Mutual Funds

MF Direct plan and NRI investor

| Updated on January 26, 2013 Published on January 26, 2013

As per a Securities and Exchange Board of India (SEBI) circular dated September 13, 2012, Mutual Funds/AMC have been mandated to provide separate plan for direct investments, i.e, investments not made through distributors in existing and new schemes.

This Direct plan will have lower expense ratio (excluding distribution expenses, commission, etc.). The plan shall have separate NAV.

In order to comply with the above regulations, Mutual Funds have classified the existing plans as Regular plan and have created identical schemes and their related options under the Direct plan as well. These Direct plans are available for investors with effect from January 1, 2013.

The FAQs below is Part 2 of a three-part series on Direct plan and are based on the general rules followed across all Fund houses.

However, some of the applicability may vary from Fund to Fund and hence SID/KIM/Addendums issued by the Asset Management Companies or their Web sites can be referred for more and latest details.

I have a running SIP/STP under existing/regular plan which is not routed through any distributor.

Should I give a request for conversion to Direct plan for the future instalments?

No. The request for the conversion is not required as the future SIP/STP instalments will be automatically converted to direct plan if the SIPs/STPs were registered not through a distributor.

However, the instalments already triggered and processed in the Regular plan will not be automatically converted into the Direct plan. If conversion for those assets is required, a separate switch request will have to be given for converting the entire unit balance in the Regular plan.

For STPs the target scheme (switch-in) will be considered for the conversion into Direct plan.

You may refer to the Addendums issued by the Asset Management Companies or their Web sites for more details.

Will the conversion of future instalments of my SIP/STP registered under the existing/Regular plan be governed by the terms and conditions applied at the time of SIP registration or will the terms and conditions be different for the future instalments?

The terms and conditions will remain the same for the future instalments of the SIP/STP registered under the Regular plan.

I have SIP registered through distributor in existing/Regular plan. Can I give a request for converting the future instalments of the SIP to Direct plan?

Yes. You can give a request for the conversion to Direct plan. However, the terms and conditions that prevailed at the time of original registration will continue for the future SIP instalments.

I am an NRI investor. Will TDS be deducted at the time of conversion from the existing/Regular plan to Direct plan?

Yes. TDS will be deducted as applicable for NRIs.

To be concluded in Part 3

Contributed by CAMS Viveka, an Investor Education Initiative from CAMS. Views expressed are general practices in the MF industry and may vary on a case-to-case

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