ltd (CVL)
• Investor has to provide original documents along with a copy to Points
of Service

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• KYC once completed, is valid across Mutual Funds
• Investors just need to submit photocopy of the KYC
acknowledgement along with application form for making
investment in any mutual fund scheme
• KYC is mandatory for all joint holders also in a folio
• In case of investment by minor, Guardian has to be KYC compliant
• In case of investment is made by POA, then both investor and POA
holder has to be KYC compliant
• It is available for NRIs.
• This relaxation is not available to HUFs, Non individuals and PIOs.
Know Your Customer (KYC)

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• PAN Card is compulsory for all investors in Mutual Funds, irrespective of
invested amount(Exception : Micro-SIP)
• Micro-SIP are exempted from requirement of PAN Card
• Annual investment does not exceed Rs.50,000 made by individuals,
NRIs, minors and sole-proprietary firms
• Exemption not available for HUFs and PIOs or non-individual
investors
• Photo identification is must even for Micro–SIP investors
• Investor is also required to provide an undertaking that their total
micro-SIP investments across all mutual funds in a year do not exceed
Rs.50,000
PAN and Micro-SIP

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• Dematerialization is a process whereby an investor’s holding of
investments in physical form (paper), is converted into a digital record.
• NSE and BSE have allowed the facility of buying and selling mutual
funds units through brokers
• Investor has to hold units in Demat form whenever units are purchased
through brokers
• For holding units in Demat form, Demat Account has to be opened
with a Depository Participant(DP) who is generally a Bank or a Broker
• When units are purchased / sold number of units in Demat Account is
increased / reduced
Demat Account

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• Benefits of Demat Account are
• Less paper work in buying and selling units
• Direct credit of bonus units
• Change of address to be intimated only to DP
• Investor can convert Demat units into physical form. This is called
re-materialization
Demat Account

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Transactions with Mutual Funds
• Application forms for investing in mutual fund schemes can be
• Downloaded from AMC website
• Obtained from distribution channels
• Application through internet allowed
• Fresh purchases are made by investors by submitting an application
form complete in all respects
• Open a new folio
• Minimum investment amount

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• Additional Purchases are subsequent purchases after fresh purchase
• Can be made under the existing folio using a transaction slip
• Minimum additional investment amount
• Transaction Slip
• Folio number to identify the investor
• Used for redemptions, additional purchases, switches and non-
financial transactions
• Has to be signed according to the mode of holding
• Online buying and selling of units can be done by exiting mutual fund
investor
Transactions with Mutual Funds

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Payment mechanism for purchase & additional purchase
Application Supported by Blocked Amount (ASBA) –
• This is a facility where the investment application is accompanied by an
authorization to the bank to block the amount of the application money
in the investor’s bank account. (Facility available only for NFO)
• The benefit of ASBA is that the money goes out of the investor’s bank
account only on allotment. Until then, it keeps earning interest for the
investor.
• M-Banking is nascent in India. RBI has permitted banks to offer the
facility of transferring up to Rs 50,000 per customer per day.
ASBA cannot be used for the purchase of ongoing scheme

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Payment Procedure for purchase / additional Purchase
• Mutual Funds do not accept payment in cash or through money orders
• Local cheques / Demand drafts are accepted
• Outstation cheques with at par payment facility accepted
• Payment instrument should not be post-dated (except for SIP) or stale
• Remittance can made directly to the Bank Account of the Scheme
through RTGS / NEFT / SWIFT - Widely used for making liquid fund
purchases by institutional investors
• ECS / Direct Debit convenient form for SIP
• Application Supported by Blocked Amount(ASBA)
• Mobile Banking (M-Banking) up to Rs. 50,000

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Payment Procedure for NRIs and FIIs
• Source of funds determines repatriability of funds on re-purchase
• Non-resident external (NRE) -Foreign currency accounts
• Funds can be repatriated on re-purchase
• Non-resident ordinary (NRO) -Indian rupee accounts
• Funds cannot be repatriated on re-purchase

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• Foreign currency non-resident (FCNR) -Payment remitted from abroad
• Foreign Inward Remittance Certificate (FIRC) is a proof that an
individual has received a payment in foreign currency from outside
the country given by Indian banker.
• Re-purchase to NRIs are subject to TDS on the capital gains made in the
transaction
• Redemption proceeds to NRIs are in Indian rupees
• FIIs use non-resident rupee accounts for investments in India
• Funds fully repatriable on re-purchase
Payment Procedure for NRIs and FIIs

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• Re-purchase may be specified in terms of units or rupees
• The repurchase price is the applicable NAV minus exit load
• Re-purchase request has to be signed by joint holders as per mode of
holding
• If a re-purchase request reduces the balance to below minimum limit,
then all the units standing to the credit of the folio will be redeemed and
the folio closed
• Proceeds are sent by direct credit or cheques
• Service re-purchase requests within 10 working days
• Failing this, AMCs have to pay a penal interest of 15% per annum to the
unit holders
Repurchase can be done in units as well as amount
Repurchase of Units

