NISM Chapter: 9

1. New Fund Offer

Units in a mutual fund scheme are offered to investors for the first time through a New Fund
Offer (NFO).
NFO Open Date – This is the date from which investors can invest in the NFO
NFO Close Date – This is the date upto which investors can invest in the NFO

Scheme Re-Opening Date – This is the date from which the investors can offer their units for re-
purchase to the scheme (at the re-purchase price); or buy new units of the scheme (at the sale price). The
AMC announces Sale and Re-purchase prices from the Scheme Re-Opening Date.

Close-ended Schemes have an NFO Open Date and NFO Close Date. But, they have no Scheme
Re-opening Date, because the scheme does not sell or re-purchase units. Investors will need to buy or sell
units from the stock exchange where the scheme is listed.

2. Investment Plans and Services

Direct and Regular Plans
Mutual Fund Plans/Options/Sub-options

DIRECT REGULAR
Growth Dividend Growth Dividend

1. Growth – Accumulated/Lets the money grow as per NAV in the scheme

2. Dividend
a. Dividend Payout – Dividend amount will credited to investor bank account
b. Dividend Re-investment – Dividend amount will get invest in same scheme on record date

3. Unit Holder Information

A mutual fund investment can have up-to three holders. All the holders must be investors eligible to
invest in a mutual fund. The folio is created in the name of the first holder who is the primary investor.
All benefits of the investments such as dividends, redemption payments and tax benefits will go to the
first holder.

4. Minor as a unit holder

An investment made for a minor (less than 18 years) is done through a guardian who complies with the
KYC and PAN requirements and all other formalities as if the investment was for themselves. The
guardian is typically a natural parent or court appointed legal guardian.

5. POA as a unit holder

Similarly, a folio operated under a Power of Attorney (PoA), requires the PoA holder and issuer to
comply with the KYC and PAN requirements and a certified copy of the PoA to be submitted to the
mutual fund before the holder can operate the folio.
 6. Sources of Information on Eligibility to invest

The individual investors eligible to invest as detailed above, can invest in any mutual fund scheme, unless
the mutual fund comes out with a specific scheme, or a plan within a scheme, that is not intended for any
category of investors.

The non-individual investors eligible to invest as detailed above, can invest in any mutual fund schemes.
However, in some schemes, only specific classes of non-individual investors are permitted.

7. Eligibility to Invest
Anyone can invest in Mutual Fund

Individual Investors Non-individual Investors

Resident Indian adult · Companies / corporate bodies, registered in India
individuals, above the age of
18 · Registered Societies and Co-operative Societies
· Minors i.e. persons below
the age of 18: With the help · Trustees of Religious and Charitable Trusts
of guardian · Trustees of private trusts
· Hindu Undivided Families · Partner(s) of Partnership Firms
(HUFs): The head of the · Association of Persons or Body of Individuals, whether incorporated or not
family (called “Karta”) · Banks (including Co-operative Banks and Regional Rural Banks) and
invests on behalf of the Financial
family. Institutions and Investment Institutions
· Non-Resident Indians · Other Mutual Funds registered with SEBI
(NRIs)/Persons of Indian · Foreign Portfolio Investors registered with SEBI
Origin (PIO) resident abroad
· International Multilateral Agencies approved by the Government of India
· Army/Navy/Air Force, Para-Military Units and other eligible institutions
· Scientific and Industrial Research Organizations
Person of Indian Origin,
· Universities and Educational Institutions
Card/OCI (Overseas
Citizenship of India) Card. · Foreign portfolio

Nomination
The applicant can make a nomination in favor of a maximum of three nominees and indicate the
percentage to each nominee. The nomination can be made at the time of application or subsequently at
any time.

Minimum Investment
The Scheme Information Document (SID) and Key Information Memorandum (KIM) provides
information on the minimum application amount
FATCA (Foreign Account Tax Compliance Act)
What is FATCA?
- FATCA stands for the Foreign Account Tax Compliance Act, a new set of US Tax Regulations
brought in by the US govt. and enacted through the Internal Revenue Service (IRS), which is
similar to Income Tax Department in India.

Why was FATCA enacted?

- It was enacted by US Government to combat tax evasion by US persons with accounts held
outside the US and who do not declare their taxable income or gains for US tax purposes / to
force foreign financial institutions to disclose U.S. account holders’ information to the IRS in
order to curb offshore tax evasion.

Notes:
a. FATCA is mandatory for all types of investor.
b. Without FATCA investor unable to initiate any financial transactions.
c. Even for the redemption also we required FATCA.

