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Investing in mutual funds has become the new rage among investors. There are countless new funds that are launched on a regular basis. A variety of funds, each focusing on short and long- term period are easily available. There are plentiful funds obtainable in the market that can find a perfect match to suit your risk.

A mutual fund is an investment, which is operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities, or money market securities. These funds offer investors the advantages of diversification and professional management.

 

What are mutual funds?

A mutual fund is a group of stocks, bonds and other investments that are owned by a large number of investors and managed by a professional investment company. The investor buys the units of a particular fund and becomes a part of the mutual fund and participates in the loss and profits.

As a rule, Investors should read the mutual fund prospectus clearly before investing. The reason being, the prospectus clearly defines a fund's investment objective, the investment style of the manager and the types of securities in which the fund will invest.

 

How does a Mutual Fund work?

When you invest in a mutual fund, you become the shareholder of the selected mutual fund. The fund manger takes the entire pool of money from all of the fund's investors and invests it in a carefully selected range of investments based on specific goals and procedures that are outlined in the fund’s prospectus.

The fund's value keeps fluctuating from day to day. The NAVs of the funds don’t remain constant. The value of a fund's units i.e. NAVs are updated on a daily basis and are available on the AMC’s website.

Many factors like change in interest rates, economic trends influence the performance of a mutual fund. When you purchase units in a mutual fund, you agree to pay certain fees and expenses in the form of entry and exit load.

 

What are the different types of mutual funds?

Mutual Fund Schemes are generally classified into two types viz.
  1. Schemes according to Maturity Period:
    • Open-ended Fund/ Scheme: An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis.
    • Close-ended Fund/ Scheme: A close-ended fund or scheme has a fixed maturity period. The fund is open for subscription only during a specified period at the time of launch of the scheme. During this period, investors can invest in the scheme at the time of the initial public issue. When the fund date closes, the investor can buy or sell the units of the scheme on the stock exchanges where the units are listed. Some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices, which serves as exit route.
  2. Schemes according to Investment Objective:
    A scheme can also be classified as growth, income or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:
    • Growth / Equity Oriented Scheme: The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities, which comparatively have high risks. These schemes provide options like dividend, capital appreciation, etc. and the investors can choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.
    • Income / Debt Oriented Scheme: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long-term investors may not bother about these fluctuations.
    • Balanced Fund: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.
    • Money Market or Liquid Fund: These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.
    • Gilt Fund: These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors like income or debt oriented schemes.
    • Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same proportion comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as ‘tracking error’ in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme.
      There are also exchange traded index funds launched by the mutual funds, which are traded on the stock exchanges.
    • Sector specific funds/schemes: Sector funds are those funds, which invest in the securities of only those sectors or industries as, specified in the offer documents e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.
    • Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. The growth opportunities and risks involved are somewhat similar to an equity-oriented scheme.
 
Can NRIs invest in Mutual Funds in India?

Investments by NRIs in Mutual Funds can be made on a repatriable or on a non-repatriable basis, as preferred by the investor

  1. Repatriable Basis: To invest on a repatriable basis, you must have an NRE or FCNR Bank Account in India. The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on repatriation basis, subject to the following conditions:
    • The mutual fund should comply with the terms and conditions stipulated by SEBI.
    • The amount representing investment should be received by inward remittance through normal banking channels, or by debit to an NRE / FCNR account of the non-resident investor.
    • The net amount representing the dividend / interest and maturity proceeds of units may be remitted through normal banking channels or credited to NRE / FCNR account of the investor, as desired by him subject to payment of applicable tax.
  2. Non-Repatriable Basis: The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on non-repatriation basis, subject to the following conditions:
    • Funds for investment should be provided by debit to NRO account of the NRI investor. Alternatively, funds may be invested by inward remittance or by debit to NRE / FCNR Account.
    • The current income in the form of dividends is allowed to be repatriated.

    No permission of Reserve Bank either by the Mutual Fund or the NRI investor is necessary.

