IX. INVESTOR SERVICES

Table of Contents

Investor Services – Mutual Fund NFO Process

  1. New Fund Offer (NFO) Process Overview:
    • NFO is the initial offering of units in a mutual fund scheme to investors.
    • Standardization of investor services is crucial for a consistent and predictable experience.
    • Standardization helps investors understand what to expect and what not to expect.
  2. Key Steps in the NFO Process:
    • The Asset Management Company (AMC) selects a scheme based on inputs from the Chief Investment Officer (CIO) and Chief Marketing Officer (CMO).
    • AMC prepares the Scheme Information Document (SID), which requires approval from Trustees and the Board of Directors (BoD) of the AMC.
    • SID is filed with SEBI, and any observations made by SEBI are incorporated.
    • AMC determines the NFO timetable, considering market conditions.
    • Advertising and public relations campaigns are launched to create awareness about the NFO, complying with SEBI’s advertising code.
    • Events are conducted for intermediaries and the press to familiarize them with the scheme’s unique features and benefits.
    • Scheme Documents and Application Forms are distributed to market intermediaries and circulated in the market for investors to apply in the NFO.
  3. Dates in the NFO of an Open-Ended Scheme:
    • NFO Open Date: The date from which investors can invest in the NFO.
    • NFO Close Date: The date until which investors can invest in the NFO.
    • Scheme Re-Opening Date: The date from which investors can offer units for re-purchase or buy new units at respective prices.
    • Sale and re-purchase prices are announced by the AMC from the Scheme Re-Opening Date.
  4. Close-Ended Schemes:
    • Close-ended schemes have an NFO Open Date and NFO Close Date.
    • They do not have a Scheme Re-opening Date as units are not sold or re-purchased.
    • Investors buy or sell units from the stock exchange where the scheme is listed.
  5. SEBI Guidelines for NFOs:
    • NFOs (excluding ELSS) can remain open for a maximum of 15 days.
    • Allotment of units or refund of money should be completed within 5 business days after the scheme closes.
    • Open-ended schemes must re-open for sale/re-purchase within 5 business days of the allotment.

New Fund Offer (NFO) Price vs. Ongoing Offer Price

  1. NFO Price:
    • The NFO Price is the price per unit that investors need to pay during the New Fund Offer.
    • It is the initial price at which units of the mutual fund scheme are offered to investors during the NFO.
    • Investors can subscribe to the scheme at this price during the NFO period.
  2. Ongoing Offer Price:
    • The Ongoing Offer Price is the price at which investors can purchase, redeem (sell), or switch out units in the mutual fund.
    • It applies after the NFO period has ended and the scheme is open for regular subscriptions and redemptions.
    • Investors can buy additional units or sell/switch out their existing units at the prevailing ongoing offer price.

Note: To present this information in a table format, you can use the following structure:

Type of PriceDescription
NFO PricePrice per unit during the New Fund Offer (NFO) period
Ongoing Offer PricePrice for purchase, redemption (sale), or switch-outs

Investment Plans and Services

  1. Direct and Regular Plans:
    • Investors have the choice to invest directly through the Asset Management Company (AMC) or through distributors.
    • Each mutual fund offers two plans: regular plan and direct plan.
    • Direct plans have a lower expense ratio as they exclude distribution expenses and commissions. No commission is paid from direct plans.
    • Regular plans have a higher expense ratio as they include distribution expenses and commissions.
    • Both plans have separate Net Asset Values (NAVs).
  2. Income Distribution cum Capital Withdrawal (Dividend) Options:
    • Mutual fund schemes typically offer three options: Income Distribution cum Capital Withdrawal, Growth, and Reinvestment of Income Distribution cum Capital Withdrawal.
    • The dividend option has been renamed to Income Distribution cum Capital Withdrawal from April 1, 2021, to reflect the actual income situation for investors.
    • All three options have the same portfolio returns but differ in cash flows, income accruals, tax implications, and the number and value of units held.
    • In the Pay-out option, the fund declares dividends, resulting in a decline in NAV. The investor receives the dividend in their bank account, but the number of units held remains the same.
    • In the Reinvestment option, dividends are reinvested in the same scheme at the ex-dividend NAV. Additional units are allotted to the investor.
    • In the Growth option, no dividends are declared. The NAV captures the full value of portfolio gains, but there is no increase in the number of units held.

