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NON-FINANCIAL TRANSACTIONS

NON-FINANCIAL TRANSACTIONS

NON-FINANCIAL TRANSACTIONS (Part 1)

  • Definition: Non-financial transactions relate to changes in investor details, registration of nominee/power of attorney, transmission of units, change in investment option, investor grievance redressal mechanisms, and value-added services provided by RTAs.
  • Details: These transactions do not have a financial or NAV implication and are necessary for maintaining accurate investor information.

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Key Concepts

  • Change in Investor Details: Investors may need to update their personal information, such as address, bank details, or status, which are captured by the RTA and linked to their folio number.
  • Types of Changes: Changes can include:
    • Change in Name: Requires submission of documents such as PAN card, KYC confirmation, and name change certificate.
    • Change of Address: Requires updating address with KRA and providing documentary proof.
    • Change of Bank Details: Requires providing complete bank account details, bank mandate form, and verification documents.
    • Change in/Updation of Other Details: Includes changes to contact details, PAN, and other information.

Registration of Power of Attorney (PoA) and Nominee

  • PoA: An investor can register a PoA either at the time of opening a fresh mutual fund folio or in an existing folio, requiring a notarized copy of the PoA and signature of the PoA holder.
  • Nominee: An investor can appoint a nominee for their investments, with certain conditions such as nomination facility only available for individual investors, and nominees cannot be POA holders.
  • Nominee Details: Requires providing personal identifier number, contact details, and relationship with the investor.

Transmission of Units and Other Concepts

  • Transmission of Units: In case of death of the investor, the nominee/claimant is required to complete their KYC and submit a request for transmission of units.
  • Minor becoming Major: Requires the minor to obtain a new PAN card, complete KYC process, and update information with the bank and AMC.
  • Other Concepts: Includes concepts such as cooling period, family declaration, and verification of bank details.

NON-FINANCIAL TRANSACTIONS (Part 2)

  • Nomination: Nomination is a process where an investor can appoint a nominee to receive the assets in case of their demise.
  • Mandatory Nomination: Nomination is mandatory for single holding only, while it is optional for jointly held accounts/folios.
  • Acknowledgement and Record-Keeping: Regulated entities must provide acknowledgement to the investor for each instance of nomination and maintain physical or electronic records for a period of eight years.
  • Periodic Statement of Holding: Regulated entities must provide the name(s) of the nominee(s) or indicate whether nomination has been made by the investor in their periodic statement of holding.
  • Multiple Nominees: If an investor specifies multiple nominees, they must also specify the percentage share for each nominee. In the absence of such specification, the regulated entity shall apportion the assets equally among all nominees.

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Pledge and Lien Marking

  • Pledge: Mutual fund units can be offered as collateral for loans, and the borrower/unit holder must write a letter to the AMC/RTA requesting to pledge the units in favor of the lender.
  • Lien Marking: The RTA records the event and marks a lien in favor of the lender, and the units cannot be redeemed by the investor/borrower without a no-objection certificate (NOC) issued by the lender.

Transmission of Units

  • Transmission: Transmission is the process of transferring mutual fund units in case of the demise of the unit holder.
  • Transmission to Surviving Unit Holders: The units are transmitted to the surviving unit holder(s) upon the demise of one or more joint holders.
  • Transmission to Registered Nominee(s): The units are transmitted to the registered nominee(s) in case of death of sole or all unit holders.
  • Transmission to Claimant(s): The units are transmitted to the claimant(s) where the nominee is not registered, in case of death of sole or all unit holders.
  • Documentation Required: Various documents are required for transmission, including transmission request forms, death certificates, KYC acknowledgments, and more.
  • Rule of Survivorship: The surviving member(s) shall receive the assets as owner(s) and not as a trustee, and the mode of operation of the joint account shall be unaffected by the rule of survivorship.

NON-FINANCIAL TRANSACTIONS (Part 3)

  • Transmission of Units: In case of death of the unit holder, the units can be transmitted to the claimant(s) without the need for a Succession Certificate or Probate of Will.
  • Required Documents:
    • Affidavit: An affidavit as per the defined annexure from the legal heir/claimant(s) is required.
    • Bond of Indemnity: A bond of indemnity is not required if the claimant is submitting a Succession Certificate or Probate of Will.
    • Individual Affidavits: Individual affidavits from each legal heir in the prescribed format are required.
    • NOC from Other Legal Heirs: A No Objection Certificate (NOC) from other legal heirs as per the defined format is required.

Transmission Requirements

  • Transmission Amount: If the transmission amount is more than Rs. 5 lakhs, additional documents are required.
  • Signature Attestation: The signature of the claimant must be attested by a Notary Public or a Judicial Magistrate First Class (JMFC).
  • Individual Affidavits: Individual affidavits from legal heir(s) in the prescribed format are required.
  • Documents for Transmission Value: Depending on the transmission value, additional documents such as a Notarized Copy of Registered Will, Legal Heirship Certificate, or Succession Certificate may be required.

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Transmission in Case of Hindu Undivided Family (HUF)

  • Death of Karta: In case of death of the Karta, the members of the HUF will appoint a new Karta who needs to submit the required documents for transmission.
  • Required Documents:
    • Request Form (Form T4): A request form for change of Karta upon demise of the registered Karta.
    • Death Certificate: A death certificate in original or photocopy duly notarized or attested by a Gazetted Officer or a Notary Public.
    • Bank Certificate: A duly certified bank certificate stating that the signature and details of the new Karta have been appended in the bank account of the HUF.

