MFD - Level 2

Quick and Easy Chapter Summaries

Chapter 8 : Investor Services

Here are the important points to remember from this chapter :

» In a NFO, besides the official points of acceptance viz. Offices of the AMC and RTA, applications are also received by collection bankers appointed by the AMC.

» Allotment formalities need to be completed and statement of accounts despatched to investors within 5 days from NFO closure.

» The day of allotment is called inception date. The scheme starts declaring its NAV from the following day, which is also the day when open-end schemes are opened for on-
going transactions.

» The period when on-going transactions are permitted in an open end scheme is also called continuous offer period.

» During the continuous offer period, sale and repurchase transactions happen at NAV based prices.

» The Treasury department of the AMC is informed of the sale and re-purchase volume, so that they can plan their investments or disinvestments.

» The AMC's fund accounting department calculates the NAV, after considering day-end portfolio values and the day's sale/re-purchase transactions. The day-end NAV is
communicated to the RTA.

» Based on the NAV information, the RTA proceeds with the crediting of the new units or deducting the re-purchased units from the folio of the investor.

» If a limit price order is given, the order will be executed at a price better than or equal to the limit price.

» If the order is placed without a limit price i.e. at the market, then it has a greater chance of being executed i.e. the order would not lapse at the end of the day.

» The unit-holder has a right to nominate one or more persons (up to three) in whom the units shall vest in the event of his death.

» Where the units are held by more than one person jointly, the nomination needs to be done by the joint unit-holders together.

» The nomination can be made only by individuals applying for/ holding units on their own behalf singly or jointly.

» Nomination can also be in favour of Central government, state government, a local authority, any person designated by virtue of his office or a religious or charitable trust.

» The nominee shall not be a trust, society, body corporate, partnership firm, karta of HUF or a power of attorney holder.

» In case of multiple nominees, if the aggregate allocation is less than 100%, then the balance will be re-balanced to the first unit holder. If the aggregate is greater than 100%,
the nomination will be rejected.

» In the event of the unit-holders not indicating the percentage of allocation/ share for each of the nominees, the mutual fund/ asset Management Company shall settle the
claim equally amongst all the nominees.

» Investors can borrow money against pledge of their mutual fund units.

» Once the charge is created, the investor will not be able to sell those units or offer them for re-purchase, though he can continue receiving the dividend.