Note: The implications of different options can be summarized in a table format:

ParameterIncome Distribution cum Capital Withdrawal (Pay-out Option)Income Distribution cum Capital Withdrawal (Reinvestment Option)Growth Option
Dividend received in bank accountYesNoNo
Tax on DividendYesYesN.A.
Increase in number of units on account of reinvestment of dividendNoYesNo
NAV changeNAV declines to the extent of dividendNAV declines to the extent of dividendNAV captures the portfolio gain

Allotment of Units to the Investor

  1. NFO Allotment:
    • Units in a New Fund Offer (NFO) are sold at the face value, typically Rs. 10 per unit.
    • The number of units allotted to the investor is determined by dividing the investment amount by the face value.
    • All valid applications received during the NFO period, subject to meeting the specified minimum subscription amount, are fully allotted.
    • The Trustee reserves the right to reject any application without providing a reason.
    • Allotment is completed within 5 business days after the closure of the NFO.
    • For applicants who have provided their demat account details, the units are credited within 2 working days to their demat accounts.
  2. On-Going Offer Allotment:
    • In an on-going offer for an open-end scheme, units are sold to investors at the applicable Net Asset Value (NAV).
    • The sale price is equal to the NAV since entry load is not permitted.
    • The number of units allotted to the investor is determined by dividing the investment amount by the sale price (NAV).
  3. Rights Issue and Bonus Issue:
    • In a rights issue, the units are offered at a specific price, and the number of units allotted is determined by dividing the investment amount by the rights price.
    • In a bonus issue, no payment is required, and new units are allotted for free. The ratio of new units depends on the bonus issue (e.g., 1:3 means 1 new unit for every 3 existing units).
  4. Allotment Process:
    • Allotted units are credited to the investor’s demat account if they have opted for receiving dematerialized units.
    • Dematerialized units are fully transferable.
    • In case of application rejection, the full amount is refunded within 5 business days from the closure of the NFO. Any delay in refund attracts 15% p.a. interest, payable by the AMC.

Note: The information can be presented in a table format for a clearer visual representation of the allotment process and options:

Type of Offer/IssueAllotment Process
NFOUnits sold at face value (Rs. 10 per unit). Number of units allotted is investment amount divided by 10.
On-Going OfferUnits sold at applicable NAV. Number of units allotted is investment amount divided by the NAV.
Rights IssueUnits offered at a specific price. Number of units allotted is investment amount divided by the price.
Bonus IssueUnits allotted for free. Ratio determined by the bonus issue.
Allotment ProcessAllotted units credited to demat account (if opted for). Demat units are fully transferable.
Refund in Case of RejectionFull amount refunded within 5 business days. Delay attracts 15% p.a. interest payable by the AMC.

Account Statements for Investments

  1. Monthly Statement of Account:
    • Mutual funds issue a Monthly Statement of Account if there is a transaction during the month.
    • The statement includes details of each transaction (sale/re-purchase), such as transaction value, relevant NAV, and number of units transacted.
    • It also provides the closing balance of units held in the folio and the value of those units based on the latest NAV.
  2. Annual Account Statement:
    • Mutual funds provide an Annual Account Statement to unit holders who have not transacted in the last six months prior to the statement’s generation date.
    • The statement reflects the latest closing balance and value of units before the generation date.
    • Account statements may be generated and issued annually, or a soft copy may be sent to the registered email address of the investor if mandated.
  3. Consolidated Account Statement (CAS):
    • A CAS is sent by post/email each calendar month if there has been a financial transaction in the folio during the previous month.
    • If an email ID is registered with the AMC, the CAS is sent via email.
    • CAS is sent to investors based on their Permanent Account Number (PAN) for identification across mutual funds.
    • In cases where PAN is not available, individual account statements are sent since a consolidated statement cannot be generated.
    • If there are no transactions in a folio for any six-month period, a CAS detailing holdings across all schemes of all mutual funds is sent at the end of that period (i.e., September/March).
    • The periodicity and time limit for sending these account statements to investors are specified by SEBI.

