SEBI’s new KRA regulations

SEBI KRA Regulations

​Can you tell me what SEBI’s new KRA regulations are all about?

Until recently, if you wanted to invest through multiple intermediaries, you had to complete KYC compliance processes for each of the intermediaries separately. However, as per SEBI’s new KRA regulations, there is a unified KYC process for all securities, and you need to complete this only once. This regulation has been effective since January 1, 2012, and currently, this unified KYC process is carried out by KYC Registration Agencies (KRAs), as notified by SEBI.

 

Do existing investors need to repeat KYC formalities to comply with SEBI’s KRA regulations?

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In case your PAN and KYC status is already updated in our records, you need not go through the KYC process again. If further details are required as per the new regulations, you will be notified, and can submit the same at our servicing centres. If you are a new investor, and have not completed your KYC process yet, you will need to complete formalities as per SEBI’s KRA regulations.

​Is it alright if I send my KYC documents to your office via post or courier?

Yes, that’s absolutely fine. However, make sure you comply with the following:

• Your form is duly filled, correctly and is not incomplete in any way
• The In-Person Verification (IPV) section of your form has been completed either by a National Institute of Securities Markets (NISM)/ Association of Mutual Funds in India (AMFI) distributor who is Know Your Distributor (KYD) complied or by a scheduled commercial bank.

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​I am an NRI who wants to complete my KYC formalities and invest in SBI Mutual Fund. What do I do?

You need to complete your KYC form and submit it at any of our servicing centres. Please remember that the In-Person Verification (IPV) section of your form has been completed either by a National Institute of Securities Markets (NISM)/ Association of Mutual Funds in India (AMFI) distributor who is Know Your Distributor (KYD) complied or by a scheduled commercial bank.

Why can’t I invest in mutual funds without having a PAN card?​

(Permanent Account Number) PAN Card

 

Why can’t I invest in mutual funds without having a PAN card?

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As per circulars MRD/DoP/Cir-05/2007 dated April 27, 2007 and MRD/DoP/Cir-08/2007 dated June 25, 2007, SEBI has made the Permanent Account Number (PAN) the primary, mandatory identification for all mutual fund transactions. This has been done to reduce the risk of fraud and money-laundering, and create an environment that is conducive for investors. Since all mutual fund and asset management companies are bound to adhere to this requirement from SEBI, you need to have a valid PAN card to invest in mutual funds.

What should I do if I want to invest in mutual funds but don’t have a PAN?

As per SEBI’s directives and mandatory requirements, you are permitted to invest in units of mutual fund schemes only if you have a valid Permanent Account Number. You will need to apply for and get a registered PAN card before you can own mutual fund investment units.

 

Is it possible for me to get my PAN verified along with my mutual fund investment?

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Yes. If you are an investor who has a PAN that is not verified, submit a photocopy of your PAN Card and your original PAN card at our servicing centre or at a Computer Age Management Services (CAMS) Investor Service Centre. Your original PAN card will be verified and returned to you immediately. Once your verification is complete, you will not need to carry out PAN verification for your subsequent mutual fund investments.

​If I am KYC complied and have a Mutual Fund Identification Number (MIN), do I still need to verify my PAN before investing?

Yes. You do. In addition to KYC norms, SEBI has mandated that PAN is the sole identification for all mutual fund related transactions. So even though you have a MIN, you need to have a verified PAN to be able to invest in mutual funds

National Electronic Funds Transfer (NEFT)?

National Electronic Funds Transfer (NEFT)

​What exactly is National Electronic Funds Transfer (NEFT)?

National Electronic Funds Transfer or NEFT is a facility provided by the Reserve Bank of India (RBI), to make transfer of funds between bank accounts, convenient and secure. You can avail of the NEFT service to move your funds from any branch of any bank across India, to any other bank branch in the country. subscribe now for information and alerts to stay updated on New Fund Offers that get launched.

​Why should I choose NEFT over my current payout method?

If your current payout method is Demand Draft or Pay Order, it takes at least 3-4 days until your payout is dispatched and reaches you. NEFT, on the other hand, allows your payout amount to be transferred on the same day or the next day. The advantage of choosing NEFT over your current payout method is that NEFT is secure, quick and involves minimum risk.

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What are the steps for me to enrol for NEFT?

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Enrolling for NEFT is a quick 3-step process. All you need to do is download the form, fill it correctly, and submit or forward it to us. Once your form is received, we will process it within a week’s time and you will receive a confirmation and statement of account for the same. After that, you will receive any redemption/dividend payout that you are eligible for, through NEFT.

 

Do I have to make any payment in order to enrol for NEFT?

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No. We do not require you to make any payment to enrol for the NEFT facility. Your bank, however, may charge you a nominal amount to avail of NEFT. So you can check and confirm with your bank before enrolling for NEFT.

What is a New Fund Offer?​

New Fund Offer (NFO)

 

What is a New Fund Offer?

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An NFO or a New Fund Offer is a new opportunity for investors to invest. An NFO could be the offer for a new mutual fund scheme that is being launched by the company, and alternately, the NFO could also be the launch of additional units of existing close-ended funds, that are available for investing.