Transmission to Claimant(s) upon Death of Karta of HUF

  • Transmission Request Form (Form T5): A transmission request form for transmission of units to the claimant.
  • Required Documents:
    • Death Certificate: A death certificate of the deceased Karta in original or photocopy thereof attested by a Notary Public or a Gazetted Officer.
    • PAN Card: A self-attested copy of the PAN Card of the claimant(s) or guardian (in case the claimant is a minor).
    • KYC Acknowledgment: A KYC acknowledgment or KYC form of the claimant(s) or guardian (in case the claimant is a minor).

SEBI Guidelines

  • Ease of Process: SEBI has prescribed an ease of process for transmission of units which are to be mandatorily followed by all Mutual Funds/AMCs.
  • Image-Based Processing: AMCs are required to implement image-based processing wherever the claimant is a nominee or a joint holder in the investor folio.
  • Dedicated Central Help Desk: AMCs should have a dedicated Central Help Desk and a webpage carrying the relevant information and instructions to provide assistance on the transmission process.

Deletion of Names of Deceased Unit Holders

  • Request Form (Form T1): A request form from surviving unitholder(s) requesting for deletion of the name of the deceased 2nd and/or 3rd holder.
  • Required Documents:
    • Death Certificate: A death certificate in original or photocopy self-attested and attested by a Notary Public or a Gazetted Officer.
    • Fresh Bank Mandate Form: A fresh bank mandate form along with a cancelled cheque of the new bank account (only if there is a change in existing bank mandate).

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NON-FINANCIAL TRANSACTIONS (Part 4)

  • Definition: Non-financial transactions refer to changes or updates made to an investor's account or portfolio that do not involve a financial transaction, such as a change in dividend options or a change in corporate name or status.
  • Details: Non-financial transactions include changes to dividend options, changes in corporate name or status, changes in authorized signatories, and investor grievance redressal.

Key Concepts

  • Dividend Options: SEBI has renamed the 'dividend options' of mutual fund schemes to 'Income Distribution cum Capital Withdrawal (IDCW) options', which include pay-out, re-investment, and transfer plans.
  • Change in Corporate Name or Status: Investors must update their records to reflect changes in a company's name or status, such as a merger or acquisition, and provide necessary documents, including a name change certificate and authorization to invest.
  • Change in Authorised Signatories: Institutional investors must update their authorized signatories list and provide necessary documents, including a certified true copy of the Board of Directors resolution and an instruction letter with specimen signatures of new signatories.

Investor Grievance Redressal

  • Definition: Investor grievance redressal refers to the process of resolving complaints or issues raised by investors related to services provided by Asset Management Companies (AMCs) and Registrar and Transfer Agents (RTAs).
  • Details: Investors can approach the Investor Service Centre of RTA, write to the designated Investor Relations Officer of the mutual fund, or use SEBI's online investor grievance redressal system, SCORES 2.0, to register complaints and track their status.

Value Added Services by RTAs

  • Definition: Value-added services refer to additional services provided by RTAs to help investors monitor their investments and plan their taxes efficiently.
  • Details: RTAs provide various statements and reports, including consolidated account statements, statements of realized capital gains, and reports of pay-out of IDCW, to help investors make informed decisions about their investments.

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Timelines for Non-Financial Transactions

  • Definition: Timelines refer to the expected timeframes for processing various non-financial transactions, such as transmission requests, dematerialization requests, and changes in investor details.
  • Details: SEBI has mandated timelines for various non-financial transactions, which are summarized in Table 15.2, including processing times for transmission requests, dematerialization requests, and changes in investor details.

NON-FINANCIAL TRANSACTIONS (Part 5)

  • Definition: Non-financial transactions refer to requests made by mutual fund investors to update their details, such as bank account details, address, nominee, and other personal information.
  • Details: These requests are processed by the Registrar and Transfer Agent (RTA), and may include changes to authorized signatories for institutional investors.

Key Concepts

  • Processing of request for Updation of PAN: Investors can update their PAN details, which is a crucial step for KYC compliance.
  • Re-validation of dividend / interest / redemption instruments: This process involves verifying the bank account details and other information to ensure accurate remittance of dividends, interest, and redemption proceeds.
  • Grievance Redressal: Investors can raise inquiries and grievances, which are addressed by the RTA or other relevant authorities.
  • Other Operational Activities: This includes allotment of securities (IPO), intimation regarding distribution of corporate benefits, and other activities related to mutual fund investments.

MITRA Platform

  • Definition: MITRA (Mutual Fund Investment Tracing and Retrieval Assistant) is a platform developed by QRTAs (CAMS and KFintech) to help investors track their inactive and unclaimed Mutual Fund folios.
  • Key Features:
    • Enables investors to identify overlooked investments or unclaimed Mutual Fund folios.
    • Encourages investors to complete KYC as per current norms.
    • Contributes to a transparent financial ecosystem.
    • Helps mitigate fraud risk.

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Sample Questions

  • Change requests that can be made by mutual fund investors include change of address, change of bank details, and change of nominee.
  • A change request in authorized signatories of an institutional investor requires a copy of the Board of Directors resolution authorising the change.
  • Registrar and Transfer Agent makes changes in the personal information of the investor in the mutual fund folio.
  • The person who executes the Power of Attorney (PoA) is called the attorney.
  • A non-financial transaction request has to be signed by unit holders as per the mode of holding.
  • A request by an investor to update the registered bank account details is treated as a non-financial transaction.
  • Transmission of units means transfer of units upon death of a unitholder to a nominee/legal heir.
  • For minor becoming major, the required compliance by the investor is submitting a KYC form with PAN and bank details of the major.
  • The key role of RTAs in non-financial transactions is processing investor service requests such as address, email, or contact detail changes.
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