Investors contact Mutual Funds / Registrar and Transfer Agents (RTAs) with general queries regarding their folios and investments. Some such questions, asked by investors are replied to below.

Please explain the term ‘Clear Units'.

‘Clear units' refers to those units which are available to investors for transaction. Of the total units an investor has in a scheme, only some units may be marked as ‘clear' in the account statement and available for transaction, such as ‘switch' and ‘redemption'.

Units may not be clear due to many reasons. Units under Equity-Linked Saving Schemes (ELSS) / Tax Saving schemes are locked and are not available for transaction for three years from the date of purchase. Units under lien, that is, units which have been pledged to a financier, are not free for the investor to redeem. Any recently purchased units, where the credit status is not established, such as instances where the fund house has not received the credit proceeds from the investor bank, would also not be clear for transaction.

What do you mean by a ‘Default Option' in a Scheme?

Mutual Funds give investors a choice of two options while investing — dividend option and growth option. Under the growth option, dividend is not paid to the investor, and the value grows along with the growth of Net Asset Value (NAV).

Investors should clearly mention the option selected at the time of filling in the application form. If an investor does not select any option in the application form, he / she will be allotted units under the default option. A ‘default' option is allotted, as mentioned in the scheme documents, and in the Key Information Memorandum (KIM). This may be either the Growth or Dividend option. Each Fund has its own default options and investors must refer to the KIM for details.

Under Dividend, there are two sub-options — payout of the dividend or reinvestment of the dividend in the same scheme. When investors miss selecting an option, either for payout or reinvesting, then the default option of the scheme will be applied.

I have dividend re-investment for my schemes. What is Dividend Transfer Plan (DTP)?

This is a facility offered by some mutual funds, which allows the investor to transfer the declared dividend to another scheme of the same fund house. In the case of dividend reinvestment, the dividend is reinvested in the same scheme. In the case of DTP, the dividend amount is invested in another scheme. The source and target schemes, for which this facility is available, are specified in Key Information Memorandum, which comes along with the application form.

Investors who wish to remain invested, but reallocate their funds into another scheme can use this facility.

Is it possible for me to change the mode of holding from ‘joint' to ‘either or survivor'?

Yes! This is possible. Investors would have to send a written request, duly signed by all the holders, requesting the mutual fund to change the mode of holding from ‘joint' to ‘either or survivor' or vice versa.

Is it possible for me to add my spouse as a joint holder in my folio?

Most funds do not allow addition of a joint holder in their folios, and investors would have to enter details of holders at the time of application for units. Subsequent changes are not allowed by funds. Similarly, most funds would not allow the deletion of a living joint holder from the folio. In this regard, please note that most funds do not allow a transposition, that is, interchanging of the first and second holders.

(Contributed by CAMS Viveka, an Investor Education Initiative from CAMS. The views expressed herein are general practices in the mutual fund industry and may vary on a case-to-case basis.)

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