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Cut-off Time
• NAV is computed on business days for all Schemes
• Except Liquid Funds, for which NAV is computed every calendar day
• Cut-off time varies for Liquid Fund purchases
• Historical NAV is possible
• For all non-Liquid Funds, the applicable NAV is prospective
• Liquid Fund investments and Debt Funds investments above Rs.1 crore
are subject to realization of funds

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• The cut-off timing is not applicable for NFOs and International
Schemes
• Applications for purchase / re-purchase of units are time stamped and
date stamped
• For on line and Stock Exchange transactions the time as per web server
is taken to determine NAV for sale / re-purchase transactions
Cut-off Time

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Cut-off Time and Applicable NAV
Transaction Cut-off Time Applicable NAV
Liquid Fund Purchases
12.00 noon(now,2.00
pm)
NAV of the day prior to
the day on which clear
funds are available
Liquid Fund
Repurchase
3.00 pm NAV of Transaction Day
Non-Liquid Fund
Purchases
3.00 pm NAV of Transaction Day
Non-Liquid Fund
Repurchases
3.00 pm NAV of Transaction Day

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Time Stamping
• Record the time at which a transaction was received at an official
Points of Acceptance(PoAs)
• The electronic time stamp is mandatory to determine the applicable
NAV for a financial transaction
• The location code, machine identifier, date, time (hh : mm) and
running serial number are generated in every time stamp

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• The time stamping machine records three impressions for purchase:
• the application form or transaction slip,
• the back of the payment instrument and the acknowledgement.
• For redemption transactions all 3 impressions are on the redemption
request.
• These POA`s have time stamping machines with tamper-proof seal.
(Opening / repairing or maintenance is permitted only to vendors or
nominated persons of mutual Fund. & has to be documented &
informed to trustees)
Time Stamping

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Transactions Through Stock Exchange
• Transactions are placed like orders to the brokers
• Contract Note generated with an electronic time stamp
• Sale and Re-purchase requests are handled by brokers
• Allotment of units on sale and release of funds on re-purchase is
handled by R&T agents
• Responsibility of settlement lies with the AMC and R&T agents

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• May be in physical form or through Demat Account
• Demat statement is considered as the SoA to the investor
• Demat transactions are settled through depository
• Physical transactions are settled through R&T Agent.
• NSE platform is called – NEAT MFSS
• BSE platform is called – BSE Star
• Both platforms are open from 9 am to 3 pm on every working day.
Transactions Through Stock Exchange

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Options under Mutual Fund Schemes
• The underlying portfolios for all options are the same, only post-tax
returns are different
• Options offered under Mutual Fund Schemes are usually as under
• Dividend Payout option
• Fund declares dividend from realized profits after Trustee approval
• Amount and frequency varies and depends upon distributable
surplus
• Ex-dividend NAV and Cum-dividend NAV
• NAV falls after dividend payout to the extent of dividend paid

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• Dividend Reinvestment option
• Dividend is re-invested in the same Scheme by buying additional
units at the ex-dividend NAV
• No. of units increases
• Growth option
• Gains made in the portfolio are retained and reflected in NAV
• Realized profit/loss is treated as capital gains or loss
Options under Mutual Fund Schemes

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Investment Options – An Example
Particulars Dividend Payout Dividend Reinvestment Growth
NAV at the beginning Rs 10/- Rs 10/- Rs 10/-
Number of Units Bought 100 100 100
NAV after 1 year Rs 12/- Rs 12/- Rs 12/-
Dividend of 10%
declared
Yes Yes No
Dividend Amount Rs 100/- Rs 100/- Nil
NAV post-dividend 1100/100=Rs 11/- 1100/100=Rs 11/- Rs 12/-
No. of units held 100 100+(100/11)
=109.09
100
Value of investment 100*11=1100 109.09*11=1200 100*12=1200
Pre-tax Return on
Investment
Rs 100/- dividend + Rs
100/- Capital Gain
Rs 100/- dividend + Rs
100/- Capital Gain
Rs 200/- Capital Gain

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Systematic Investment Plan
• A fixed sum is invested periodically into a Mutual Fund Scheme
• Applicable NAV is the NAV on the date of the installments
Rupee cost averaging
• Period of commitment in SIP can vary e.g. 6 months, 1 year, 3 years, 5
years
• At specific intervals investment must be made e.g. monthly, quarterly,
half-yearly
• Investment is made on specific dates e.g. 1st , 5th , 10th , 15th of every
month
• Can be initiated along with NFO
• Payment modes–Post-dated cheques, electronic clearing service,
standing instruction for direct transfer
Investment Plans

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Systematic Withdrawal Plan & Systematic Transfer Plan
Systematic Withdrawal Plan (SWP)
• Periodic redemptions at the prevailing NAV (less exit load as
applicable)
• Investors periodically book profits and generate regular income
• Investor must specify the date of withdrawal, the period of
withdrawal
• May be specified in terms of number of units or amount

