A Fresher’s Guide to Basics

Niranjan Babu Ramayanam

Chief Operating Officer
Anand Rathi Wealth Ltd
What will be covered during the Training?

General Information Mutual Fund Specific Processes Mutual Fund Transactions & their Execution
Investment & it’s Types Investment Account & it’s Components Types of Transactions
Mutual Funds & it’s Constituents NAV Applicability Rules Purchase Transactions
Mutual Fund Schemes & their Classifications Third Party Payment Rules Physical – Non-Demat
Categorization of Mutual Fund Schemes Payout Settlement Rules Online – Non-Demat
Mutual Fund Terms Change of Broker Process Online – Demat
Mutual Fund Transaction Types Consolidation of Folios Redemption Transactions
Account Holding Patterns Change of Tax Status Physical – Non-Demat
Account Tax Status Change of Nominee Online – Non-Demat
Transaction Submission Modes Change of Bank Accounts Online – Demat
Unit Holding Modes Common Account Statements Switch Transactions
Demat Account Constituents Types of Brokerages/Commissions Physical – Non-Demat
KYC Constituents T30 & B30 Cities Categorization Online – Non-Demat
FATCA & UBO RTA Mail-back Feeds Online – Demat
INVESTMENT
&
IT’S TYPES
What do you mean by investment?
• An investment is essentially an asset that is created with the intention of allowing money to grow.

• The wealth created can be used for a variety of objectives such as:
• Meeting shortages in income
• Saving up for retirement
• Fulfilling certain specific obligations such as repayment of loans
• Payment of tuition fees
• Purchase of other assets

• Investment may generate income for you in two ways:

• One, if you invest in a saleable asset, you may earn income by way of profit
• Second, if Investment is made in a return generating plan, then you will earn an income via
accumulation of gains

• In this sense, ‘what is investment’ can be understood by saying that investments are all about
putting your savings into assets or objects that become worth more than their initial worth or
those that will help produce an income with time.
What are the Objectives of Investment?

• To keep money safe

• To help money grow

• To earn a steady stream of income

• To minimize the burden of tax

• To save up for retirement

• To meet your financial goals

What are the Categories of Investment?
• Ownership Investments
• Assets that are purchased and owned by the investor without a pre-defined “Return on Investment
(RoI)”. Few Examples are:
• Direct Equity
• Mutual Funds
• Real Estate
• Gold
• Funding a business is also a kind of ownership investment
• Lending Investments
• Assets that are held as collateral against an investment with a pre-defined “Return on Investment (RoI)”.
Few Examples are:
• Corporate Bonds
• Government Bonds
• Savings accounts are all examples of lending investments
• The money you park in a savings account is basically a loan that you give the bank
• Cash Equivalents
• Highly liquid and can easily be converted into cash
• Money market instruments are excellent examples of cash equivalents
What are the Avenues for Investment?

• Physical
• Real Estate (Land / Building)
• Commodity (Gold / Silver / Platinum)

• Electronic
• Fixed Deposits
• Shares
• Mutual Funds
• Debentures
• Provident Fund
• Pension
• Insurance
 MUTUAL FUNDS
&
IT’S CONSTITUENTS
What is a Mutual Fund?

• A Mutual Fund is an investment vehicle which pools money from many investors to invest
in securities like stocks, bonds, money market instruments, and other assets

• Mutual Funds are operated by professional money managers, who allocate the Fund's
assets and attempt to produce capital gains or income for the Fund's investors

• Mutual Funds are divided into several kinds of categories, representing the kinds of
securities they invest in, their investment objectives, and the type of returns they seek
Constituents of a Mutual Fund
• Sponsor

• A ‘Sponsor’ is any person who, acting alone or in combination with another Body
Corporate, establishes a Mutual Fund

• The Sponsor of a Fund is like the “Promoter” of a company

• In accordance with SEBI Regulations, the Sponsor forms a Trust and appoints a Board
of Trustees, also generally appoints an Asset Management Company (AMC) as Fund
Manager

• In addition, the Sponsor also appoints a Custodian to hold the Fund Assets

• The Sponsor must contribute at least 40% of the net worth of the AMC and possess a
sound financial track record over five years prior to registration
Constituents of a Mutual Fund
• Mutual Fund (MF)

• A MF in India is constituted in the form of a Trust under the Indian Trusts Act, 1882

• The assets of the Trust are held by the Trustee for the benefit of Unit Holders, who are
the beneficiaries of the Trust

• Under the Indian Trusts Act, the Trust or the Fund has no independent legal capacity

• It is the Trustee(s) who have the legal capacity

Constituents of a Mutual Fund

• Trustees

• The MF or Trust can either be managed by the Board of Trustees, which is a body of
individuals, or by a Trust Company, which is a Corporate Body

• Most of the Funds in India are managed by Board of Trustees

• The Trustees being the primary guardians of the Unit Holder’s funds and assets, a
Trustee must be a person of high repute and integrity

• The Trustees, however, do not directly manage the portfolio of securities

• The portfolio is managed by the Asset Management Company (AMC) as per the
defined objectives, in accordance with Trust Deed and SEBI (Mutual Funds) Regulations
Constituents of a Mutual Fund

• Asset Management Company (AMC)

• The AMC, which is appointed by the Sponsor or the Trustees and approved by SEBI, acts like
the Investment Manager of the Trust

• The AMC functions under the supervision of its own Board of Directors, and under the
direction of the Trustees and SEBI

• AMC, in the name of the Trust, floats and manages the different investment ‘schemes’ as per
the SEBI Regulations and as per the Investment Management Agreement signed with the
Trustees
Constituents of a Mutual Fund

• Fund Accountant

• Fund Accounting refers to the maintenance of the financial records of an Investment Fund

• Accounting records must be kept for the portfolio activity, the income earned, and the
expenses incurred by the Fund

• In addition, the instruments held by the Fund must be valued regularly and Fund Accounting
records these changes in value

• The Fund Accounting forms the basis for the NAV calculation
Constituents of a Mutual Fund

• Custodian

• The Custodian is appointed for the safe keeping of securities invested by the Fund and
participating in the clearing system through approved Depository

• Bankers

• The Bankers handle the financial dealings of the Fund

• Registrar & Transfer Agents (RTA)

• Transfer Agents are responsible for issue and redemption of units of MF

• They are the system of record for investors of a Mutual Fund
Constituents of a Mutual Fund
• Distributors

• Distributors are individuals / entities appointed by / empaneled with AMCs to distribute the
schemes launched by the Mutual Fund to the potential investors

• AMCs pay commission to Distributors for this purpose

• It is mandatory for every Distributor to obtain AMFI Registration Number (ARN) in order to
distribute the schemes of a Mutual Fund

• It is also mandatory for every Distributor to be empaneled with the respective AMC in order to
earn the commission on the schemes distributed by them
Constituents of a Mutual Fund

• Registered Investment Advisers (RIA)

• RIA is an Individual or a Firm that advises investors on investments and manages their
portfolios