 

Are investments in a New Fund Offer open to everyone?

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Yes. Any category / type of investor can invest in NFOs, so long as the basic eligibility requirements like possessing the appropriate documents, account details and completing the KYC process are taken care of.

Documents Required for Mutual Fund Investments

 

What do I keep in mind while filling up my mutual fund investment form?

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Make sure you provide these details correctly and clearly:

• Name, address, number of units applied for, other required details
• Correct bank account number to prevent fraudulent transactions and encashment

In case of a change in any of the above, intimate your mutual fund company immediately.

Transactions in Mutual Funds

Transactions in Mutual Funds

 

What is NAV?

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NAV is the measure of performance of an individual scheme of a mutual fund. It is essentially, the market value of the securities held by the scheme. The NAV per unit is the market value of all the securities held by the scheme divided by the number of units. Example, if the market value of securities is INR 200 lakhs, and the mutual fund has issued 10 lakh units of INR 10 each, the NAV of each unit is INR 20. Since the market value of securities changes every day, so does the NAV of funds. Depending on the type of scheme, it is mandatory for the NAV to be disclosed daily or weekly.

 

What is a load or no-load fund?

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A load fund is a fund where you need to pay a certain percentage of the NAV, each time you buy or sell a unit of that fund. Example, if a unit of the fund costs Rs. 10 and the load is 1%, you will need to pay Rs. 10.10 for each unit you buy and will receive Rs. 9.90 for each unit you sell.

A no-load fund is a fund with no extra charges required on the entry or exit, which means, you can buy units and sell units at the current NAV.

​Can a mutual fund increase the load beyond what was mentioned in the scheme when I invested?

No. Only the percentage of load mentioned when you invested, will be applicable to your investments. Even if the load is increased, it will only be applicable on the investments that follow, and not the investments that have already been done before. Also, in case of any such change, it is mandatory that mutual funds update their scheme document and make their investors aware of the same.

 

What is the sales price and repurchase or redemption price of a mutual fund?

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The price or NAV that you pay for each unit, when you invest in an open ended mutual fund scheme, is called the sales price of the scheme. This may include a sales or entry load. The price or NAV at which you sell your investment units, and the open-ended mutual fund scheme buys them back from you, is called the repurchase or redemption price. This price may include an exit load.

 

What is an assured return scheme?

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An assured return scheme is a scheme that offers you a guarantee of a certain amount of returns, irrespective of how it performs in the market. If a scheme provides assured returns, you will find it clearly mentioned in the fund document. Some schemes offer assured returns only for a specific period and some schemes may declare assured returns one year at a time, reviewing their performance each year. So it’s important to keep track of such updates and understand details before investing.

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​Can the mutual fund change its asset allocation percentage after I have invested in it?

Yes. Fund managers do have the flexibility to change the percentage of investments in debt and equity instruments, as a short term measure, to maintain the NAV and ensure good performance of the fund. However, if the change in asset allocation percentage is going to be permanent, it is mandatory to make an announcement about it and give investors an option to exit the scheme without paying an exit-load.

​How much time do I need to wait before I can receive the dividends / repurchase proceeds of the mutual fund I have invested in?

You are entitled to receive the dividend from your mutual fund within 30 days of it being declared. In case you sell your mutual fund units, repurchase proceeds should be made available to you within 10 working days of receiving your repurchase / redemption request. If you don’t receive either of these in the stipulated duration, your mutual fund company is liable to pay you interest as per the rate declared by Securities and Exchange Board of India (SEBI). Currently, this rate is 15%.

 

Can I appoint a nominee for his investment in units of a mutual fund?

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Yes, you can. A nominee can be appointed by individuals who hold mutual fund units jointly or singly. However non-individuals including society, trust, body corporate, partnership firm, Kata of Hindu undivided family , holder of Power of Attorney cannot appoint a nominee.

 

If a mutual fund winds up, what happens to the money I invested in it?

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In case a scheme winds up, the mutual fund will pay out a sum based on prevailing NAV, after adjusting for the expenses. You will also receive a report on the winding up, which will include all the necessary details.

Offer Documents and Statements

Offer Documents and Statements

 

When I receive or download a Scheme Information Document, what are the main things I should check for?

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In your Scheme Information Document, watch out for the fund features, risk factors, initial issue expenses, recurring expenses, entry or exit loads, track record of the sponsors, educational qualification and professional experience of the key personnel managing your fund and the performance of other schemes launched by the mutual fund in the past. You should also check and be aware of pending litigations and penalties imposed, if any.

 

Do I get information of exactly how and where my money is being invested?

 

Yes! Absolutely! By law, mutual funds are required to disclose their complete portfolios twice a year. These are published in leading newspapers, and some mutual funds also send out these details to their unit holders. You get details of which securities have been invested in, what is the proportion in which they have been invested, their market values and NAVs. They also declare illiquid securities, investments made in rated and unrated debt securities, Non-Performing Assets, etc.

 

Can a mutual fund change the nature of its scheme from what is printed in the offer document?