 
Does an NRI need any approvals from the Reserve Bank of India to invest in mutual fund schemes?
No. As an NRI, one does not need any specific approval from the RBI for investing or redeeming from Mutual Funds. Only OCBs and FIIs require prior approvals before investing in Mutual Funds.
 
Are bank account details mandatory?
In order to protect unit holder interest from fraudulent encashment of cheques, the current SEBI Regulations, has made it mandatory for investors to mention in their application/repurchase-redemption request, the bank name and account number of the unit holders .The AMC will not be responsible for any loss arising out of fraudulent encashment of cheques and or any delay /loss in transit. In the absence of these details, applications are liable for rejection.
 
What are the risks involved?
Investment in Mutual Fund is subject to standard and specific risk factors. The following risks are mentioned below:
 
What are the risks involved?

Investment in Mutual Fund are subject to market risks. The following risks are mentioned below:

  • Mutual funds and securities are subject to market risks and there is no assurance and no guarantee that the objectives of the mutual fund will be achieved.
  • The NAV of the units issued under the scheme may go up or down depending on the factors and forces affecting capital markets.
  • Past performance of the Sponsor/AMC/Mutual fund does not indicate the future performance of the schemes of the Mutual Fund.
  • Investors in the scheme are not guaranteed of any assured /guaranteed returns.
 
Is permanent Account Number (PAN) necessary for transaction?
Yes, according to the rules, every investor should have a Permanent Account Number (PAN), which is why it is now gaining grounds with NRIs too. Although, Non Resident Indians are not required to provide a Permanent Account Number in their Mutual Funds, shares, stocks and other related investments till now, the Securities and Exchange Board of India has directed the depositories to make PAN compulsory for all demat accounts that are started off after April, 2003. After 30th September 2006 existing demat account holders will not be allowed to operate their accounts unless their PAN card is submitted.

The procedures for availing a PAN are quite simple but, for NRIs not having their own residences and / or residential proofs can be a bit discomforting. Hence, before the procedure of acquiring a PAN becomes rigid, NRI can choose an easier alternate by providing proof of residence of his representative assessee.
Such representative assessee can be resident parents, brothers, close relatives or even friends. Details regarding PAN are mentioned herein. An NRI can avail a PAN by making an application to the Income Tax office or Office of Unit Trust of India. An NRI is required to submit the following:

  • Copy of passport
  • Photograph
  • Copy of Visa in case of an Indian citizen
  • Details and photograph of representative assessee i.e. say, parents or brothers or even a friend's details and
  • Proof of residence of representative assessee being any one of the documents be that telephone bill, electricity bill, ration card, bank statement or driving licence, showing the address of representative assessee
 
Understanding Depository System
 
What is a Depository?
A depository is an organisation, which holds securities of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities.
 
How is a depository similar to a bank?
It can be compared with a bank, which holds the funds for depositors. A Bank – Depository Analogy is given in the following table:

Bank-depository – an analogy
BANK DEPOSITORY
Holds funds in an account Hold securities in an account
Transfers funds between accounts on the instruction of the account holder Transfers securities between accounts on the instruction of the account holder
Facilitates transfer without having to handle money Facilitates transfer of ownership without having to handle securities
Facilitates safekeeping of money Facilitates safekeeping of securities
 
How many Depositories are registered with SEBI?
At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (I) Limited (CDSL) are registered with SEBI.
 
Who is a Depository Participant?
A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor. A DP can offer depository services only after it gets proper registration from SEBI. Banking services can be availed through a branch whereas depository services can be availed through a DP.
 
What is the minimum net worth required for a depository?
The minimum net worth stipulated by SEBI for a depository is Rs.100 crore.
 
How many Depository Participants are registered with SEBI?
As on 31/03/2006, total of 538 DPs are registered with SEBI. A list of DP’s and their addresses can be downloaded from SEBI website.
 