Note: The information can be presented in a table format to summarize the types of account statements and their distribution methods:

Account StatementDescription
Monthly StatementIssued if there is a transaction during the month. Shows transaction details and closing balance.
Annual Account StatementProvided to unit holders with no transactions in the last six months. Reflects the latest balance.
Consolidated Account Statement (CAS)Sent monthly by post/email if there has been a financial transaction in the folio. PAN-based identification. Includes holdings across mutual funds.

Mutual Fund Investors: Eligibility and Sources of Information

  1. Eligibility to Invest:
    • Individual Investors:
      • Resident Indian adult individuals above the age of 18 can invest, either singly or jointly (not exceeding three names).
      • Minors (persons below the age of 18) need to invest through their guardians.
      • Hindu Undivided Families (HUFs) can invest with the head of the family (Karta) investing on behalf of the family.
      • Non-Resident Indians (NRIs)/Persons of Indian Origin (PIO) residing abroad can invest on a repatriable or non-repatriable basis.
      • Foreign investors can invest in equity schemes after completing the KYC process.
    • Non-individual Investors:
      • Companies, registered societies, co-operative societies, religious and charitable trusts, private trusts, partnership firms, associations of persons, banks, financial institutions, investment institutions, mutual funds, foreign portfolio investors, international multilateral agencies, eligible institutions, scientific and industrial research organizations, universities, and educational institutions can invest.
      • Specific classes of non-individual investors may be permitted in certain schemes.
  2. Sources of Information on Eligibility to Invest:
    • Individual investors can invest in any mutual fund scheme unless a specific scheme or plan within a scheme is not intended for any category of investors.
    • Non-individual investors can generally invest in any mutual fund scheme, but specific classes may be restricted in certain schemes.
    • It is recommended to check the “Who can Invest?” section of the Scheme Information Document (SID) to verify eligibility, especially for first-time investors.

Note: The information can be summarized in a table format:

Type of InvestorEligibility to Invest
Individual InvestorsResident Indian adults, minors (through guardians), HUFs, NRIs/PIOs, Foreign investors
Non-individual InvestorsCompanies, registered societies, trusts, partnership firms, banks, financial institutions, mutual funds, foreign portfolio investors, research organizations, universities, etc.
Sources of InformationCheck the “Who can Invest?” section of the Scheme Information Document (SID)

Filling the Application Form for Mutual Funds: Key Points

  1. Direct Plan and Regular Plan:
    • Investors can choose between a Direct Plan (investing directly without a distributor) or a Regular Plan (investing through a distributor).
    • For Direct Plan, mention “Direct” in the space provided for the AMFI Registration Number (ARN).
    • For Regular Plan, provide the ARN/RIA number and other details.
  2. Unit Holder Information:
    • A mutual fund investment can have up to three holders.
    • The primary investor is the first holder, and all benefits go to them.
    • Provide details such as name(s), nationality, identity proof, KYC compliance, signatures, address, and communication details.
    • Overseas address should be provided for FPI/NRI/PIO investors.
  3. Minor as a Unit Holder:
    • Minors (below 18 years) must invest through a guardian.
    • Guardian complies with KYC and PAN requirements.
    • Provide proof of age of the minor and establish the relationship/legal guardianship.
  4. POA as a Unit Holder:
    • Power of Attorney (PoA) holders must comply with KYC and PAN requirements.
    • Submit a certified copy of the PoA.
    • Grantor can continue to operate the account, except for nominations.
  5. Status of the Holder and Mode of Holding:
    • Provide the status of the first holder as an individual or non-individual.
    • Select the mode of holding and operating the account (single/joint/either or survivor).
    • Joint holders cannot be added or deleted, except in the event of death.
  6. KYC Details:
    • Provide the KYC acknowledgement letter for each holder.
    • Collect additional KYC details regarding occupation, income/net worth, and politically exposed persons status.
  7. FATCA and CRS Details:
    • Non-Indian applicants need to provide additional information under FATCA and CRS.
    • Include details of place/city of birth, country of birth, country of citizenship/nationality, and tax residency.
  8. Bank Account Details:
    • Provide bank account details of the sole/first holder.
    • Include bank name, branch, account number, type, MICR code, and IFSC details.
    • Bank details should match those linked to the demat account for holding units in dematerialized form.
  9. Investment Details:
    • Select the scheme, plan, option, and payout option.
    • Regular Plan involves a distributor, while Direct Plan does not.
    • Choose between growth and dividend options, with different dividend payout frequencies.
  10. Payment Details:
    • Specify the payment instrument and account used for the investment.
    • Mention the application number or folio number on the reverse of the payment instrument.
    • Dividends and redemption proceeds are credited directly to the bank account.
  11. Unit Holding Option:
    • Choose to hold units in physical or dematerialized form (demat account).
    • Provide beneficiary account details and depository participant (DP) information.
    • Dividends and redemption proceeds are paid to the bank account linked to the demat account.
  12. Nomination:
    • Nominate up to three individuals and indicate the percentage for each nominee.
    • Some funds may require a separate declaration if not nominating.
  13. Minimum Investment:
    • Refer to the Scheme Information Document (SID) for the minimum application amount.
    • Ensure the investment meets the minimum investment limit set by the mutual fund.
    • All holders must sign the application form, regardless of the mode of holding.