• RIAs will have a fiduciary responsibility towards their clients, which means that they
have a moral obligation to give financial advice that is always in the best interests of
their clients

• RIAs charge a fee from the Investors for their advice

• Individuals / Firms wanting to become RIAs must obtain necessary License from SEBI
MUTUAL FUND SCHEMES
&
THEIR CLASSIFICATIONS
Various types of Scheme Classifications

• Classification by Organization Structure

• Classification by Portfolio Management

• Classification by Investment Objective

• Classification by Investment Portfolio

• Classification by Plans

• Classification by Options
Scheme Classification by Organization Structure

• Open-Ended

• Are perpetual, and open for subscription and repurchase on a continuous basis after
the New Fund Offer (NFO) on all business days at NAV based prices

• Closed-Ended

• Have a fixed maturity date

• The units are issued at the time of the New Fund Offer (NFO) and redeemed only on
maturity

• The units of close-ended schemes are mandatorily listed to provide exit route before
maturity and can be sold/traded on the stock exchanges
Scheme Classification by Organization Structure

• Interval

• Allow purchase and redemption during specified transaction periods (intervals) post
the New Fund Offer (NFO)

• The transaction period is for a minimum of 2 days with a 15-day gap between two
transaction periods

• The units of interval schemes are also mandatorily listed on the stock exchanges
Scheme Classification by Portfolio Management

• Active Funds

• The Fund Manager is ‘Active’ in selection of the underlying securities and in deciding
whether to buy, hold, or sell them

• Adopt different strategies and styles to create and manage the portfolio

• The investment strategy and style are described in advance in the Scheme Information
Document (SID)

• Expect to generate better returns (alpha) than the benchmark index

Scheme Classification by Portfolio Management

• Passive Funds

• Hold a portfolio that replicates a stated Index or Benchmark like

• Index Funds
• Exchange Traded Funds (ETFs)

• Fund manager has a passive role, as the stock selection / buy, hold, sell decision is
driven by the Benchmark Index and the Fund Manager / Dealer merely needs to
replicate the same with minimal tracking error
Scheme Classification by Investment Objective

• Mutual Funds offer products that cater to the different investment objectives of the
investors such as

• Capital Appreciation (Growth)

• Capital Preservation / Protection
• Regular Income
• Liquidity
• Tax-Saving

• Mutual Funds also offer investment plans, such as Growth and Dividend options, to help
tailor the investment to the investors’ needs.
Scheme Classification by Investment Objective

• Growth Funds

• Schemes are designed to provide capital appreciation

• Primarily invest in growth-oriented assets, such as Equity

• Require a medium to long-term investment horizon

• Historically, Equity as an asset class has outperformed most other kind of investments
held over the long term

• However, returns tend to be volatile over the short-term since the prices of the
underlying equity shares may change

• Investors must be able to take volatility in the returns in the short-term

Scheme Classification by Investment Objective

• Income Funds

• The objective is to provide regular and steady income to investors

• Income funds invest in fixed income securities such as Corporate Bonds, Debentures
and Government securities

• The return is from the interest income earned on these investments as well as capital
gains from any change in the value of the securities

• Will distribute the income provided the portfolio generates the required returns. There
is no guarantee of income

• The returns will depend upon the tenor and credit quality of the securities held
Scheme Classification by Investment Objective

• Liquid / Overnight /Money Market Mutual Funds

• Are investment options for investors seeking liquidity and principal protection, with
commensurate returns

• Invest in money market instruments with maturities not exceeding 91 days

• The return will depend upon the short-term interest rate prevalent in the market

• Ideal for investors who wish to park their surplus funds for short periods
Scheme Classification by Investment Portfolio

• Mutual Fund products can be classified based on their underlying portfolio composition

• The first level of categorization is on the asset class

• Equity
• Debt
• Money market instruments
• Gold

• The second level of categorization is on strategies and styles used to create the portfolio
• Income
• Dynamic Bond
• Infrastructure
• Large-cap / Mid-cap / Small-cap Equity

• The portfolio composition flows out of the investment objectives of the scheme.
Scheme Classification by Plans

• Regular Plan

• Regular Plans are those Mutual Fund plans that are bought through an Intermediary.
• These intermediaries are called Distributors.
• The Intermediaries charge the Fund house a certain fee for distributing their Mutual
Fund schemes.
• The AMCs usually recover this fee through expense ratio.
• The expense ratio for Regular Mutual funds is slightly higher than Direct Mutual Funds.
• Hence the returns tend to be a little higher for Direct Plans.
• A Regular Plan best suits investors who do not have the knowledge about the market
nor the time to monitor their portfolio.
• Therefore, a Regular Plan is far more convenient for investors who aren’t well informed
about the market.
• They receive expert advice at the cost of the Distribution commission.
Scheme Classification by Plans

• Direct Plan

• Direct Plans are offered directly to investors by the AMC or Fund house.
• There is no involvement of third-party agents i.e. Distributors.
• Since there are no third-party agents involved, there are no commissions paid to
anybody by the AMC.
• Hence the expense ratio of a Direct Mutual Fund is lower.
• Thus, the return is higher due to a lower expense ratio.
• The Direct Plan of a Mutual Fund can be easily identified; the word ‘Direct’ is captured
in the name of the Fund.
• These can be bought through either online or offline mode.
Scheme Classification by Options

• Growth Option

• The growth option of a mutual fund means that an investor in the fund will not receive
any dividends that may be paid out by the mutual fund scheme.
• Some schemes pay regular dividends, but by selecting a growth option, the mutual
fund holder is allowing the fund company to reinvest the money it would otherwise
payout to the investor in the form of a dividend.
• This money increases the net asset value (NAV) of the mutual fund.
• The growth option is not a good one for the investor who wishes to receive regular
cash payouts from their investments.
• However, it's a way to maximize the fund's NAV and, upon the sale of the mutual
funds, realize a higher capital gain on the same number of units they originally
purchased.
• This is because all dividends that would have been paid out have been used by the
fund company to invest in more stocks and grow clients' money.
Scheme Classification by Options

• Dividend Reinvestment Option

• Dividend distributions made by the mutual fund are used to purchase more units in
the fund.
• Cash is automatically used by the fund's administrators to buy more fund units on
behalf of the investors.

• Dividend Payout Option

• Dividend distributions made by the mutual fund are paid out directly to the unitholder.
• If the unitholder chooses this option, dividends are usually swept directly into a cash
account, transferred electronically into a bank account, or sent out by cheque.
• As is the case with the dividend reinvestment option, unitholders in most cases incur
no fees for having their dividends paid in cash.
 CATEGORIZATION
OF
MUTUAL FUND SCHEMES
What is Market Capitalization?