Is it compulsory for every investor to open a depository account to trade in the capital market?
As per the available statistics at BSE and NSE, 99.9% settlement takes place in demat mode only. Therefore, in view of the convenience in settlement through demat mode, it is advisable to have a beneficiary owner (BO) account to trade at the exchanges.
 
What are the benefits of availing depository services?

The benefits are enumerated below:

  • A safe and convenient way to hold securities
  • Immediate transfer of securities
  • No stamp duty on transfer of securities
  • Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.
  • Reduction in paperwork involved in transfer of securities
  • Reduction in transaction cost
  • No odd lot problem, even one share can be sold
  • Nomination facility
  • Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately
  • Transmission of securities is done by DP eliminating correspondence with companies
  • Automatic credits into demat account of shares, arising out of bonus/split/consolidation/merger etc.
  • Holding investments in equity and debt instruments in a single account.
 
Account Opening
How can services of a depository be availed?
To avail the services of a depository an investor is required to open an account with a depository participant of any depository.
 
How can one open an account?

First an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by copies of any one of the approved documents to serve as proof of identity (POI) and proof of address (POA) as specified by SEBI. Besides, production of PAN card in original at the time of opening of account has been made mandatory effective from April 01, 2006.

All applicants should carry original documents for verification by an authorized official of the depository participant, under his signature. Further, the investor has to sign an agreement with DP in a depository prescribed standard format, which details rights and duties of investor and DP. DP should provide the investor with a copy of the agreement and schedule of charges for their future reference. The DP will open the account in the system and give an account number, which is also called BO ID (Beneficiary Owner Identification number).

The DP may revise the charges by giving 30 days notice in advance. SEBI has rationalised the cost structure for dematerialisation by removing account-opening charges, transaction charges for credit of securities, and custody charges vide circular dated January 28, 2005.

Further, SEBI has vide circular dated November 09, 2005 advised that with effect from January 09, 2006, no charges shall be levied by a depository on DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account/s at transferee DP and at transferor DP are one and the same, i.e. identical in all respects. In case the BO Account at transferor DP is a joint account, the BO Account at transferee DP should also be a joint account in the same sequence of ownership.

 
Why should an investor give his bank account details at the time of account opening?
It is for the protection of investor’s interest. The bank account number will be mentioned on the interest or dividend warrant, so that such warrant cannot be encashed by any one else. Further, the company will credit cash corporate benefits such as dividend, interest to the investors account directly through the Electronic Clearing Service (ECS) facility, wherever available.
 
Can an investor change the details of his bank account?
Yes. Since in the depository system monetary benefits on the security balances are paid as per the bank account details provided by the investor at the time of account opening, the investor must ensure that any subsequent change in bank account details is informed to the DP.
 
What should be done if the address of the investor changes?
Investor should immediately inform his/her DP, who in turn will update the records. This will obviate the need of informing different companies.
 
Can multiple accounts be opened?
Yes. An investor can open more than one account in the same name with the same DP and also with different DPs.
 
Does the investor have to keep any minimum balance of securities in his/her accounts?
No.
 
Is it necessary to have account with the same DP as broker has?
No. Depository / DP can be chosen by investor as per convenience irrespective of the DP of the broker.
 
Can an investor open a single account for securities owned in different ownership patterns such as securities owned individually and securities owned jointly with others?
No. The demat account must be opened in the same ownership pattern in which the securities are held in the physical form. e. g. if one share certificate is in the individual name and another certificate is jointly with somebody, two different accounts would have to be opened.
 
What is required to be done if one has physical certificates with the same combination of names, but the sequence of names is different i.e. some certificates with ‘A’ as first holder and ‘B’ as second holder and other set of certificates with ‘B’ as first holder and ‘A’ as the second holder?
In this case the investor may open only one account with ‘A’ & ‘B’ as the account holders and lodge the security certificates with different order of names for dematerialisation in the same account. An additional form called "Transposition cum Demat" form will have to be filled in. This would help you to effect change in the order of names as well as dematerialise the securities.
 