Financial Transactions with Mutual Funds

I. Initial Purchase of Mutual Fund Units:

  • Fresh purchase made during the new fund offer (NFO) period or in an ongoing open-ended scheme.
  • Application form and prescribed documentation required.
  • Existing investors can use the application form for fresh purchases or additional purchases in the same scheme.
  • Personal information provided in the application form is used to create the investor record or folio.

II. Additional Purchases:

  • Once an investor has a folio, subsequent investments don’t require a full application form.
  • Transaction slip with folio number and payment required for additional purchases.
  • Most mutual funds provide a transaction slip along with the Statement of Account.
  • Blank transaction slips are available at AMC branches, distributors, and ISCs.
  • Existing folio details override conflicting information in the application form.

III. Repurchase of Units:

  • Investor can offer units for repurchase to the mutual fund.
  • Transaction slip with folio number, scheme details, and re-purchase amount/units required.
  • Repurchase price is the applicable NAV less Exit Load.
  • Investor can specify the re-purchase amount or number of units.
  • Units are redeemed on a First-in-First-Out (FIFO) basis.
  • Redemption requests can be made physically or through a depository participant (DP) for dematerialized units.

IV. Switch:

  • A switch is a redemption from one scheme and a purchase into another combined into one transaction.

V. Payment Mechanism for Mutual Fund Purchases:

  • Payments should be made through approved banking channel modes.
  • Online transactions via internet banking, UPI, or digital payment mediums are convenient and secure.
  • ASBA (Application Supported by Blocked Amount) allows blocking the application money in the investor’s bank account.
  • AEPS (Aadhaar Enabled Payment Service) enables bank-to-bank transactions using the Aadhaar number.
  • NUUP (National Unified USSD Platform) facilitates mobile banking without a smartphone or internet.
  • Cards (debit, credit, prepaid) are commonly used for digital payments.
  • E-Wallets provide virtual wallets for making payments and transfers, subject to limits and regulations.
  • Other payment mechanisms include cheque/demand draft and cash (subject to restrictions).

VI. One-Time Mandate (OTM):

  • OTM allows authorization for the bank to process debits for mutual fund purchases.
  • Investors need to fill an OTM form to register a bank account for this facility.
  • OTM is valid at the folio level and eliminates the need for initiating payment with each transaction.
  • OTM can be used for physical, online, SMS, and other modes of transactions offered by the mutual fund.

VII. Other Payment Mechanisms:

  • Third-party payments are generally not accepted, except for specific cases with proper documentation.
  • Cash payments are allowed for small investors up to Rs. 50,000 per financial year, subject to compliance with regulations.
  • Instruments not accepted for payment include stock-invests, postal orders, money orders, outstation cheques, and post-dated cheques (except for systematic investments).

Payment Mechanism for Repurchase of Units:

I. Cheque:

  • Traditional approach with delayed receipt of money due to various processes involved.
  • Time taken by the AMC to prepare and send the cheque.
  • Time taken by postal authorities/courier to deliver the cheque.
  • Time taken by the investor to deposit the cheque in the bank.
  • Time taken by the banking system to transfer the proceeds to the investor’s bank account.

II. Electronic Modes:

  • Faster and more efficient than cheques.
  • Direct Credit from the mutual fund’s account to the investor’s bank account (if arrangement exists).
  • Other electronic modes include RTGS/NEFT/NACH, requiring account details (number, branch address, IFSC/MICR code).
  • Availability of electronic modes depends on geographic location and bank/branch relationship.
  • Cheques and demand drafts used if electronic modes are not available.

