Sunday, October 17, 2010

Know Your Client (KYC) documents is a mandatory proceduretoday

Know Your Client (KYC) documents is a mandatory procedure today. KYC is a client identification program that verifies and maintains records of the identity and address of investors.
 Source: business standard.com

Today other regulators too have made KYC mandatory. The Securities and Exchange Board of India (Sebi) has mandated it for mutual funds and broking accounts, the Insurance Regulatory Development Authority (IRDA) while buying insurance and the Forwards Markets Commission (FMC) for commodity trading. You need to submit it even for making post office deposits.
 

Impact: Although the effort towards strengthening identification norms has helped in preventing money laundering and reducing fraud, it has had a negative impact in an unexpected quarter. The growth in investor numbers in various instruments is either stagnating or reducing. Apparently, the KYC norms are proving restrictive because of the hassles of documentation. The KYC requirement sometimes leads to unnecessary and repetitive work, delaying operations. Customers complain about the paperwork involved. Ultimately, it means customers have to run from pillar to post for complying with the KYC norms. Investors complain of being asked to provide details repeatedly or face a freeze on their accounts.


IN BRIEF
* KYC is mandated by most regulatory authorities 
* Documents for proof of identity and address are needed. 
* Certain investments may need PAN card details
* Duplication of documents in some cases is possible
* Investee firms may also incur compliance cost

Mutual Fund Distributors Certification Examination

NISM-Series-V-A: Mutual Fund Distributors Certification Examination
The examination seeks to create a common minimum knowledge benchmark for all persons involved in selling and distributing mutual funds including:
  • Individual Mutual Fund Distributors
  • Employees of organizations engaged in sales and distribution of Mutual Funds
  • Employees of Asset Management Companies specially persons engaged in sales and distribution of Mutual Funds
The certification aims to enhance the quality of sales, distribution and related support services in the mutual fund industry.
Examination Objectives:
On successful completion of the examination the candidate should:
  • Know the basics of mutual funds, their role and structure, different kinds of mutual fund schemes and their features
  • Understand how mutual funds are distributed in the market-place, how schemes are to be evaluated, and how suitable products and services can be recommended to investors and prospective investors in the market.
  • Get oriented to the legalities, accounting, valuation and taxation aspects underlying mutual funds and their distribution.
  • Get acquainted with financial planning as an approach to investing in mutual funds, as an aid for mutual fund distributors to develop long term relationships with their clients.

Assessment Structure:
The examination consists of 100 questions of 1 mark each and should be completed in 2 hours. The passing score for the examination is 50%. There shall be negative marking of 25% of the marks assigned to a question.
Registration:
Test Details:
Sr. No. Name of Module Fees (Rs.) Test Duration (in minutes) No. of Questions Maximum Marks Pass Marks* (%) Certificate # Validity (in years)
1 NISM-Series-V-A: Mutual Fund Distributors Certification Examination 1000 120 100 100 50 3

Kotak Select Focus Fund declares Maiden Dividend


Holding Mutual Fund Units in dematerialised form!

NSDL has introduced facility to hold existing mutual fund units in demat accounts. You can use your existing demat account for converting your mutual fund units in dematerialised form by submitting conversion request to your Depository Participant. You can now have a single Transaction Statement for shares, debentures and mutual fund units. For further information, please visit our website at the following link:
https://nsdl.co.in/nsdlnews/hold-mutual-fund-units.php
Procedure for conversion of Mutual Fund Units into dematerialised form through your Depository Participant (DP)
    • Obtain Conversion Request Form (CRF) from your DP.
    • Fill-up the CRF.
    • Submit the CRF alongwith the Statement of Account to your DP.
    • After due verification, the DP would sent the CRF and Statement of Account to the Asset Management Company (AMC) / Registrar and Transfer Agent (RTA).
    • The AMC / RTA will after due verification confirm the conversion request sent by your DP and credit the mutual fund units in your demat account.

Friday, October 15, 2010

Index funds are meant for the long-term investor

What is an index fund? It is a fund that invests in the exact proportion determined by this independent body in each and every one of the stocks that are present in the index. Such a fund must have a very good dealer (that is, a person who buys and sells stocks) but does not need a fund manager.