• Market capitalization is the aggregate valuation of the company based on its current share
price and the total number of outstanding shares

• It is calculated by multiplying the current market price of the company's share with the
total outstanding shares of the company

Market Capitalization Type of Stock

Top 100 Companies by full Market Cap Large-Cap

101st to 250th Company by full Market Cap Mid-Cap

Beyond 250th Company by full Market Cap Small-Cap

Categorization of Mutual Fund Schemes
• Equity Schemes
Large Cap Fund At least 80% in Large Cap Stocks
Mid Cap Fund At least 65% in Mid Cap Stocks
Small cap Fund At least 65% in Small Cap Stocks
Large and Mid Cap Fund At least 35% in Large Cap Stocks & 35% in Mid Cap Stocks
Mid and Small Cap Fund At least 35% in Mid Cap Stocks & 35% in Small Cap Stocks
At least 65% in Equity & Equity related instruments with a specific minimum and maximum
Multi Cap Fund
apportionment to each category of Large, Mid & Small Cap Stocks
At least 65% in Equity & Equity related instruments without a specific minimum and maximum
Flexi Cap Fund
apportionment to each category of Large, Mid & Small Cap Stocks
Dividend Yield Fund Predominantly invest in dividend yielding securities, with at least 65% in stocks
Value Fund Value investment strategy, with at least 65% in stocks
Contra Fund Scheme follows contrarian investment strategy with at least 65% in stocks
Focused on the number of stocks (maximum 30) with at least 65% in equity & equity related
Focused Fund
instruments
Sectoral / Thematic Fund At least 80% investment in stocks of a particular sector/ theme
At least 80% in stocks in accordance with Equity Linked Saving Scheme, 2005, notified by
ELSS
Ministry of Finance
Categorization of Mutual Fund Schemes

• Debt Schemes
Overnight Fund Overnight securities having maturity of 1 day
Liquid Fund Debt and money market securities with maturity of upto 91 days only
Ultra Short Duration Debt & Money Market instruments with duration of the portfolio between 3 months - 6
Fund months
Investment in Debt & Money Market instruments with duration portfolio between 6
Low Duration Fund
months- 12 months
Money Market Fund Investment in Money Market instruments having maturity upto 1 Year
Investment in Debt & Money Market instruments with duration of the portfolio between
Short Duration Fund
1 year - 3 years
Investment in Debt & Money Market instruments with duration of portfolio between 3
Medium Duration Fund
years - 4 years
Medium to Long Investment in Debt & Money Market instruments with duration of the portfolio between
Duration Fund 4 - 7 years
Investment in Debt & Money Market Instruments with duration of the portfolio greater
Long Duration Fund
than 7 years
Categorization of Mutual Fund Schemes

• Debt Schemes – contd…

Dynamic Bond Investment across duration
Minimum 80% investment in corporate bonds only in AA+ and above rated corporate
Corporate Bond Fund
bonds
Minimum 65% investment in corporate bonds, only in AA and below rated corporate
Credit Risk Fund
bonds
Minimum 80% in Debt instruments of banks, Public Sector Undertakings, Public Financial
Banking and PSU Fund
Institutions and Municipal Bonds
Gilt Fund Minimum 80% in G-secs, across maturity
Minimum 65% in floating rate instruments (including fixed rate instruments converted to
Floater Fund
floating rate exposures using swaps / derivatives)
Short-Term Debt Fund Evaluated for the credit risk they may take to earn higher coupon income
Closed-ended funds which eliminate interest rate risk and lock-in a yield by investing only
Fixed Maturity Plan
in securities whose maturity matches the maturity of the fund
Capital Protection The portfolio is structured to provide capital protection and is rated by a credit rating
Oriented Fund agency on its ability to do so
Categorization of Mutual Fund Schemes

• Hybrid Schemes
Conservative Hybrid 10% to 25% investment in equity & equity related instruments; and 75% to 90% in Debt
Fund instruments
40% to 60% investment in equity & equity related instruments; and 40% to 60% in Debt
Balanced Hybrid Fund
instruments
65% to 80% investment in equity & equity related instruments; and 20% to 35% in Debt
Aggressive Hybrid Fund
instruments
Dynamic Asset
Investment in equity / debt that is managed dynamically (0% to 100% in equity & equity
Allocation or Balanced
related instruments; and 0% to 100% in Debt instruments)
Advantage Fund
Multi Asset Allocation Investment in at least 3 asset classes with a minimum allocation of at least 10% in each
Fund asset class
Scheme following arbitrage strategy, with minimum 65% investment in equity & equity
Arbitrage Fund
related instruments
Equity and equity related instruments (min.65%); debt instruments (min.10%) and
Equity Savings
derivatives (min. for hedging to be specified in the SID)
Categorization of Mutual Fund Schemes

• Solution oriented and other schemes

Retirement Fund Lock-in for at least 5 years or till retirement age whichever is earlier
Children’s Fund Lock-in for at least 5 years or till the child attains age of majority whichever is earlier
Index Funds/ ETFs Minimum 95% investment in securities of a particular index
Fund of Funds
Minimum 95% investment in the underlying fund(s)
(Overseas/ Domestic)
International Funds Enable investments in markets outside India
MUTUAL FUND TERMS
Net Asset Value (NAV)

• The performance of a mutual fund scheme is denoted by its NAV per unit
• NAV per unit is the market value of securities of a scheme divided by the total number of
units of the scheme on a given date
• Since market value of securities changes every day, NAV of a scheme also varies on day-to-
day basis
• NAVs of mutual fund schemes are published on respective mutual funds’ websites as well
as AMFI’s website daily
• Unlike stocks, where the price is driven by the stock market and changes from minute-to-
minute, NAVs of mutual fund schemes are declared at the end of each trading day after
markets are closed, in accordance with SEBI Mutual Fund Regulations
• Further, Units of mutual fund schemes under all scheme (except Liquid & Overnight funds)
are allotted only at prospective NAV
• A mutual fund may accept applications even after the cut-off time, but you will get the
NAV as per the applicable NAV rules only
OTHER IMPORTANT TERMS

• Scheme Information Document (SID)

• All Fundamental Attributes like Investment Objective and Policies, Asset Allocation
Pattern, Fees and Liquidity Provisions
• Fund Management Team details
• All Risk Factors in the scheme as well as risk mitigation mechanisms
• Scheme details like load, plans and options, past performance, benchmark
• General Unitholder information
• Other details like list of AMC branches, Investor Service Centres, Official Points of
Acceptance

• Key Information Memorandum (KIM)

• The concise version of SID is the KIM, that is attached with the application form
• As the name suggests, it contains all the Key Information that an investor must know
before investing in the scheme
• The KIM must be made available with every physical application form
OTHER IMPORTANT TERMS

• Scheme Additional Information (SAI)

• The constitution of the Mutual Fund – Sponsors, Asset Management Company and
Trustees
• All information on key personnel of the AMC and associates such as Registrars,
Custodians, Bankers, Auditors and Legal Counsel
• All Financial and Legal issues

• Know Your Customer (KYC)

• “Know Your Customer” is a mandatory process to be carried out by any Entity which is opening
an account for its clients
• KYC standards are designed to protect financial institutions against fraud, corruption, money
laundering and terrorist financing
• All applicants should be KYC compliant in order to invest in Mutual Funds
OTHER IMPORTANT TERMS

• New Fund Offer (NFO)