III. Redemption Proceeds:

  • Paid in favor of the sole/first holder of the folio.
  • Cheques sent to the unitholder’s address.
  • For dematerialized units, proceeds paid into the bank account registered with the DP.
  • Non-resident investors receive payment in rupees, with associated costs for converting into foreign currency if desired.
  • Repatriable investments can be credited to NRE/FCNR accounts.
  • Tax deducted at source for redemptions by NRIs.

IV. Multiple Bank Accounts:

  • Investors can register multiple bank accounts to receive redemption, dividends, and other payouts.
  • Individual investors can register up to five bank accounts, non-individual investors can register up to ten.
  • First holder of the folio must be an account holder in each registered account.
  • One account is designated as the default account for credits, unless otherwise specified.
  • Investors can change the default bank account by instructing the AMC.

V. NRI Investments:

  • Payment made through NRO account requires the registered account to be of the same type.
  • Payment made through NRE account allows registered accounts to be NRO or NRE.

VI. Instant Access Facility (IAF):

  • Available in Liquid schemes of the mutual fund.
  • Facilitates credit of redemption proceeds on the same day of the redemption request.
  • Monetary limit of Rs. 50,000 or 90% of the latest value of investment, whichever is lower.
  • Limit applicable per day per scheme per investor.

Cut-off Time and Time Stamping:

I. Cut-off Time for NAV Determination:

  • SEBI has prescribed cut-off timing to determine the applicable NAV for fairness to investors.
  • Applicable for equity-oriented funds and debt funds (except liquid funds) for purchases and switch-ins.
  • Cut-off time for purchases and switch-ins is 3:00 pm.
  • The NAV applicable is of the business day on which funds are available for utilization before the cut-off time.
  • Liquid funds have a different cut-off time and NAV determination.

II. Cut-off Time and Applicable NAV for Different Types of Schemes:

  1. Equity Oriented Funds and Debt Funds (Except Liquid Funds):
  • Cut-off time for purchases and switch-ins: 3:00 pm.
  • Applicable NAV: NAV of the business day on which funds are available for utilization before the cut-off time.
  1. Liquid Funds:
  • Cut-off time for purchases and switch-ins: 1:30 pm.
  • Applicable NAV: a. If the application is received before the cut-off time and funds are available for utilization before the cut-off time: Closing NAV of the day immediately preceding the day of the receipt of the application. b. If the application is received after the cut-off time and funds are available for utilization on the same day: Closing NAV of the day immediately preceding the next business day. c. If the funds are not available for utilization before the cut-off time: Closing NAV of the day immediately preceding the day on which the funds are available for utilization.
  1. Equity Oriented Funds, Debt Funds (Other than Liquid Funds), and Liquid Funds:
  • Cut-off time for redemptions and switch-outs: 3:00 pm.
  • Applicable NAV: Same day NAV if received before the cut-off time, next business day NAV for applications received after the cut-off time.

III. Examples of Applicable NAV Calculation:

  • Examples provided for different scenarios of purchase, redemption, and liquid fund transactions.
  • Explanation on how the NAV is determined based on the cut-off time and availability of funds.

IV. Time Stamping Mechanism:

  • Mutual funds disclose Official Points of Acceptance (OPoAs) where transaction requests need to be submitted.
  • Time stamping is done at the OPoAs with tamper-proof machines.
  • Sequential numbering of applications for tracking and documentation purposes.
  • Stamping of applications, payment instruments, and acknowledgments with location code, machine identifier, serial number, date, and time.
  • Online transactions use the time of the web server for NAV determination.

Note: The cut-off time and time-stamping mechanism ensure transparency and accuracy in determining the applicable NAV for different types of transactions in mutual funds.

KYC Requirements for Mutual Fund Investors:

I. Who Needs to be KYC Compliant?

  • All investors, including individuals, non-individuals, joint holders, NRIs, PoA holders, and guardians of minors, must be KYC compliant.
  • KYC compliance is mandatory irrespective of the investment value.
  • Applicable for new/additional purchases, switch transactions, new SIP/micro-SIP registrations, new STP registrations, and new DTP registrations.