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Systematic Transfer Plan (STP)
• Periodically a specified sum is transferred from one scheme to
another within the same fund house
• Re-purchase from source scheme
• Investment of re-purchase proceeds into the destination scheme
• SWP from source scheme and SIP into destination scheme
• It is also called “switch” when not done systematically
• Exit loads not charged for switch within options
• Exit loads charged as applicable for inter-scheme switch
• Capital gains apply, STCG/LTCG
Systematic Withdrawal Plan & Systematic Transfer Plan

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• Triggers
• Automated purchase, redemption, switch or dividend decisions
based on pre-defined events
• Pre-defined event may be Sensex levels, return targets etc.
• Mutual Funds cannot give loan against fund units
• Mutual fund units can be pledged to borrow funds from Banks, NBFCs,
etc.
• Loan amount depends on the value of units on the date of borrowing
and margin
• Units pledged are marked under lien in the folio and cannot be
redeemed
Other Services offered by Mutual Funds

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• Nomination facility allowed (KYC documents required from nominee
along with death certificate of deceased and indemnity before transfer
of units)
• Nomination request has to be signed by all joint holders
• A minor can be a nominee
• Statement of Account and Investment Certificate
• Online access to information on investments for investors
• Daily NAV through SMS /E-mail
• Transactions through Phone/Internet/E-mail
Other Services offered by Mutual Funds

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Other Investment services
Pledge
• Mutual funds units can be pledged by unit holders. Same can be affected
by pledge form executed by unit holders.
• Once the units are pledged the units can not be sold or transferred until
the pledgee gives no-objection to release the pledge.
• Online Access to information on investments including consolidated
view of various folios that related to different family members.
• Daily NAV and other key developments transmitted through SMS/email

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Questions
Q-1: Investor A has opted for a systematic transfer plan. This means
(a) The investor is allowed to transfer on a periodic basis a specified
amount from one to another scheme within the fund family.
(b) A specified amount is automatically transferred from his bank
account to his fund account
(c) The investor can withdraw specified amounts at periodic intervals.
(d) The investor can invest any amount in the scheme at periodic
intervals

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Q-2: Which of the following is not true with respect to the SWP?
(a) Allows the investor to make systematic withdrawals on a regular
intervals
(b) Here the amount withdrawn is treated as the redemption of units
(c) SWP is same as the Monthly Income Plan
(d) None of the above.
Questions

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Q-3: Which of the following is not true with respect to the voluntary
accumulation plan?
(a) It give the flexibility to the investor regarding the amount to be
invested
(b) It give the flexibility to the investor regarding the frequency of
investment
(c) VAP follower is obliged to keep investing
(d) None of the above.
Questions

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Q-4: Mutual funds transaction on stock exchange are governed
by stock exchange redressal system.
(a) True
(b) False
Questions

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Q-5: An investor is doing a liquid investment, fund is available and time is
12.30. NAV would be applicable for the ________
(a) Next working day
(b) Same Day
(c) Closing NAV of Day immediately preceding the date of application
(d) Closing NAV of Day immediately preceding next business day
Questions

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Q-6: Cut-off time for NAV is ………………………….
(a) Decided by AMC
(b) same for all schemes
(c) By Trustee
(d) Prescribed by SEBI
Questions

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Q-7: For a customer holding units in demat , the AMC also requires to do
his KYC.
(a) True
(b) False
Questions

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Q-8: Foreign exchange can be remitted through
(a) NEFT
(b) RTGS
(c) SWIFT
(d) All of the above
Questions

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Q-9: NRI can not make repartition investment in MF using demand draft.
(a) True
(b) False
Questions

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Q-10: Which is the fastest way of remitting funds on real time basis?
(a) NEFT
(b) Demand Draft
(c) SWIFT
(d) RTGS
Questions

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Q.11: In case of joint holding , on redemption , the proceeds are paid to
the …………………………………
(a) Nominee
(b) Last holder
(C) First holder
(d) as per the request of holder
Questions

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Q.12: The maximum number of joint holders can be
(a) 2
(b) 3
(c) 4
Questions

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Q.13: The investor is given which of the following as proof of purchase
(a) Unit certificate
(b) An account statement
(c) A pass book
(d) None of the above
Questions

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Q.14: Mutual fund in India do not offer
(a) Nomination and transfer facilities
(b) Redemption of units
(c) Loans against units
(d) Unit certificate
Questions

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Q.15: What is difference between SIP and VAP
(a) SIP is systematic investment and VAP is value avaraging plan
(b) No relation
(c) Vap is modified version of sip that allows the investors flexibility
with respect to amount and frequency of Investment
(d) Sip is systematic plan and vap is Withdrawal paln
Questions

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A-1 : (a)
A-2 : (c)
A-3 : (c)
A-4 : (b)
A-5 : (d)
A-6 : (d)
A-7 : (b)
A-8 : (c)
A-9 : (a)
A-10: (d)
A-11: (c)
A-12: (c)
Answers for Revision
A-13 : (b)
A-14 : (c)
A-15 : (c)