• A New Fund Offer (NFO) is the first-time subscription offer for a new scheme launched
by the Asset Management Companies (AMCs)
• A New Fund Offer is launched in the market to raise capital from the public in order to
buy securities like shares, govt. bonds etc. from the market
• NFO is like the Initial Public Offer (IPO) with an attempt to raise capital from the market
• NFOs are offered for a stipulated period. This means that the investors opting to invest
in these schemes at the offer price (in most cases the offer price is fixed at Rs 10) can
do so in this stipulated period only
• After the NFO period, investors can take exposure in these funds only at the prevailing
NAV
OTHER IMPORTANT TERMS

• Official Point of Acceptance (OPA)

• “Official Points of Acceptance" or “OPA” are places as specified by AMC from time to
time where application for subscription / redemption / switch will be accepted on
ongoing basis

• Sale (Purchase) Price

• Sale Price is the price payable per unit by an investor for purchase of units
(subscription) and/or switch-in from other schemes of a Mutual Fund

• Repurchase (Redemption) Price

• The Repurchase/Redemption Price is the price per Unit at which a Mutual Fund would
‘repurchase’ the units (i.e., buys back units from the investor) upon redemption of
units or switch-out of units to other schemes/plans of the Mutual Fund by the
investors, and includes Exit Load, if / wherever applicable
OTHER IMPORTANT TERMS

• Entry Load
• An additional charge levied as a percentage to NAV at the time of subscription of units by the
investor
• SEBI has abolished Entry Load a few years ago

• Exit Load
• A reduction as a percentage on NAV at the time of withdrawal of units by the investor
• Will vary from scheme to scheme and the period within which the withdrawal is taking place
from the investment date

• Cut-off Time
• The time till which a transaction is accepted to be processed for applicable NAV

• Time-Stamp
• An officially recorded time at which the transaction was submitted at an Official Point of
Acceptance (OPA)
MUTUAL FUND TRANSACTION TYPES
Types of Transactions

• Purchase
• This is a transaction through which units are created for an investment made by an investor
• Purchases are of multiple types
• NFO Purchase – Units created for investment at the time of NFO
• Fresh Purchase – Units created for investment for the first time but post the NFO
• Additional Purchase – Units created for investments made after the NFO or Fresh Purchase

• Redemption
• This is a transaction through which units are extinguished for a withdrawal made by an investor
• The amount redeemed is paid out to the investor into a registered bank account
Types of Transactions

• Switch-Out
• This is a transaction through which units are extinguished for a withdrawal made by an investor
for the purpose of investment into another scheme
• This is like a redemption, but the amount is not paid to the investor but invested into the
target scheme
• The amount switched-out is moved to the target scheme account by the AMC

• Switch-in
• This is a transaction through which units are created for an investment made by an investor by
withdrawing units from another scheme
• This is like a purchase, but the amount is not paid by the investor but invested from the source
scheme
• The amount switched-in is moved from the source scheme account by the AMC

A Switch Transaction (Switch-out & Switch-in) is movement of units across schemes of the same
Mutual Fund but within the same Folio/Account
Types of Transactions

• Transfer-out
• This is a transaction through which units are moved out from one Folio/Account into another
Folio/Account
• The units remain in the same scheme

• Transfer-in
• This is a transaction through which units are moved into a Folio/Account from another
Folio/Account

A Transfer Transaction (Transfer-out & Transfer-in) is movement of units within the same scheme of
the same Mutual Fund but across Folios/Account

• Transmission
• It is a process through which securities held in the name of one or more deceased holder(s)
are transferred in the name(s) of the surviving holder(s) / Nominee (s) / Legal heir(s)
Types of Transactions
• Systematic Investment Plan (SIP)

• A methodology offered by Mutual Funds wherein one could invest a fixed amount in a
Mutual Fund scheme periodically, at fixed intervals instead of making a lump-sum
investment

• A very convenient method of investing in Mutual Funds through standing instructions

to debit your bank account, without the hassle of having to write out a cheque /
transfer funds to the AMC account each time

• A simpler approach to long-term investing in disciplining and committing to a fixed sum

for a fixed period and sticking to this schedule regardless of the conditions of the
market

Involves a registration process to debit the bank account as well as initiate instalment
transactions for a specific amount on a specific date at specified intervals
Types of Transactions

• Systematic Withdrawal Plan (SWP)

• A methodology offered by Mutual Funds wherein one could withdraw a fixed amount
in a Mutual Fund scheme periodically, at fixed intervals instead of making a lump-sum
redemption

• A very convenient method of withdrawing from Mutual Funds through standing

instructions to credit your bank account, without the hassle of having to submit
redemption requests each time

• A simpler approach to manage your cashflow requirements in a disciplined manner

Involves a registration process to initiate instalment transactions for a specific amount

on a specific date at specified intervals
Types of Transactions

• Systematic Transfer Plan (STP)

• A methodology offered by Mutual Funds wherein one could withdraw a fixed amount
from a Mutual Fund scheme and invest in another Mutual Fund scheme of the same
AMC periodically, at fixed intervals instead of making a lump-sum switches

• A very convenient method of withdrawing from one Mutual Fund scheme and invest in
another Mutual Fund scheme, without the hassle of having to submit switch requests
each time

• A simpler approach to spread your investments in the target scheme over a period
rather than investing in one-go

Involves a registration process to initiate instalment transactions for a specific amount

on a specific date at specified intervals
ACCOUNT HOLDING PATTERNS
Holding Pattern or Mode of Operation
• Single
• The investment account is held in a single individual/entity name

• Joint
• The investment account is held in two or three individual names
• Any transaction in the Account will be accepted only if approved by all the holders

• Anyone or Survivor
• The investment account is held in two or three individual names
• Any transaction in the Account will be accepted even if approved by one of the holders

• Either or Survivor (Discontinued)

• The investment account is held in two individual names
• Any transaction in the Account will be accepted even if approved by one of the holders

• First or Survivor (Discontinued)

• The investment account is held in two or three individual names
• Any transaction in the Account will be accepted only if approved by the First Holder (or) the Survivors if
the First Holder is no more
ACCOUNT TAX STATUSES
Tax Status

• Resident Individual
• The investment account is held in the name of a person who is Resident in India

• Non-Resident Individual
• The investment account is held in the name of a person who is NOT Resident in India

• On Behalf of Minor
• The investment account is held in the name of a person who has not completed 18 years of
age (majority)
• Such accounts are operated by a Guardian who can be a Natural Parent (Father/Mother) or
appointed by a Legal Entity (Court)

• HUF
• The investment account is held in the name of a Hindu Undivided Family
• Such accounts are operated by the KARTA of the HUF who is normally the eldest male member
of the family
Tax Status

• Foreign National
• The investment account is held in the name of a person who is a Foreign National

• Person of Indian Origin

• The investment account is held in the name of a person who is a Person of Indian Origin

• Overseas Corporate Body (Discontinued)

• The investment account is held in the name of an entity registered outside India

• Association of Persons (AOP) / Body of Individuals (BOI)