II. KYC Process and Required Documents:

  • KYC process establishes the identity and address of the investor as per Anti-Money Laundering Laws.
  • Application for investment must be accompanied by the KYC acknowledgement issued by the KYC Registration Agency (KRA).
  • The following documents are required for KYC: a. Permanent Account Number (PAN) Card with photograph (mandatory, except for specific exemptions). b. Proof of Address (e.g., Passport, Voter’s ID, Ration Card, etc.). c. Self-attested copies of the documents must be provided, and originals may be required for verification.

III. PAN Exemptions for Mutual Fund Investments:

  • Certain categories of investors are exempt from providing PAN for mutual fund investments: a. Transactions on behalf of Central/State governments and court-appointed officials. b. Investors residing in Sikkim. c. UN entities/Multilateral agencies exempt from taxes/filing tax returns in India. d. Mutual fund investments up to Rs. 50,000 per investor per year.

IV. Centralised KYC Registration Agencies (KRAs):

  • SEBI instituted a centralised KYC process for the capital market, including mutual funds.
  • Once KYC is completed with one intermediary, it is valid across the capital market.
  • KRAs facilitate the centralised KYC process and store investor data for access by reporting entities.
  • In-Person Verification (IPV) of the investor is mandatory and can be performed by intermediaries or scheduled commercial banks.

V. KYC through e-KYC service of UIDAI:

  • UIDAI’s e-KYC service is accepted as a valid process for KYC verification.
  • Investor authorizes intermediaries to access their data through UIDAI system for verification.
  • Registered intermediaries enter into agreements with KYC User Agencies (KUA) to undertake Aadhaar Authentication.
  • Investors submit their OVDs (Officially Valid Documents) for KYC through online/digital platforms or email.

VI. KYC for Minors, Power of Attorney (PoA) Holders, and NRIs:

  • For investments by minors, KYC requirements are complied with by the guardian.
  • KYC requirements must be met by both investor and PoA holder for investments made through PoA.
  • NRIs need to provide PAN, passport/PIO card/OCI card, and overseas address proof for KYC compliance.

VII. Additional Requirements for Institutional Investors:

  • Institutional investors require eligibility to invest, authorizations, and details of Ultimate Beneficial Owners (UBOs).
  • UBOs own or control a certain percentage of shares/profits or are beneficiaries of trusts.
  • UBO requirements are not applicable to listed companies or subsidiaries.

VIII. Legal Information and Mandatory Declarations:

  • Clients of SEBI registered intermediaries need to provide information to verify the identity of beneficial owners or controllers of securities accounts.
  • Compliance with Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) provisions.
  • Information regarding citizenship, nationality, place of birth, tax residency, and taxpayer reference ID may be required.

Note: The KYC process ensures compliance with anti-money laundering laws and helps establish the identity and address of mutual fund investors. It involves submitting required documents, verification processes, and adherence to PAN and FATCA/CRS regulations.

KYC Requirements for Mutual Fund Investors:

I. Who Needs to be KYC Compliant?

  • All investors, including individuals, non-individuals, joint holders, NRIs, PoA holders, and guardians of minors, must be KYC compliant.
  • KYC compliance is mandatory irrespective of the investment value.
  • Applicable for new/additional purchases, switch transactions, new SIP/micro-SIP registrations, new STP registrations, and new DTP registrations.

II. KYC Process and Required Documents:

  • KYC process establishes the identity and address of the investor as per Anti-Money Laundering Laws.
  • Application for investment must be accompanied by the KYC acknowledgement issued by the KYC Registration Agency (KRA).
  • The following documents are required for KYC: a. Permanent Account Number (PAN) Card with photograph (mandatory, except for specific exemptions). b. Proof of Address (e.g., Passport, Voter’s ID, Ration Card, etc.). c. Self-attested copies of the documents must be provided, and originals may be required for verification.

III. PAN Exemptions for Mutual Fund Investments:

  • Certain categories of investors are exempt from providing PAN for mutual fund investments: a. Transactions on behalf of Central/State governments and court-appointed officials. b. Investors residing in Sikkim. c. UN entities/Multilateral agencies exempt from taxes/filing tax returns in India. d. Mutual fund investments up to Rs. 50,000 per investor per year.