Can an investor operate a joint account on ‘either or survivor’ basis just like a bank account?
No. The demat account cannot be operated on ‘either or survivor’ basis like the bank account.
 
Can someone else operate the account on behalf of the BO on the basis of a power of attorney?
Yes. If the BO authorises any person to operate the account by executing a power of attorney and submit it to the DP, that person can operate the account on behalf of the BO.
 
Can addition or deletion of names of accountholders is permitted after opening the account?
Yes. If the BO authorises any person to operate the account by executing a power of attorney and submit it to the DP, that person can operate the account on behalf of the BO.
 
Can addition or deletion of names of accountholders is permitted after opening the account?
No. The names of the account holders of a BO account cannot be changed. If any change has to be effected by addition or deletion, a new account has to be opened in the desired holding pattern (names) and then transfer the securities to the newly opened account. The old account may be closed.
 
Can an investor close his demat account with one DP and transfer all securities to another account with another DP?
Yes. The investor can submit account closure request to his DP in the prescribed form. The DP will transfer all the securities lying in the account, as per the instruction, and close the demat account.
 
What would be the charges for account closure and securities transfer due to account closing?

SEBI vide Circular No. MRD/DoP/Dep/Cir-22 /05 dated November 09, 2005 advised that with effect from January 09, 2006, no charges shall be levied by a depository on DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account/s at transferee DP and at transferor DP are one and the same, i.e. identical in all respects. In case the BO Account at transferor DP is a joint account, the BO Account at transferee DP should also be a joint account in the same sequence of ownership.

All other transfer of securities consequent to closure of account, not fulfilling the above-stated criteria, would be treated like any other transaction and charged as per the schedule of charges agreed upon between the BO and the DP.

 
Whether investors can freeze or lock their accounts?
Investors can freeze or lock their accounts for any given period of time, if so desired. Accounts can be frozen for debits (preventing transfer of securities out of accounts) or for credits (preventing any movements of hindrances into accounts) or for both.
 
Dematerialisation
What is dematerialisation?
Dematerialisation is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited into the investor's account with his/her DP.
 
How can one convert physical holding into electronic holding i.e. how can one dematerialise securities?

In order to dematerialise physical securities one has to fill in a DRF (Demat Request Form), which is available with the DP, and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN Number. The complete process of dematerialisation is outlined below:

  • Surrender certificates for dematerialisation to your depository participant.
  • Depository participant intimates Depository of the request through the system.
  • Depository participant submits the certificates to the registrar of the Issuer Company.

    Registrar confirms the dematerialisation request from depository.
  • After dematerialising the certificates, Registrar updates accounts and informs depository of the completion of dematerialisation.
  • Depository updates its accounts and informs the depository participant.
  • Depository participant updates the demat account of the investor.
 
What is an ISIN?
ISIN (International Securities Identification Number) is a unique identification number for a security.
 
Can odd lot shares be dematerialised?
Yes, odd lot share certificates can also be dematerialised.
 
Do dematerialised shares have distinctive numbers?
Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable.
 
Can electronic holdings be converted back into Physical Certificates?

Yes. The process is called rematerialisation. If one wishes to get back his securities in the physical form one has to fill in the RRF (Remat Request Form) and request his DP for rematerialisation of the balances in his securities account. The process of rematerialisation is outlined below:

  • One makes a request for rematerialisation.
  • Depository participant intimates depository of the request through the system.
  • Depository confirms rematerialisation request to the registrar.
  • Registrar updates accounts and prints certificates.
  • Depository updates accounts and downloads details to depository participant.
  • Registrar dispatches certificates to investor.
 
Trading/ Settlement
 
What is the procedure for selling dematerialised securities?
The procedure for buying and selling dematerialised securities is similar to the procedure for buying and selling physical securities. The difference lies in the process of delivery (in case of sale) and receipt (in case of purchase) of securities.
 