• The investment account is held in the name of an AOP / BOI

• Bank / Financial Institution

• The investment account is held in the name of a Bank or a Financial Institution
Tax Status

• Private Limited Company

• The investment account is held in the name of an entity which is a Private Limited Company

• Public Limited Company

• The investment account is held in the name of an entity which is a Public Limited Company

• Partnership Firm / Limited Liability Partnership (LLP)

• The investment account is held in the name of a Partnership Firm or the LLP

• Society / Trust
• The investment account is held in the name of a Society or a Trust

• Foreign Institutional Investor (FII)

• The investment account is held in the name of a Foreign Institutional Investor

All non-individual accounts are operated by signatories authorized by the respective entities
TRANSACTION SUBMISSION MODES
Transaction Submission Modes

• Physical
• An application form or a transaction slip is used for submitting the transaction
• The same must be submitted at an Official Point of Acceptance (OPA) and time-stamped

• Electronic
• The transaction is submitted through Online Platforms which facilitate transaction submission
to AMC/RTA
• The transaction is time-stamped by the Online Platform if they are declared as OPA by the
AMCs
• If the Online Platform is not declared as an OPA by the AMC, they will in turn forward the
transactions electronically to the AMC/RTA who in turn time-stamp the transactions
• In such cases, these Online Platforms will have an internal cut-off ahead of the scheme cut-
off
UNIT HOLDING MODES
Unit Holding Mode

• Demat

• The units are held in electronic form in a Demat Account opened with a Depository Participant

• For transactions where units are created, the RTA credits the Units into the Client’s Demat
Account through a Corporate Action process

• For transactions where units are extinguished, the units are transferred from the Client’s
Demat Account to the AMCs Demat Account

• Non-Demat (Physical)

• Though renowned as Physical, the units are held in electronic mode only in the form of a
Statement of Account
DEMAT ACCOUNT
CONSTITUENTS
Demat Account & It’s Constituents
• Depository

• A Depository refers to a place or entity that holds financial securities in a dematerialized form,
eliminating the risk related to holding physical financial securities

• A Depository functions as a connection between the public companies that issue financial
securities and the investors or shareholders.

• A Depository holds the securities of customers and gives them back when the customers want.

• In India, there are basically two Depositories:

• Central Depository Services (India) Ltd (CDSL)
• National Securities Depository Ltd (NSDL)
Demat Account & It’s Constituents
• Depository Participant (DP)

• Depository Participants are the agents of a Depository such as NSDL or CDSL

• They are given license to operate by a Depository, under the provisions of The Depositories
Act, 1996

• An investor, needs to approach a Depository Participant to open a Demat account

• Shares/Units purchased by the investor are held in that account with the Depository
Participant, but the investor remains the sole Beneficial Owner of the shares / units.
KYC CONSTITUENTS
Know Your Customer & It’s Constituents
• KYC Registration Agency (KRA)

• KYC Registration Agency (KRA) is an agency registered with SEBI under the Securities and
Exchange Board of India [KYC (Know Your Client) Registration Agency] Regulations, 2011

• The KRA will maintain KYC records of the investors centrally, on behalf of capital market
intermediaries registered with SEBI.

• There are FIVE KRAs in India

• CVL KRA
• CAMS KRA
• KARVY KRA
• NDML KRA
• NSE KRA

• KYC done with one KRA is accessed by other KRAs through interoperability
Know Your Customer & It’s Constituents

• CERSAI KYC

• Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI) is a

central online security interest registry of India authorized by the Government of India to act
as and to perform the functions of the Central KYC Records Registry under the PMLA
(Prevention of Money-Laundering) rules 2005
FATCA & UBO
FATCA
• Foreign Accounts Tax Compliance Act (FATCA)
• The Foreign Account Tax Compliance Act (FATCA) is a tax law that compels U.S. citizens at home
and abroad to file annual reports on any foreign account holdings
• The FATCA was endorsed in 2010 as part of the Hiring Incentives to Restore Employment (HIRE)
Act to promote transparency in the global financial services sector
• FATCA seeks to eliminate tax evasion by American individuals and businesses that are
investing, operating, and earning taxable income abroad
• The Indian Government also signed the Inter-Governmental Agreement (IGA) with the
United States of America in the year 2015 for the implementation of FATCA
• According to the agreement, Indian tax officials are required to obtain specific account
information from US investors
• The goal was to ensure tax compliance by the US citizens while increasing transparency
for their Internal Revenue Service (IRS)
• This gave a legal basis for the reporting financial institutions to maintain and report
personal and income details
UBO
• Ultimate Beneficiary Owner (UBO)

• Countering money laundering and terrorism financing have become top priorities for
regulators in recent years

• Some fraudulent parties can use off-shore accounts to mask their activity and investigators
regularly trace suspicious transactions to fictional addresses, PO boxes or the private homes of
unsuspecting residents

• A UBO or Ultimate Beneficial Owner is the person that is the ultimate beneficiary when an
institution initiates a transaction

• The definition of who constitutes a UBO varies between jurisdiction, but generally a UBO is
defined as an individual who holds a minimum of 10-25% (dependent on jurisdiction) of capital
or voting rights in the underlying entity
INVESTMENT ACCOUNT
&
IT’S COMPONENTS
Investment Account & It’s components

• Applicants / Holders
• Up to 3 in case of Individuals Accounts (other than Minors)
• Single in case of Minor & Non-Individual Accounts
• Guardian to be provided in case of Minor Applicant/Holder
• Tax Status
• Sole/Primary Applicant/Holder Legal Status
• Mode of Operation
• Single
• Joint
• Anyone or Survivor
• Bank Accounts
• Up to 5 Bank Accounts can be registered for Payout
• One of them will be primary and default
• Investments can be made from any of these accounts or any other bank account where the
Sole/Primary applicant/holder is one of the account holder i.e. 1st, 2nd or 3rd
• Redemption Payouts can be sought only into one of these registered bank accounts
Investment Account & It’s components
• Nominees
• The Applicants/holders may or may not choose to nominate
• Up to 3 Nominees can be registered
• % of share should total to 100%
• If Nominee is a Minor, Guardian details should be mandatorily provided
• Applicants cannot be Guardian(s) to Nominee(s)
• Additional KYC of all Holders
• Gross Annual Income / Net-worth as on a date
• Politically Exposed Person (PEP) Status
• Occupation
• Address
• Communication
• Permanent
• Overseas Address (for NRI Clients)
• Demat Account Details
• FATCA declaration
• UBO details
NAV Applicability Rules
NAV Applicability Rules
Transaction Liquid / Overnight Funds All Other Schemes
Purchase Previous day NAV if Transaction is time- Closing NAV of the Business day on which
(Subscription) / stamped & Credit received in AMC Transaction is time-stamped & Credit received in
Switch-in account before 1:30 p.m. AMC account before 3:00 p.m.
(OR) (OR)
Closing NAV of the day immediately Closing NAV of the next Business day on which
preceding the Business day on which the funds are available for utilization before 3:00
the funds are available for utilization if p.m. if either Transaction is time-stamped and /
either Transaction is time-stamped and/ or the credit is received after 3:00 p.m.
or the credit is received after 1:30 p.m.
Redemption Closing NAV of the day immediately Closing NAV of the Business day if the
(Withdrawal) / Switch- preceding the next Business day if the Transaction is time-stamped before 3:00 p.m.
out Transaction is time-stamped before (OR)
3:00 p.m. Closing NAV of the next Business day if the
(OR) transaction is time-stamped after 3:00 p.m.
Closing NAV of the next Business day if
the transaction is time-stamped after
3:00 p.m.
* Distribution Entities / Transaction Aggregator Platforms may have different internal cut-off times which are ahead of the scheme cut-off times
Third Party Payment Rules
Third Party Payment Rules
• As per Third Party Payment rules, investments can be made only from the Bank Account where the
Primary Holder in the Investment Account (Folio/UCC/Demat/Trading Code) is one of the holders
in the Bank Account. The below table illustrates the possible conditions:
Type Investment Account Holding Pattern Bank Account Holding Pattern Payment for Investment Accepted
1 Single Holder A Single Holder A YES
2 Single Holder A First Holder A YES
Second Holder B
3 Single Holder A First Holder B YES
Second Holder A
4 Single Holder A Single Holder B NO
5 First Holder A Single Holder A YES
Second Holder B
6 First Holder A First Holder A YES
Second Holder B Second Holder B
7 First Holder A First Holder B YES
Second Holder B Second Holder A
8 First Holder A Single Holder B NO
Second Holder B
9 First Holder B Single Holder A NO
Second Holder A
10 First Holder B First Holder A YES
Second Holder A Second Holder B
Payout Settlement Rules
Switch-out/Switch-in/Payout Rules