De-mat Account
1. Dematerialization:
- Transfer from physical to electronic mode
- Transfer of units from Mutual Fund to De-mat Account
- Transfer from OFFLINE to ONLINE

2. Re-materialization:
- Transfer from electronic to physical mode
- Transfer of units from De-mat Account to Mutual Fund
- Transfer from ONLINE to OFFLINE

KYC (Know Your Client)

Types of KRA
a) CVL
b) CAMS
c) NDML
d) DOTEX
e) KARVY
 1. C-KYC:
- CKYC refers to Centralized KYC (Know Your Customer).
- The main objective of CKYC is to have a central KYC which will applicable to all finance
sectors.
- Once the CKYC is completed for an Investor, he / she is allotted a 14 digit unique KIN (KYC
Identification Number)
- There is no transaction amount limit. Regulated by CERSAI

Process for C-KYC

a. Fill CKYC application form (Download from website)
b. Recent color passport size photo
c. PAN card copy (Cary original for verification)
d. Proof of address (Cary original for verification)
e. Carry original documents for In Person Verification. (Mandatory)

1. Note: Investor has to visit personally for In Person Verification. If investor will sent request by
post/Courier request will get reject.
2. Note: If investor can’t visit AMC branch for KYC In Person Verification. There is 2 option for
KYC In Person verification
a. You can do KYC from KYD registered broker.
b. You can do In Person Verification from schedule commercial Banks
3. Note: Investor can also send the request by post/Courier post IPV (In Person Verification)
attestation from schedule commercial Banks.

Note: Normally it takes 3 to 4 days for KYC. But investor can do investment and KYC at the same
time.

2. e-KYC:
- E-KYC is an Online KYC process.
- E-KYC is completely based on Aadhaar verification.
- Under EKYC there is a limit of Rs. 50,000/- Per Financial Year Per Mutual Fund

3. PAN Exempt KYC:

- If Investor doesn’t have PAN can invest in MF? Yes, He/she has to do PAN exempt KYC
- There is a limit of Rs. 50,000/- Per Financial Year Per Mutual Fund
- They can start micro-SIP (i.e. SIP aggregate amount less than 50,000)
- Micro SIP means: Your SIP amount should be less that Rs. 50000 (i.e. Amount*12 months =
50,000)
 Modes of Payment

Modes of Payment Payment Mechanism for Purchase- Details

Offline
Cheque/Demand Draft
Account holder name, account no., IFSC code, MICR code, bank name, amt
(DD)
Payment by Parents/Grand-Parents/Related Persons on behalf of a minor in
consideration of natural love and affection or as gift for a value not exceeding Rs
50,000/- for each regular purchase or per SIP installment. ‘Related Person’ means any
Third Party Payments
person investing on behalf of a minor in consideration of natural love and affection or
as a gift. In such cases, persons who make payment should be KYC Compliant and
sign Third Party Declaration form

Cash Payments Cash payment not allowed but as per SEBI invest upto Rs. 50,000/- Per FY Per MF

Online - Electronic Modes of Payment

Internet Banking
The National Electronic Fund Transfer (NEFT) facility allows digital transfer of funds
NEFT)
between bank accounts.
The Immediate Payment Service (IMPS) is an instant interbank electronic fund transfer
IMPS)
available to registered users of banks through mobile phones, net banking and ATMs.
Remittance can also be made directly to the bank account of the scheme through Real
RTGS) Time Gross Settlement (RTGS) / National Electronic Funds Transfer (NEFT) facilities
(for transfers within India)
Electronic Clearing Service (ECS) / Standing Instructions (SI) are a convenient form of
ESC investment in a SIP. On the specified date, each month, the bank will automatically
transfer money from the investor’s account to the account of the mutual fund
M-Banking i.e. mobile banking has now become a convenient way for investment and
M-Banking
transaction
Unified Payment Interface It’s like BHIM app, UPI transaction take place with the help of VAP (Virtual Payment
(UPI) address) e.g. abc@icici or 123456@icici

Aadhaar Enabled Payment

Based on Aadhaar payment
Service (AEPS)

Cards Debit card transaction

E-Wallets Like Paytm wallet
One-Time Mandate OTM is a mandate given by an investor to his/her respective bank, in name of Mutual
(OTM) Fund, it enables paperless transactions
This is a facility where the investment application in a New Fund Offer (NFO) is
Application Supported by accompanied by an authorization to the bank to block the amount of the application
Blocked Amount (ASBA) money in the investor’s bank account. The benefit of ASBA is that the money goes out
of the investor’s bank account only on allotment.
******* Cut-off timing is not applicable for NFOs and International Schemes.
Time Stamping

- The precision in setting cut-off timing makes sense only if there is a fool proof mechanism of
capturing the time at which the sale and re-purchase applications are received.
- This is ensured through the following: Mutual funds disclose Official Points of Acceptance
(OPoAs) and their addresses in the SID and their website.
- All transaction requests need to be submitted at the OPoAs.
- The time stamping on the transaction requests is done at the official points of acceptance.

As a convenience, the distributor may accept the transaction request from the investor, but this would
need to be sent to an OPoA at the earliest.

When the cut-off timing is applied, the time when it is submitted to the OPoA is relevant–not the
time when the investor submits the transaction request to the distributor.