In case of purchase:
  • The broker will receive the securities in his account on the payout day
  • The broker will give instruction to its DP to debit his account and credit investor's account
  • Investor will give ‘Receipt Instruction to DP for receiving credit by filling appropriate form. However, one can give standing instruction for credit into one’s account that will obviate the need of giving Receipt Instruction every time.
 
In case of sale:

The investor will give delivery instruction to DP to debit his account and credit the broker’s account. Such instruction should reach the DP’s office at least 24 hours before the pay-in, as other wise DP will accept the instruction only at the investor’s risk.

 
What is 'Standing Instruction' given in the account opening form?

In a bank account, credit to the account is given only when a 'pay-in' slip is submitted together with cash/cheque. Similarly, in a depository account 'Receipt in' form has to be submitted to receive securities in the account. However, for the convenience of investors, facility of 'standing instruction' is given. If you say 'Yes' for standing instruction, you need not submit 'Receipt in' slip every time you buy securities. If you are particular that securities can be credited to your account only with your consent, then do not say 'yes' (or tick) to standing instruction in the application form.

 
What is Delivery Instruction Slip (DIS)? What precautions do one need to observe with respect to Delivery Instruction Slips?

To give the delivery one has to fill a form called Delivery Instruction Slip (DIS). DIS may be compared to chequebook of a bank account. The following precautions are to be taken in respect of DIS:

  • Ensure and insist with DP to issue DIS book
  • Ensure that DIS numbers are pre-printed and DP takes acknowledgment for the DIS booklet issued to investor
  • Ensure that your account number [client id] is pre-stamped.
  • If the account is a joint account, all the joint holders have to sign the instruction slips. Instruction cannot be executed if all joint holders have not signed.
  • Avoid using loose slips
  • Do not leave signed blank DIS with anyone viz., broker/sub-broker. Keep the DIS book under lock and key when not in use
  • If only one entry is made in the DIS book, strike out remaining space to prevent misuse by any one
  • Investor should personally fill in target account -id and all details in the DIS
 
Is it possible to give delivery instructions to the DP over Internet and if yes, how?

Yes. Both NSDL and CDSL have launched this facility for delivering instructions to your DP over Internet, called SPEED-e and EASI respectively. All registered users can use the facility after paying the applicable charges.

 
Corporate Benefits
 
Is it possible to get securities allotted in public offering directly in the electronic form?

Yes, it is possible to get securities allotted to in Public Offerings directly in the electronic form. In the public issue application form there is a provision to indicate the manner in which an investor wants the securities allotted. He has to mention the BO ID and the name and ID of the DP on the application form. Any allotment made will be credited into the BO account.

 
How are cash corporate benefit such as dividend / interest received?

The concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure / record date from Depositories. The payment to the investors will be made by the company through the Electronic Clearing Service (ECS) facility, wherever available. Thus the dividend / interest will be credited to your bank account directly. Where ECS facility is not available dividend / interest will be given by issuing warrants on which your bank account details are printed. The bank account details will be those, which you would have mentioned in your account opening, form or changed thereafter.

 
How would one receive non-cash corporate benefit such as bonus etc.?

The concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure/record date from depositories. The company directly into the BO account will credit the entitlement.

 
Who should be contacted in case of discrepancies in corporate benefits?

In case of discrepancies in corporate benefits, one can approach the company/its R&T Agent.

 
Pledging
 
Can one pledge-dematerialised securities?

Yes. In fact, pledging dematerialised securities is easier and more advantageous as compared to pledging physical securities.

 
What should one do to pledge electronic securities?

The procedure to pledge electronic securities is as follows:

  • Both investor (pledger) as well as the lender (pledgee) must have depository accounts with the same depository
  • Investor has to initiate the pledge by submitting to DP the details of the securities to be pledged in a standard format
  • The pledgee has to confirm the request through his/her DP
  • Once this is done, securities are pledged.
  • All financial transactions between the pledger and the pledgee are handled as per usual practice outside the depository system.
 