Mutual Fund - Applicable Transaction Date / NAV / Payout Date

Redemption Transaction Submission Day Redemption /
Switch-in Switch-in Date Redemption
/ Switch-out (Before applicable scheme cut-off Switch-Out Date
Scheme / NAV Payout Date
Scheme times) / NAV
Equity / Debt On any Business Day Same Business Day T+2 Business Day
1 Calendar Day T+2 Business
Equity
Liquid On any Business Day Same Business Day before T+2 Business Day
Day
Debt / Equity On any Business Day Same Business Day T+1 Business Day
1 Calendar Day T+1 Business
Debt
Liquid On any Business Day Same Business Day before T+1 Business Day
Day
On a Business Day Preceding a Business Day Same Business Day
Liquid
On a Business Day Preceding Non-Business Day(s) 1 Calendar Day before T+1 Business Day
T+1 Business
Liquid On a Business Day Preceding a Business Day Same Business Day T+1 Business Day
Day
1 Calendar Day
Equity / Debt
On a Business Day Preceding Non-Business Day(s) before T+1 Business T+1 Business Day
Day
CHANGE OF BROKER PROCESS
Change of Broker (COB) – Mutual Funds

• Regular Plan transactions are sold to Clients by a Distributor who has a valid ARN only
• A client may choose to move his investments held under one distributor to another distributor for
various reasons
• This movement of investments from one distributor to another can be achieved through the
“Change of Broker” process
• The Client must submit a duly signed request mentioning the Folio and Scheme details to the
respective AMC/RTA
• The RTA will process the COB at their end subject to the request being proper in all aspects
• The investments will start reflecting under the new ARN holder as per the RTA records post COB
• The AMC will stop paying trail commission on the assets that are moved through the COB process
• Necessary transaction feeds are made available by the RTA through their mail-back services both
to the Old and New broker
CONSOLIDATION OF FOLIOS
Consolidation of Folios (COF)– Mutual Funds
• The Mutual Fund AMC/RTA creates an Account in their records for all investors who make
investments in their Fund
• This Account is called a Folio
• Folios are created based on the Holding Pattern in which the investment is made
• The investors end up creating Multiple Folios in the same Mutual Fund knowingly or unknowingly
• Sometimes, it becomes more difficult in managing investments under multiple folios in the same
AMC
• Therefore, investors may choose to merge these investments into a single folio
• This process of merging investments under multiple folios into a single folio is called “Consolidation
of Folios”
• Consolidation is only affected between folios with identical holding patterns and tax status
• The Client must submit a duly signed request mentioning the Source and Target Folio to the
respective AMC/RTA
• The RTA will process the COF at their end subject to the above-mentioned validations
• The investments will start reflecting under the Target Folio as per the RTA records post COF
• Necessary transaction feeds are made available by the RTA through their mail-back services to the
ARN holder
CHANGE OF TAX STATUS
Change of Tax Status (COT) – Mutual Funds

• All Mutual Fund investments are made under a specific holding pattern and Tax Status
• There will be tax implications to the Client based on the Tax Status under which the investments
are made
• The client’s tax status may change due to various reasons like change of Age, Residential country,
constitution
• Minor becoming a Major
• Resident Individual becoming a Non-Resident Individual and vice-versa
• Pvt Ltd company becoming a Ltd company or an LLP
• Upon any such change, Investors must get their Tax Status updated in the respective Account/Folio
• The Client must submit a duly signed request mentioning the reasons for the change and submit
relevant supporting documents to the respective AMC/RTA
• The RTA will process the COT at their end subject to the required documentation being available
CHANGE OF NOMINEE
Change of Nominee (CON) – Mutual Funds

• SEBI mandates clients investing in Mutual Funds to provide a nomination or mention their choice
to Opt-out from nominating anyone
• Registration of Nominee in an Account/Folio makes the process of transmission simpler in case of
death of the holder(s)
• The Clients may choose to change the nominees already registered by them in the Account/Folio
• The Client must submit a duly signed Nominee Modification form along with relevant supporting
documents to the respective AMC/RTA
• The RTA will affect the CON and confirm to the Clients
CHANGE OF BANK ACCOUNTS
Change of Bank Mandate (COM) – Mutual Funds

• SEBI mandates clients investing in Mutual Funds to register their Bank Accounts for availing credits
for withdrawal payouts
• This also helps in validating investments happening using third party funds
• Registering multiple Bank Accounts in the Folio avoids initiating any change at the time of
withdrawal transaction
• To avoid fraudulent withdrawals, the payout for redemptions submitted along with a COM are put
on cooling period for 10 days
• Currently, an Individual investor can register up to 5 Bank Accounts and a Non-Individual investor
can register up to 10 Bank Accounts in a Folio
• The clients may choose to change these Bank Accounts already registered by them in the folios if
they need
• The Client must submit a duly signed Change of Bank Account form along with the proof of Old and
New Bank Accounts to the respective AMC/RTA
• The RTA will affect the COM subject to all the required documents being available and the Client’s
signatures matching as per their records
COMMON ACCOUNT STATEMENTS (CAS)
Common Account Statements (CAS) – Mutual Funds