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Yes. Such a change is allowed. However, it is mandatory that the mutual fund sends a written communication about it to every investor and also issues an advertisement announcing the same in one English-language daily that gets circulated nationally, and one regional-language daily that is circulated in the region where the mutual fund has its head office. As an investor, you then have a right to exit the scheme without any exit load if you do not wish to continue with the scheme. A similar process is followed when your mutual fund changes the scheme from open ended to closed ended and vice versa or if there is a change in its sponsor.

​How will I know if my mutual fund makes changes to the scheme?

You will receive communication from the mutual fund in case of material changes to your scheme. Also, a quarterly newsletter, revised and updated mutual fund documents at least once in two years and addendums to the document in the interim period till the updated scheme documents are sent out, will let you keep track of any changes made to your mutual funds.

 

After I invest in a mutual fund, how soon will I get the certificate or statement of account?

 

Within 6 weeks of the date of closure of the initial subscription of the mutual fund scheme you have invested in, the mutual fund company will dispatch a certificate or statement of account. If you invest in a close ended scheme, you will receive a demat account statement or unit certificate and if you invest in an open ended scheme, you will receive a statement of account within 30 days of closure of the initial fund offer.

 

In a close ended scheme, after I purchase units, how long does the transfer from stock market take?

According to SEBI regulations, transfer of units needs to get done within thirty days from the date of lodgement of certificates with the m​utual fund.

Ways to Choose Mutual Fund Schemes

 

Where can I find mutual funds to invest in?

You can turn to any of these for updates on mutual fund schemes that are open for investments.

• Advertisements in leading newspapers
• Websites of mutual fund companies
• Agents and distributors of mutual funds
• Banks and post offices that function as distributors of mutual funds

Remember that banks and post offices are not responsible for the performance of the funds they distribute and it is always advisable to track performance of funds before investing rather than relying on agents and distributors who give you gifts or incentives to invest in a particular fund.

 

How to select a mutual fund scheme to invest in?

 

To decide which scheme you should invest in, understand your investment goals and match them to the objectives and expected returns and previous performance track record of the mutual fund scheme you are considering. Begin by answering these simple questions for yourself and then reaching out to a financial expert for guidance.

• What is your age?
• How much money can you invest?
• For how long can you invest the money?
• How often do you need the returns?
• How much risk can you handle?
• Will you need money in the recent future?
• Do you need to save tax?

Read the offer document carefully, track the past performance of the scheme, compare it with others in its category and evaluate the quality of the securities that the scheme is planning to invest in.

 

How do I decide what the proportion of my debt and equity investments should be like?

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Your risk-taking capacity, age, financial position, income and liabilities will determine the ideal debt and equity investment proportion for you. You can assess these using different tools and calculators as well as get a financial advisor to guide you. Many times, your mutual fund agents and distributors could help you out as they are more aware and clued in to fund and market performances.

 

How should I begin my mutual funds investment process?

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What are the things I should check for before investing in a particular fund of my choice?

• As a start, read the objective of the fund and see that is matches your investment goals.
• Then check your scheme document for details on how the investment is being planned, on what basis are the securities being decided and what the overall logic and thought process behind the fund’s investment strategy is.
• Once you are convinced of the strategy, track the past returns of the fund to see how the strategy has worked and how the fund has performed in different market situations. While this does not guarantee future performance, it gives you a fair estimate.
• Mutual funds are not without risks, and fund managers will often diversify their portfolio to minimise risks and maximise returns. Read the scheme information document for information on risks.
• Diversify your investment portfolio and don’t invest all your money in a single fund.
• When choosing different funds to invest in, allocate your money in growth as well as income schemes, based on your age, income and risk handling ability.

​If different mutual funds have schemes in the same category, is it a better decision to opt for the scheme which has a lower NAV?

While determining which scheme to invest in, the NAVs and the resulting number of units available for a certain price are irrelevant to the decision. Always opt for a scheme which is professionally managed and belongs to a mutual fund whose schemes have performed well in the past. Number of units that you will be able to buy should not be a consideration factor because it is possible that two schemes with the same rates of return will offer you the same amount of returns even if the number of units purchased is different. Remember that if a new scheme offers units at a price of Rs. 10 and an existing one offers units at Rs. 90, your decision to invest should still be based on the professional management of the fund and the experience and qualifications of the fund managers.

 

How do I ensure that a company, whose name seems like that of a mutual fund company, is actually a mutual fund company?

Mutual fund companies can mobilise funds from investors only after they register with SEBI. If the companies do not come under the purview of SEBI, they are not legitimate mutual fund companies.

 

If the net worth of my mutual fund scheme sponsor is high, does it guarantee me better returns?

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The net worth of a sponsor for a period of three years is mentioned in the offer document only to give investors an idea of the track record of the company sponsoring the fund. In no way does it guarantee higher returns or imply that the sponsor will compensate in case the NAV of the scheme falls.

 

As a Non-Resident Indian (NRI), can I still invest in mutual funds in India?

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Yes. You can. All details about the regulations and procedures for NRI investments in a particular scheme are available in the offer document of that mutual fund scheme.