Index funds are meant for the long-term investor, it is said. In my view a long term equity investor is a person who buys equity like our mothers used to buy gold–buy it when you have the money; sell to meet an emergency or to buy a longer term asset, like a house or a married life or an education for a child! Anyone who invests or disinvest by timing the market is not a long-term investor.

The key risk that a long-term investor runs, when investing in equity is either that the company he chose becomes a non-performer or the person who chose it for him becomes a non-performer. The greatest advantage of an index fund is that you have to worry less about such events: the index committee or agency, whose members may change but whose processes are person-independent, takes care of such developments on an on-going basis.

They do not take the decision based on hot tips or broker influence and are not affected by the departure of that divine fund manager. Which is why, as markets become more and more efficient, most long term investors prefer to invest in index funds.

Frequently Asked Questions on Infrastructure Bonds

1. What is the Tax Treatment of interest on these Bonds?
The interest received on these bonds shall be treated as income from any other source and shall form part of the total income of the assessee in that financial year in which they are received.

2. Who are the eligible investors?
Only Resident Indian Individuals (Major) and HUF can invest in these bonds.

3. Can a Minor apply for subscription to these bonds?
A minor is not eligible to apply for subscription to these bonds.

4. Are these infrastructure bonds Tax Free?
No, the interest received in these bonds are not tax free. The investor is liable to pay tax on the interest creceived

5. Will TDS be deducted on these bonds?
No TDS shall be deducted on the interest received as these bonds are issued Compulsorily in Demat mode and shall be listed on NSE & BSE .

6. I don't have Demat Account. Can I apply?
The bonds shall be compulsorily issued in Demat mode, so investors without Demat A/c shall not be eligible.

7. I only have a joint De-mat account. Can I apply in my own name only?
The name of applicant shall be same as the holders of Demat account. In case of single applicant the demat account shall also be held in the name of the same single applicant.

8. Can I apply in joint names?
Yes application can be made in joint names with a maximum of three applicants, however the demat account shall also be held in the joint names and order of applicant shall be the same as appearing in the demat account. In case of application made in joint names, the tax benefit shall only be availed by the first applicant.

9. What is the maximum amount for which the benefit u/s 80CCF be availed?
Maximum benefit to an investor shall be Rs. 20,000/-- under section 80CCF of the Income Tax Act, 1942

10. What would happen if I apply amount more than Rs. 20,000/-?
The allotment shall be made for the sum applied, however the benefit under section 80CCF may only be availed for a maximum sum of Rs.20,OOOI-

11. Can I invest in all the four option?
Yes an applicant may subscribe to all the four options but the minimum application under each option shall be one bond i.e. Rs.5000/-

12. What is the benefit of investing in Tax Saving Infrastructure Bonds if they offer the same tax benefit?
The Tax exemption benefit under Sec 80CCF on a sum of Rs. 20,000/- is over and above Rs. 1,00,000/- benefit under section 80C, 80CCC and 80CCD.

13. What is the tenure & lock-in period of these Tax Free Infrastructure Bonds?
The Tenure of these bonds shall be 10 years and the bonds have a lock-in of 5 years

14. Who can offer these Long Term Infrastructure Bonds?
The entities like LlC, IDFC, IFCI and other NBFCs which are classified as Infrastructure Finance Companies by RBI shall be allowed to issue these long term infrastructure bonds.

15. I Don't have a PAN card. Can I still apply for subscription?
PAN card is mandatory for subscribing to these bonds.

16. How will i get my interest on the due date?
The interest shall be credited to the respective Bank account registered with the Demat account through ECS on the due date for interest payment, and -if the due date is a public holiday then the next working date.

17. Can I get loan on these bonds?
You cannot avail of any loan pledging these bonds in the first 5 years. Thereafter, these bonds may be pleadged to avail of loans

18. Where shall I submit the application forms?
The application form may be submitted at the branches collecting banks whose address are mentioned on the
application forms.

19. Who would get the interest in case of the joint application?
In case of joint application the interest shall be paid to the account of the first applicant only.

20. Can Intercity clearing cheques acceptable?
No, cheques has to be payable at par or local clearing cheques are only allowed.

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