• The Finance Ministry has mandated SEBI to ensure the Client’s investing in investment avenues
coming under the purview of SEBI Financial Assets are provided a Common Account Statement
(CAS) on specified frequencies combining all their investments
• Accordingly, SEBI has mandated the Depositories and RTAs to facilitate a CAS by combining the
Client transactions/investments held under both Demat and Non-Demat (Physical) modes
• A CAS is sent as per the following logic:
• By the Depository if the Client holds investments in securities under both Demat and Non-
Demat (Physical) modes
• By the RTAs if the Clients holds investments in Mutual Funds under Non-Demat (Physical)
mode
• A CAS is normally sent on a Monthly basis by the Depository/RTA as mentioned above
• A CAS is sent to the Client on the email ID registered in the Demat/Folios. If the email ID is not
available, then the CAS is sent to the address registered in the Demat/Folios
• The investors can also choose to generate a CAS at will from the RTA websites
TYPES of BROKERAGES/COMMISSIONS
Types of Brokerage

• A Distributor is paid a commission by the AMCs for their products sold to the Clients. This
commission is normally called Brokerage
• Though there are various heads under which the Brokerage is paid to the Distributors, the below
two are predominant methods
• Upfront
• The percentage of brokerage is calculated as a flat fee on the transaction amount. For e.g.
• 2% Upfront on Rs.1,00,000/- investment would mean Rs.2,000/-
• Trailer Fee
• The percentage of brokerage is calculated on the Average Asset value of the investment,
calculated for the period for which the fee is paid. For e.g.
• Investment Amount is Rs.1,00,000/-
• Trail is 1% p.a.
• Average Assets value of this investment is 1,15,254/-
• The trailer fee calculated for 31 days would be as below:
• 1,15,254 X 1/100 X 31/365 = Rs.97.89
• Normally, the brokerage is paid to the Distributor on a Monthly basis
T30 & B30 CITIES CATEGORIZATION
T30 & B30 Cities

• In 2012, SEBI introduced the B15 cities regulation (modified to B30 cities in April 2018) to
incentivize AMCs to increase mutual fund penetration beyond the top metros
• The idea was to compensate mutual funds on the additional cost required to capture and
service clients from smaller towns
• AMCs are allowed to charge an additional 30bps applicable on B30 cities based on certain
criteria defined by SEBI/AMFI
• SEBI has recently suspended this due to the loop-holes in the system
• AMFI has provided the list of Top30 Cities which fall under the T30 category
• Cities which are not part of the T30 category are considered under B30 category
• AMCs declare an additional commission to distributors for assets mobilized from the B30
cities
MUTUAL FUND TRANSACTIONS &
THEIR EXECUTION
Understanding Mutual Fund Transaction Processing & Cycle

• General Mutual Fund Transactions:

• Purchase – Buying of units of a Mutual Fund scheme
• Redemption – Selling of units of a Mutual Fund scheme
• Switch – Simultaneous selling of units of one scheme and buying of units of another
scheme within same Mutual Fund
• Triggered Transactions
• Due to a Corporate Action
• Dividend Reinvestment & Payout
• Due to a Customer Action
• Systematic Investment
• Systematic Transfer
• Systematic Withdrawal
• Dividend Transfer
Involves a Registration Process with the RTA/Concerned Entity to define the
Amount/Units, Frequency & Date
Various Transaction Types and Modes

Transaction Type Physical & Non- Online & Non- Online &
Demat Demat Demat
Purchase YES YES YES