Cut-off Time:
- Cut off time for purchase in ALL SCHEMES is 3:00 pm
- Only For Liquid and Overnight Fund cut-off time is 1:30 pm.
- (w.e.f. 1st Feb 2021…. NAV is applicable as per Fund Realization for all schemes.
- Business days are from Monday to Friday
- Saturday and Sunday are non-business day
- NAV declared at night 11:00 pm Monday to Friday
- Only for Liquid Plan & Overnight Fund NAV declares 365 days i.e. on Saturday and Sunday as
well.

Fund Realization means:

Amount debited from the investor bank account and credited to the scheme account that’s called fund
realization. Fund realization also called credit confirmation, fund utilization also.
Purchase NAV Applicability

Purchase NAV Applicability

Scheme Amount Timing NAV Applicability

ALL SCHEMES Fund realize before 3 pm - Same business

Cut off time is 3 PM,
(Equity, Debt, day NAV will be applicable
but NAV will be
Hybrid, Solution Any
applicable as per fund
oriented, Others Amount
realization on any Fund realize after 3 pm - Next business day
including Money
amount NAV will be applicable
Market)
 Liquid Plan/Overnight Fund - Purchase NAV Applicability
Scheme Amount Timing NAV Applicability

Fund realize before 1:30 pm - pre-ceding day

Cut off time is 1:30 NAV will be applicable
Liquid
Any PM, but NAV will be
Plan/Overnight
Amount applicable as per fund Fund realize after 1:30 pm – Day pre-ceding
Fund
realization. Next business day will be applicable (i.e.
Same day NAV)

Liquid Plan/Overnight Fund - Purchase NAV Applicability

Transaction day Transaction time Fund Realize NAV applicability
Monday Before 1:30 pm Before 1:30 pm Sunday's NAV
Monday After 1:30 pm After 1:30 pm Monday's NAV
Tuesday Before 1:30 pm Before 1:30 pm Monday's NAV
Tuesday After 1:30 pm After 1:30 pm Tuesday's NAV
Wednesday Before 1:30 pm Before 1:30 pm Tuesday's NAV
Wednesday After 1:30 pm After 1:30 pm Wednesday's NAV
Thursday Before 1:30 pm Before 1:30 pm Wednesday's NAV
Thursday After 1:30 pm After 1:30 pm Thursday' NAV
Friday Before 1:30 pm Before 1:30 pm Thursday' NAV
Friday After 1:30 pm After 1:30 pm Sunday's NAV
Saturday Sunday's NAV
Saturday Sunday's NAV
Any Time Any Time
Sunday Sunday's NAV
Sunday Sunday's NAV

Redemption/Re-purchase/Withdrawal Cut-off time and NAV applicability:

Cut-off
Scheme Time NAV applicability
Equity
Before 3:00 pm Same business day NAV will be applicable
Debt 3:00 PM
Liquid/Money Market After 3:00 pm Next business day NAV will be applicable
 Types of Transaction – FT/NFT

Financial Transaction: Non-Financial Transaction:

First time investment Change of email id and mobile number Change of address
Additional purchase
Link Your Aadhar De-mat Process
process
Investment on behalf of
FATCA Updation Change of Mode of Holding
minor process
Redemption process DOB and PAN Updation Change in Tax Status
Transmission (In case of death of
Switch process OTM Registration investor units get transfer to
nominee

SIP (SIP Top up, SIP Nominee Updation/Modification/Deletion Lien registration/cancellation

Insure) process process

SWP Change of Bank (COM/COB) Change in Name

STP Multiple Bank A/c Registration Change in Signature
Dividend and DTP Change of Dividend option Minor Attaining Majority
Trigger Folio Consolidation Process Change in Guardian
Chapter 9: Sample Questions

1. What term is used to describe the Net Asset Value (NAV) of the scheme after the
dividend is paid out (Remember the NAV would have dropped to the extent of the
dividend paid)?
a. Ex-Dividend NAV
b. Cum-Dividend NAV
c. Lower NAV
d. Dividend NAV

2. At what price are the bonus units issued to the unitholder?

a. The price is decided by the AMC in consultation with the trustees
b. The bonus units are allotted free of cost
c. At the prevailing NAV
d. At the prevailing NAV divided by the bonus ratio

3. Which of the following statements is True?

a. Hindu Undivided Families (HUFs) are not allowed to invest in mutual fund
schemes
b. Minors cannot invest in mutual fund schemes
c. Foreign investors can invest in Indian mutual fund schemes, provided they
have completed the Know-Your-Client (KYC) formalities

4. Whose KYC needs to be completed in case of an application by a minor?

a. The minor
b. The guardian
c. Any family member of the minor
d. No KYC is required in case of applications by minors

5. How many (maximum) bank accounts can a resident individual investor register with
a mutual fund folio?
a. 1
b. 2
c. 3
d. 5