IV. Centralised KYC Registration Agencies (KRAs):

  • SEBI instituted a centralised KYC process for the capital market, including mutual funds.
  • Once KYC is completed with one intermediary, it is valid across the capital market.
  • KRAs facilitate the centralised KYC process and store investor data for access by reporting entities.
  • In-Person Verification (IPV) of the investor is mandatory and can be performed by intermediaries or scheduled commercial banks.

V. KYC through e-KYC service of UIDAI:

  • UIDAI’s e-KYC service is accepted as a valid process for KYC verification.
  • Investor authorizes intermediaries to access their data through UIDAI system for verification.
  • Registered intermediaries enter into agreements with KYC User Agencies (KUA) to undertake Aadhaar Authentication.
  • Investors submit their OVDs (Officially Valid Documents) for KYC through online/digital platforms or email.

VI. KYC for Minors, Power of Attorney (PoA) Holders, and NRIs:

  • For investments by minors, KYC requirements are complied with by the guardian.
  • KYC requirements must be met by both investor and PoA holder for investments made through PoA.
  • NRIs need to provide PAN, passport/PIO card/OCI card, and overseas address proof for KYC compliance.

VII. Additional Requirements for Institutional Investors:

  • Institutional investors require eligibility to invest, authorizations, and details of Ultimate Beneficial Owners (UBOs).
  • UBOs own or control a certain percentage of shares/profits or are beneficiaries of trusts.
  • UBO requirements are not applicable to listed companies or subsidiaries.

VIII. Legal Information and Mandatory Declarations:

  • Clients of SEBI registered intermediaries need to provide information to verify the identity of beneficial owners or controllers of securities accounts.
  • Compliance with Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) provisions.
  • Information regarding citizenship, nationality, place of birth, tax residency, and taxpayer reference ID may be required.

Note: The KYC process ensures compliance with anti-money laundering laws and helps establish the identity and address of mutual fund investors. It involves submitting required documents, verification processes, and adherence to PAN and FATCA/CRS regulations.

Operational aspects of Systematic Transactions:

I. Systematic Investment Plan (SIP):

  • Investors can choose the amount, frequency, and period of the SIP.
  • Submission of the application form and SIP enrollment form is required for registration.
  • Payment modes include post-dated cheques, NACH, direct debit, and standing instructions.
  • Renewal of SIP requires submitting a renewal form.
  • Cancellation of SIP requires giving notice to the AMC or insufficient funds in the bank account.

II. Systematic Withdrawal Plan (SWP):

  • Registration of SWP with the mutual fund is necessary.
  • Details such as scheme, plan, option, withdrawal amount, frequency, and period need to be provided.
  • SWP credits are made to the default bank account registered with the mutual fund.
  • Minimum amounts for each SWP tranche are specified by the mutual fund.
  • SWP can be cancelled by providing written notice to the mutual fund.

III. Systematic Transfer Plan (STP) and Switches:

  • Source and target schemes are selected during registration of STP or switch.
  • Minimum transfer amount is defined by the mutual fund.
  • STP and switch instructions need to be provided using the transaction slip.
  • Execution of STP and switch transactions occurs at the applicable NAV on the transaction date.
  • Mutual fund notice period is required for registering and cancelling STP.

IV. Triggers:

  • Triggers are offered by some mutual funds to seize investment opportunities.
  • Investors can set triggers for profit booking, stop-loss, or market decline.
  • Triggers can be based on NAV levels, market indices, or percentage depreciation.
  • Triggers can be set for redemption, transfer, or switch actions.
  • Each investment under a folio requires a separate trigger facility request.
  • Notice period may be specified for registering and cancelling triggers.

Note: Operational aspects include registration, cancellation, execution, and triggers for systematic transactions. Investors need to provide accurate information and follow the specified procedures for each type of transaction.

Non-Financial Transactions in Mutual Funds:

I. Nomination:

  • Nomination provides clarity on unit-holding in the event of the investor’s demise.
  • Nomination form specifies the nominee’s name.
  • Maximum of three nominees can be appointed.
  • Nomination is required for single folios unless specifically waived.
  • Nomination cannot be made in favor of trusts, societies, corporations, partnerships, etc.
  • Nomination can be changed or cancelled at any time by all original nominators.