How can one close the pledge after repayment of loan?

After one has repaid the loan, one can request for a closure of pledge by instructing the DP in a prescribed format. The pledgee on receiving the repayment will instruct his DP accordingly for the closure of the pledge.

 
Can one change the securities offered in a pledge?

Yes, if the pledgee (lender) agrees, one may change the securities offered in a pledge.

 
Who would receive the corporate benefits on the pledged securities?

The securities pledged are only blocked in the account of pledger in favour of the pledgee. The pledger would continue to receive all the corporate benefits.

 
Who would receive the corporate benefits on the pledged securities?

The securities pledged are only blocked in the account of pledger in favour of the pledgee. The pledger would continue to receive all the corporate benefits.

 
Transaction Statement
 
How does one know that the DP has updated the account after each transaction?

The DP gives a Transaction Statement periodically, which will detail current balances and various transactions made through the depository account. If so desired, DP may provide the Transaction Statement at intervals shorter than the stipulated ones, probably at a cost.

 
At what frequency will the investor receive his Transaction Statement from his DP?

DPs have to provide transaction statements to their clients once in a month, if there are transactions and once in a quarter, if there are no transactions.
Moreover, DPs can provide transaction statement in electronic form under digital signature subject to their entering into a legally enforceable arrangement with the BOs to this effect.

 
What is to be done if there are any discrepancies in transaction statement?

In case of any discrepancy in the transaction statement, one can contact his/her DP. If the discrepancy cannot be resolved at the DP level, one should approach the Depository.

 
Whom should one contact in case of any investor complaint / problem / query?

In case of any investor complaint / problem / query one may first contact his DP. If DP is unable to solve the complaint / problem / query one should approach concerned depository. If one is not satisfied one may approach SEBI. One may also approach SEBI directly.

 
Lending and borrowing of Demat securities
 
What is Lending and Borrowing of Securities?

If any person required to deliver a security in the market does not readily have that security, he can borrow the same from another person who is willing to lend as per the Securities Lending and Borrowing Scheme.

 
Can lending and borrowing be done directly between two persons?

No. Lending and borrowing has to be done through an 'Approved Intermediary' registered with SEBI. The approved intermediary would borrow the securities for further lending to borrowers. Lenders of the securities and borrowers of the securities enter into separate agreements with the approved intermediary for lending and borrowing the securities. Lending and borrowing is effected through the depository system.

 
Can I lend the securities lying in my account?

Yes. You can lend your securities through Approved Intermediaries registered with SEBI.

 
How would I lend my demat securities?

You may enter into an agreement with the approved intermediary to be a lender under this scheme. After that, you may lend securities any time by submitting lending instruction to your DP.

 
How would I get back the securities lent by me?

Intermediary may return the securities at any time or at the end of the agreed period of lending. Intermediary has to repay the securities together with any benefits received during the period of the loan.

 
How would I receive the corporate benefits, which would accrue on these securities during the period of lending?

The benefits will be given to the Intermediary/borrower. However, whenever the securities are being returned / recalled. Intermediary/borrower will return the securities together with benefits received.

 
Nomination
 
Who can nominate?

Only individuals holding beneficiary accounts either singly or jointly can make nomination. Non-individuals including society, trust, body corporate, karta of Hindu Undivided Family, holder of power of attorney cannot nominate.

 
Who can be a nominee?

Only an individual can be a nominee. A nominee shall not be a society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family or a power of attorney holder.

 
Transmission of demat securities
 
What is transmission of demat securities?

Transmission is the process by which securities of a deceased account holder are transferred to the account of his legal heirs / nominee. Process of transmission in case of dematerialised holdings is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting documents to the DP, whereas in case of physical securities the legal heirs/nominee/surviving joint holder has to independently correspond with each company in which securities are held.

 
In the event of death of the sole holder, how the successors should claim the securities lying in the demat account?

