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Introduction of New Mutual Fund Service System (MFSS) & Bombay Stock Exchange Platform for Allotment and Redemption of Mutual Fund Units (BSE StAR MF)

Securities Exchange Board of India (SEBI) vide circular SEBI/IMD/CIR No. 11/ 183204/2009 dated November 13, 2009 allowed transaction in Mutual Fund schemes through the Stock Exchange infrastructure. Units of Mutual fund Schemes have been permitted to be transacted through registered Stock Brokers of recognized Stock Exchanges. With this the Stock Exchange mechanism extends the present convenience available to secondary market investor to mutual fund investors. This will give distributors and brokers a level- playing field with banks in enabling clients to invest in mutual fund and enable to expand the reach of mutual fund schemes to more towns and cities.

Subscription – Depository Mode:

• Investor who chooses depository mode can place order for subscription as currently followed for secondary market activities. The investor should provide their depository account details along with PAN details to the Participant. When investor desires to hold units in dematerialised form, KYC performed by DP will be considered compliance with applicable requirements specified in this regard in terms of SEBI circular ISD/AML/CIR-1/2008. This is in accordance with SEBI circular no SEBI/IMD/CIR No.11/183204/2009 dated November 13, 2009.

• Participant shall enter the subscription order on the MFSS front-end system with the option of ‘Depository’ settlement. The MFSS will identify each scheme uniquely in terms of Symbol & Series. Subscription orders would be created in terms of Amount. Once the order is created, system will generate a unique confirmation No. for the order.

• The investor will receive from the Participant a confirmation slip (which will contain unique confirmation number and date and time stamp of order entry) generated from the MFSS system. Till the Participant provides allotment details to the investor, the order confirmation slip would be the proof of the transaction.  In the case of demat mode, demat statement given by depository participant would be deemed to be adequate compliance of the requirement of Statement of Account as specified in SEBI circular number SEBI/IMD/CIR No.11/183204/2009. 

•  Exchange will validate these transactions on T day evening with the RTA as well as the depository and any discrepancy in the transaction details will be informed to the Participant on the same day evening.

• The Clearing Corporation shall also provide the Participants with funds obligation report end of day for all the valid transactions.

• The Clearing Corporation of the Exchange shall debit the designated clearing bank account of the Participants for the required funds obligation on T+1 morning.

• In case of shortage if any, the concerned Participant will be provided an opportunity to identify transactions and provide details of the transactions for which payments have been received and transactions for which payment have not been received. 

• The funds collected from the bank account of the Participant shall be compared with the details provided by the Participant on the payment received status as per above. If the funds collected from the bank account of the Participant covers the details of the payments received as provided by the Participant, the same shall be further processed. Wherever the funds collected from the bank account falls short of the amount indicated in the details provided by the Participant, the details shall be considered defective and shall not be further processed.  In such cases, the funds collected, if any, shall be returned to the designated bank account of the Participant.

• The Exchange / Clearing Corporation shall take appropriate action including penalty on participants who fail to fulfil their funds obligation as required.

• The Exchange will notify RTA for all such defective transactions and rejections due to non payment of funds. The RTA will reverse such transactions for respective Participants and transactions for other Participants who have fulfilled their funds obligations will be processed by the RTA. The RTA will intimate the allotment details for the accepted transactions. 

• Allotment information shall be provided to the Participants so that they can provide allotment details to the investor.  In the case of demat transaction, demat statement given by depository participant shall be considered as fulfilling the requirement of Statement of Account.

• RTA will also credit the depository account of the investor directly end of day through credit corporate action process.

Redemption – Depository Mode:

• Investor who chooses depository mode can place order for redemption as currently followed for secondary market activities. The investor should provide their depository account details along with PAN details to the Participant. The investor should also provide their Depository Participant with Depository instruction slip with relevant units to be credited to Clearing Corporation pool account same day before 4.30 p.m.

• The Participant shall enter the redemption order on the MFSS system with the option of ‘Demat’ settlement. The MFSS will identify each scheme uniquely in terms of Symbol & Series. For demat, redemption orders would be created only in Quantity. Once the order is created system will generate a unique confirmation No. for the order.

• The investor will receive from the Participant a confirmation slip (which will contain unique confirmation number) generated from the MFSS front-end system. This will be the proof of the transaction for the investor till the redemption proceeds are received from the registrar

• Exchange shall validate the depository redemption orders with the depository as well as RTA on T day evening and any discrepancy in the transaction details in terms of DP id etc will be informed to the Participant on the same day evening.

• Subsequent to the validation, Clearing Corporation will provide valid orders to depository to validate the delivery instructions (DIS) received from the investor and accept units received if they are equal to the valid transactions. The units thus received will be credited to the beneficiary account of the AMC(s) by the Clearing Corporation.

• For all units received through the depository system as above, the Exchange will inform the RTA same day with details of the addresses and bank mandate as captured on the depository system. 

•  RTA will carry out the redemption processing at its end and provide final redemption information to the Exchange on T+1. The file will contain information about valid and rejected redemption orders. For successful redemptions, the file will contain the redemption NAV, units redeemed, redemption amount, STT (if any).  The payouts however will happen as per the scheme provisions and within the timelines as per SEBI regulations as applicable from time to time.

• Redemption information shall be provided to the Participants through files so that they can provide Redemption details to the investor.

• The redemption proceeds will be directly sent by RTA through appropriate payment mode such as direct credit, NEFT or cheque as decided by AMC from time to time, as per the bank account details recorded with the RTA.

• The units will be extinguished by the RTA from the beneficiary account of the
  AMC(s)

Important Points for Clients:

• Depository settlement is available for DP account hold in National Securities Depository Ltd. (NSDL) & Central Depository Services (India) Ltd (CDSL)

 

• While entering order for Depository settlement, Participant should ensure that client details should appear in same order as per depository record.

 

• Redemption through Depository settlement, client has to ensure that Delivery Instruction slip should be provided to their Depository before the stipulated time.

 

• In case of physical settlement, participant should write the unique confirmation number on the application received from the client.

 

• The Participant should deposit / courier the completed application form along with the other documents submitted by the investor for each subscription / redemption order with option of Physical settlement to the local / head office of the RTA or AMC.

 

• In case of physical settlement, if subscription application form has not reached the RTA, the redemption request for such subscription will not be taken by RTA and shall be rejected.

 

• The subscription amount per transaction should be less than Rs. 1 Cr.