II. Pledge/Lien of Units:

  • Units can be pledged as collateral for loans.
  • Pledge form executed by the unit-holder and includes details of the pledgee.
  • Pledged units should have completed the lock-in period.
  • Unit-holders cannot sell or switch pledged units without written no-objection from the pledgee.
  • Lender can enforce the pledge and redeem units after providing necessary documents.

III. Demat Account:

  • Dematerialization converts physical investments into a digital record.
  • Investor needs to open a demat account with a depository participant.
  • Mutual funds provide the option to hold units in demat form.
  • Application form allows for providing demat account details.
  • Units credited directly to the demat account after realization of funds.
  • Changes in demat account information should be made with the depository.

IV. Change in Folio Details:

  • Personal information changes need to be updated with each mutual fund.
  • Changes in name, address, status, contact details, etc., should be registered.
  • KYC Registration Agency (KRA) provides change forms for updating information.
  • Supporting documents and verification may be required for changes.

V. Change in Bank Account Details:

  • Investor can register up to five bank accounts with a mutual fund.
  • One account is designated as the default account for proceeds credit.
  • Form and cancelled cheque or bank statement required for adding a bank account.
  • Change of default bank account requires designating a new default account.

VI. Transmission of Units:

  • Transmission is the transfer of units to the person entitled in the event of the unitholder’s death.
  • Transmission depends on joint holding, nomination, and legal successors.
  • KYC documentation, death certificate, and indemnity may be required for transmission.
  • Standard Transmission Request Form and supporting documents are prescribed by AMFI.

Note: Non-financial transactions in mutual funds include nomination, pledge/lien of units, demat accounts, changes in folio details, bank account details, and transmission of units. Each transaction has specific procedures and requirements that need to be followed for smooth processing.

Change in Status of Special Investor Categories:

I. Minor turned Major:

  • Minors turning major cannot make financial transactions in their accounts.
  • KYC completion and PAN card update are required.
  • Change in bank account status and new cheque book with the major’s name.
  • Demat account needs to be opened in the major’s name, transferring securities from the minor account.
  • Existing standing instructions like SIP, SWP, STP cease if documents are not submitted.

II. NRI to Resident Indian:

  • Inform the bank about the change of status and open a Resident Rupee Account.
  • Notify the designated authorized dealer branch and DP about the change of status for investments and demat account.
  • Open a new demat account with ‘Resident’ status and transfer balances from the NRI demat account.
  • Inform AMCs about the change of status, address, and bank details for mutual fund investments.

III. Change in Karta of HUF:

  • Provide a letter from the new Karta stating the reason for the change in mutual fund records.
  • Submit KYC documents of the new Karta and HUF.
  • Enclose attested copy of the death certificate, bank certificate with new Karta details, and indemnity bond signed by all co-parceners and new Karta.

Note: Each change in status requires specific documentation and procedures to be followed for smooth transition and compliance with regulations.

Investor Transactions – turnaround times:

  • NAV Calculation and disclosure: Daily basis.
  • Mutual Fund Schemes (other than IPO of ELSS) to remain open for subscription: Maximum of 15 days.
  • Mutual Fund Schemes to allot units or refund money: Within 5 business days of closure of NFOs.
  • Re-opening for ongoing sale/re-purchase of open-ended scheme (other than ELSS): Within 5 business days of allotment.
  • Dispatch of Dividend warrants to investors: Within 15 days of declaration of the dividend.
  • Dispatch of Redemption/re-purchase cheques to investors: Within 10 working days from the date of receipt of transaction request.
  • Scheme-wise Annual Report or an abridged summary to all unitholders: Four months from the date of closure of the relevant account’s year.
  • Statement of portfolio to be sent to all unitholders: Before the expiry of 10 days from the close of each half-year (i.e., 31st Mar and 30th Sep).
  • Half Yearly Disclosures (unaudited financial results) on mutual fund website: Within 1 month from the close of each half-year.
  • Disclosure of debt and money market securities transactions: Daily basis with a time lag of 15 days.
  • Consolidated Account Statement (CAS) by post/email: As per SEBI’s specified timelines.
  • Unit certificate: To be issued within 5 working days of the receipt of the request for the certificate.
  • Statement of Account in case of SIP/STP/SWP: Within 5 working days from the date of closure of the initial subscription list or from the date of receipt of the application.

Note: The turnaround times are regulated by SEBI to ensure timely processing and transparency in investor transactions.