The claimant should submit to the concerned DP an application Transmission Request Form (TRF) along with the following supporting documents

  1. In case of death of sole holder where the sole holder has appointed a nominee,
    notarised copy of the death certificate is needed.
  2. In case of death of the sole holder, where the sole holder has not appointed a nominee nnotarised copy of the death certificate is needed.
    Any one of the below mentioned documents -
    • Succession certificate
    • Copy of probated will
    • Letter of Administration
    • The DP, after ensuring that the application is genuine, will transfer securities to the account of the claimant
    • The major advantage in case of dematerialised holdings is that the transmission formalities for all securities held with a DP can be completed by interaction with the DP alone, unlike in the case of physical share certificates, where the claimant will have to interact with each Issuing Company or its Registrar separately.
 
Inter Depository Transfers
 
If my depository account is with NSDL/CDSL, can I receive my securities from an account holder having account with the other depository in India?

Yes. Inter depository transfers are possible.

 
What will investors receive as a proof of their investment?

Every unit holder of the scheme will have an account number allotted to him and a statement of account of the units to the credit of his account will be issued.

For any investments made during the initial offer period the statements of account will be issued to all investors within 10 days after the closure of the offer. After the scheme reopens for subscription investors will be issued a statement of account detailing the number of units allotted. The Fund will endeavor to issue the statement of account within 5 business days after processing of the application. A fresh statement of account will be issued after every partial encashment / declaration of dividend / issue of bonus units / further purchase of units giving the total number of units standing to the investors’ credit. On every such operation the previous statement of account shall automatically stand cancelled.

In addition, each unit holder will also receive an annual account statement as soon as practicable after 31st March each year which will detail the investors opening unit balance as of 1st April of the prior year, all transactions that occurred during the preceding twelve months and the closing balance of units held as of 31st March.

No unit certificate will be issued under the scheme. However incase of a specific request unit certificate may be issued within 6 weeks from the receipt of request from the investor at the appropriate authorized centre.

 
How will the investors be allotted units in the scheme?

Allotment of units will be made after realisation of Cheque/DD for the amount invested depending upon the NAV of the units, subject to the prevailing load structure in fractional units upto 3 decimals.

 
Where can investors track the NAV?

The NAV shall be calculated everyday including holidays and declared on each business day in accordance with the SEBI guidelines from time to time and will be displayed / available at the Corporate office, Registrars office and other Authorized Centers such as the Area Offices. The NAV along with the sale and repurchase prices will also be published in atleast 2 daily newspapers along with the sale and repurchase price on all business days in accordance with SEBI guidelines, and will be made available on the website and AMFI website on a daily basis.

 
How do investors redeem their units?

Investors may redeem their entire holdings either in full or in part. Investors have also the option to request the redemption of a specified amount in Rupees or of a specified number of units of the scheme where the redemption request is for both a specified amount and for a specified number of units; the specified unit request is considered as definite. In case of a specified request for an amount in rupees, the number of units to be redeemed will be determined on the basis of the applicable repurchase price. Similarly, where the request is for a specified number of units for redemption, the redemption amount payable will be the number of units multiplied by the applicable repurchase price. Where the request for redemption exceeds the holdings of the unit holders, the account of the unit holder will be closed and the entire holding to the investor’s credit will be redeemed at the applicable repurchase price.

Repurchase/ redemption shall effect on receipt of the repurchase/ redemption request along-with the duly discharged statement of account mentioning the number of units offered amount sought for repurchase/ redemption at the authorised centre where the Units were originally purchased. The new statement of account, mentioning the units outstanding to the credit of investor, if any, will be sent to the investor separately and upon its receipt all previous statements of account will automatically stand cancelled.

On complete redemption of the holdings the investor’s ceases to be a member of the scheme and would not be entitled to any further benefits from the scheme.

 
Are there any tax benefits for investing in mutual funds?

Investments in mutual funds do classify for tax benefits. For specific provisions please refer to the respective offer documents.

 
Source: sebi.com
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