Redemption YES YES YES

Switch YES YES YES

Understanding Mutual Fund Transaction Processing & Cycle
• Physical Transactions (Non-Demat) - Purchases
• Accepted at Official Points of Acceptance (OPA) – generally AMC/RTA branches
• If AMC branches, forwarded to the local RTA branches
• Time-stamped at the time of acceptance by OPA
• Scrutinized by the branch personnel for accuracy of information filled in the forms
• Data-captured in their Front Office software
• Cheques are deposited in the specific collection bank branches
• Electronic Transfers are made in favor of the respective AMC Accounts
• Data made available to the RTA Back Office teams for further validation and processing
• Validation warnings are rectified
• Rejected if validation errors cannot be rectified
• Funds received are reconciled and mapped against the respective transactions by AMC/RTA
• Transactions rejected for cheque bounces
• Processed upon availability of NAV from the AMC
• Mail-back data feeds made available to the intermediary based on ARN/RIA code available in
the form
• Statement of Account (SOA) emailed to the Investors
Understanding Mutual Fund Transaction Processing & Cycle
• Online Transactions (Non-Demat) - Purchases
• Accepted at AMC/RTA/Exchange/Transaction Aggregator portals
• If AMC/Exchange/Transaction Aggregator portals, forwarded to the RTAs
• Time-stamped at the time of submission at AMC/RTA
• Validations carried out at the time of acceptance by AMC/RTA centralized systems
• Invalid transactions are rejected and sent back to Exchange/Transaction Aggregators
• Funds are electronically moved from Client to Clearing Corporation to AMC Accounts
• Cheques are deposited in the specific collection bank branches
• Data made available to the RTA AMC teams for further validation and processing
• Validation warnings are rectified
• Rejected if validation errors cannot be rectified
• Funds received are reconciled and mapped against the respective transactions by AMC/RTA
• Transactions rejected for cheque bounces
• Processed upon availability of NAV from the AMC
• Mail-back data feeds made available to the intermediary based on ARN/RIA code available in
the form
• Statement of Account (SOA) emailed to the Investors
Understanding Mutual Fund Transaction Processing & Cycle
• Online Transactions (Demat) - Purchases
• Accepted at Exchange/Transaction Aggregator portals
• If Transaction Aggregator portals, forwarded to the Exchanges
• Forwarded to the RTA systems by Exchanges within scheme cut-off
• Time-stamped at the time of submission at RTA
• Validations carried out at the time of acceptance by RTA
• Invalid transactions are rejected and sent back to Exchange
• Funds move from Client Ledger to Clearing Corporation to AMC
• Cheques are deposited in the specific collection bank branches
• Data made available to the RTA AMC teams for further validation and processing
• Validation warnings are rectified
• Rejected if validation errors cannot be rectified
• Funds received are reconciled and mapped against the respective transactions
• Transactions rejected for cheque bounces
• Processed upon availability of NAV from the AMC
• Purchased units credited to Client Demat through Corporate Action by the RTA
• Reverse feeds provided to Exchanges who in turn provide data to Brokers
• Contract notes sent to Clients from Brokers
• Mail-back data feeds made available to the intermediary based on ARN/RIA code
Understanding Mutual Fund Transaction Processing & Cycle
• Physical Transactions (Non-Demat) - Redemptions
• Accepted at Official Points of Acceptance (OPA) – generally AMC/RTA branches
• If AMC branches, forwarded to the local RTA branches
• Time-stamped at the time of acceptance by OPA
• Scrutinized by the branch personnel for accuracy of information filled in the forms
• Data-captured in their Front Office software
• Data made available to the RTA Back Office teams for further validation and processing
• Signatures verified with records
• Rejected for signature mismatch, NIL units balance etc.
• Processed upon availability of NAV from the AMC
• Payouts electronically processed to Client Bank Accounts as per settlement timelines
• Mail-back data feeds made available to the intermediary based on ARN/RIA code of
the parent transactions withdrawn
• Statement of Account (SOA) emailed to the Investors
Understanding Mutual Fund Transaction Processing & Cycle
• Online Transactions (Non-Demat) - Redemptions
• Accepted at AMC/RTA/Exchange/Transaction Aggregator portals
• If AMC/Exchange/Transaction Aggregator portals, forwarded to the RTAs
• Time-stamped at the time of submission at AMC/RTA
• Validations carried out at the time of acceptance by AMC/RTA
• Data made available to the RTA Back Office teams for further validation and processing
• Validation warnings are rectified
• Rejected if validation errors cannot be rectified
• Processed upon availability of NAV from the AMC
• Payouts electronically processed to Client Bank Accounts as per settlement timelines
• Mail-back data feeds made available to the intermediary based on ARN/RIA code
available in the form
• Statement of Account (SOA) emailed to the Investors
Understanding Mutual Fund Transaction Processing & Cycle
• Online Transactions (Demat) - Redemptions
• Accepted at Exchange/Transaction Aggregator portals
• If Transaction Aggregator portals, forwarded to the Exchanges
• Forwarded to the RTA systems by Exchanges within scheme cut-off
• Time-stamped at the time of submission at AMC/RTA
• Validations carried out at the time of acceptance by AMC/RTA
• Invalid transactions are rejected and sent back to Exchange
• Redeemed Units move from Client Demat to Exchange to AMC
• Data made available to the RTA Back Office teams for further validation and processing
• Validation warnings are rectified
• Rejected if validation errors cannot be rectified
• Processed upon availability of NAV from the AMC
• Funds move from AMC to Clearing Corporation to Trading Member to Client Ledger
• Reverse feeds provided to Exchanges who in turn provide data to Brokers
• Contract notes sent to Clients from Brokers
• Mail-back data feeds made available to the intermediary based on ARN/RIA code
Understanding Mutual Fund Transaction Processing & Cycle
• Physical Transactions (Non-Demat) - Switches
• Accepted at Official Points of Acceptance (OPA) – generally AMC/RTA branches
• If AMC branches, forwarded to the local RTA branches
• Time-stamped at the time of acceptance by OPA
• Scrutinized by the branch personnel for accuracy of information filled in the forms
• Data-captured in their Front Office software
• Data made available to the RTA Back Office teams for further validation and processing
• Signatures verified with records
• Rejected for signature mismatch, NIL units balance etc.
• Switches-out processed upon availability of NAV from the AMC
• Funds electronically transferred between scheme accounts by AMCs as per settlement
timelines
• Switches-in processed as per settlement timelines
• Mail-back data feeds made available to the intermediary based on ARN/RIA code of the parent
transactions withdrawn
• Statement of Account (SOA) emailed to the Investors
Understanding Mutual Fund Transaction Processing & Cycle
• Online Transactions (Non-Demat) - Switches
• Accepted at AMC/RTA/Exchange/Transaction Aggregator portals
• If AMC/Exchange/Transaction Aggregator portals, forwarded to the RTAs
• Time-stamped at the time of submission at AMC/RTA
• Validations carried out at the time of acceptance by AMC/RTA
• Data made available to the RTA Back Office teams for further validation and processing
• Validation warnings are rectified
• Rejected if validation errors cannot be rectified
• Switches-out processed upon availability of NAV from the AMC
• Funds electronically transferred between scheme accounts by AMCs as per settlement
timelines
• Switches-in processed as per settlement timelines
• Mail-back data feeds made available to the intermediary based on ARN/RIA code of
the parent transactions withdrawn
• Statement of Account (SOA) emailed to the Investors
Understanding Mutual Fund Transaction Processing & Cycle
• Online Transactions (Demat) - Switches
• Accepted at Exchange/Transaction Aggregator portals
• If Transaction Aggregator portals, forwarded to the Exchanges
• Forwarded to the RTA systems by Exchanges within scheme cut-off
• Time-stamped at the time of submission at AMC/RTA
• Validations carried out at the time of acceptance by AMC/RTA
• Invalid transactions are rejected and sent back to Exchange
• Switched-out Units move from Client Demat to Exchange to AMC
• Data made available to the RTA Back Office teams for further validation and processing
• Validation warnings are rectified
• Rejected if validation errors cannot be rectified Switches-out processed upon availability of NAV
from the AMC
• Funds electronically transferred between scheme accounts by AMCs as per settlement timelines
• Switches-in processed as per settlement timelines
• Switched-in units credited to Client Demat through Corporate Action by the RTA
• Reverse feeds provided to Exchanges who in turn provide data to Brokers
• Contract notes sent to Clients from Brokers
• Mail-back data feeds made available to the intermediary based on ARN/RIA code
UNDERSTANDING RTA MAILBACK FEEDS
RTA Mail-back Feeds

• RTAs are the system of record for Mutual Fund Investor data
• All transactions initiated by the Clients are finally processed by the RTAs at applicable NAVs
declared by Mutual Funds
• RTAs facilitate downloadable feeds to Intermediaries like Distributors, RIAs, Transaction
Aggregator Platforms for the transactions submitted under their codes
• There are various types of feeds provided by the RTAs on various frequencies
• The Intermediaries are allowed to subscribe for these feeds on a defined frequency and a
defined period or on an ad-hoc basis
• The RTAs email the data in a specific pre-defined format to the registered email ID on the
required frequency till the subscribed period
• Ad-hoc feeds are provided either on an immediate or overnight basis depending upon the
size of the data requested
• RTAs do not charge any fees from the intermediaries for these mail-back feeds. However,
they calculate some cost units for every such downloaded feed and restricts download if
the intermediary has exhausted their limit
RTA Mail-back Feeds – Contd.

• The following are some basic feeds which the RTA mail-back services provide to
distributors amongst many other feeds
• Product Master
• NAV
• Processed Transaction
• Folio Master
• AUM
• Systematic Transactions Registration
• Trailer Fee
• The intermediaries design their own systems or subscribe to systems available in the
market to consume these data feeds coming from the RTA and service their clients
UNDERSTANDING STRUCTURED PRODUCTS
Structured Products (SP)
• Structured products are pre-packaged investments that normally include assets linked to interest
plus one or more derivatives
• They are generally tied to an index or basket of securities, and are designed to facilitate highly
customized risk-return objectives.
• This is accomplished by taking a traditional security such as a conventional investment-grade bond
and replacing the usual payment features—periodic coupons and final principal—with non-
traditional payoffs derived from the performance of one or more underlying assets rather than the
issuer's own cash flow.
• The underlying instruments of the Structured Products issued by ARWL are Debentures
• Debentures are debt instruments having a fixed maturity period and a coupon (interest) rate
payable to the holder
• The coupon rate can be either fixed or floating
• The debenture with a floating coupon rate is tied-up to a benchmark, basis which the interest
payable is defined
• On maturity, apart from the principal component, there is a pay-off which depends on the
movement of the security or index to which they are linked
www.rathi.com

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