CFP- Level-1-IP (Global) Chapter 1-6 (India Specific)

Investing in Equity Shares – Shareholders’ Rights Common shareholders are granted six rights: • Voting power, • Ownership, • The right to transfer ownership, • Dividends, • The right to inspect corporate documents, • The right to sue for wrongful acts. Friday, 15 July 2022 Investment Planning & Asset Management

Shareholding – Promoters, Institutions and Retail Investors • The division of Shareholding of a company throws light on a company’s performance and expectations about the future, whether good or bad. • When investing in equity, the changes in shareholding pattern give valuable insights. • Shareholders for this purpose are generally categorised into Promoter Group and Public. • Promoters are the individuals or organisations that established or promoted a company. Normally, a majority of the board of directors are from the promoter group, which includes the kin of the promoters. • Public shareholders are more diversified. • They can be institutions such as Foreign Institutional Investors (FII), Domestic Institutional Investors (DII) such as mutual funds, insurance companies, financial institutions, Foreign Direct Investment (FDI) or individuals such as the High Net-worth Individuals and Retail investors. • Investors, among studying other information, must also compare promoter and institutional shareholdings quarter-on-quarter. Friday, 15 July 2022 Investment Planning & Asset Management

Equity Derivatives Market – Indicators and Pricing Mechanism • Derivative is a contract or a product whose value is derived from value of some other asset known as underlying. • Derivatives market helps in improving price discovery based on actual valuations and expectations. • Derivatives market helps in transfer of various risks from those who are exposed to risk but have low risk appetite to participants with high risk appetite. For example, hedgers want to give away the risk where as traders are willing to take risk. • Derivatives market helps shift of speculative trades from unorganized market to organized market. Risk management mechanism and surveillance of activities of various participants in organized space provide stability to the financial system. Friday, 15 July 2022 Investment Planning & Asset Management

Derivatives are typically used for three purposes • Hedging • Speculation • Arbitrage Friday, 15 July 2022 Investment Planning & Asset Management

Futures and Options - Call Option and Put Option • Forwards • Futures • Options CALL Option PUT Option Friday, 15 July 2022 Investment Planning & Asset Management

OPTIONS and SWAP • Buy a Call option: This gives the buyer of the option the right to buy a security on a specified date in future at the specified price, also known as strike price. The buyer of option pays a premium to the seller of option (also known as writer). The buyer exercises the right if on the specified date; the strike price is lower than the market price (spot price) of the security. • Buy a Put option: This gives the buyer of the option the right to sell a security on a specified date in future at the specified price (strike price). The buyer of option pays a premium to the seller of option. The buyer exercises the right if on the specified date; the strike price is higher than the market price (spot price) of the security. • Sell a Call option: This obligates the seller (writer) of the option to sell a security on a specified date in future at the specified price (strike price), if the buyer of the option exercises the right to transact. The seller of option receives a premium from the buyer of option. The buyer exercises the right if on the specified date; the strike price is lower than the market price (spot price) of the security. • Sell a Put option: This obligates the seller (writer) of the option to buy a security on a specified date in future at the specified price (strike price), if the buyer of the option exercises the right to transact. The seller of option receives a premium from the buyer of option. The buyer exercises the right if on the specified date; the strike price is higher than the market price (spot price) of the security. • Swaps: A swap is an agreement made between two parties to exchange cash flows in the future according to a prearranged formula. Swaps are, broadly speaking, series of forward contracts. Swaps help market participants manage risk associated with volatile interest rates, currency exchange rates and commodity prices. Friday, 15 July 2022 Investment Planning & Asset Management

Debt Markets • The Debt market —often called the bond market, fixed-income market, or credit market—is the collective name given to all trades and issues of debt securities. • Governments typically issue bonds in order to raise capital to pay down debts or fund infrastructural improvements. • Publicly-traded companies issue bonds when they need to finance business expansion projects or maintain on-going operations. • The bond market is broadly segmented into two different parts like equity market: • The primary market • The secondary market. Friday, 15 July 2022 Investment Planning & Asset Management

Types of Debt Securities: • Government Securities  Fixed and Variable Coupon Rates  Zero Coupon Bonds • Money Market Securities (Call money, Notice Money, T-bills, CDs, CPs) • Corporate Bonds, PSU Bonds and Debentures Friday, 15 July 2022 Investment Planning & Asset Management

Depth of Debt Markets and Key Players • The secondary debt market has two segments : Wholesale Debt Market Retail Debt Market. • Primary dealers, financial institutions and banks, mutual funds and insurance companies, foreign investors etc. participate in the wholesale debt market. • In the retail debt market, retail investors i.e. individuals, trusts, provident and pension funds etc. are the common participants. Friday, 15 July 2022 Investment Planning & Asset Management

Role of Debt Market • The Debt Market plays a very critical role for any growing economy which needs to employ a large amount of capital and resources for achieving the desired industrial and financial growth. • The Indian economy which has grown at more than 7% p.a. in the last decade and is on the take off stage for double digit growth would have to meet its resources requirements from robust and active debt market in India. • The Debt Markets in India and all around the world are dominated by Government securities, which account for between 50 - 75% of the trading volumes and the market capitalization in all markets. • Government securities (G-Secs) account for 70 - 75% of the outstanding value of issued securities and 90- 95% of the trading volumes in the Indian Debt Markets. • State Government securities & Treasury Bills account for around 3-4 % of the daily trading volumes. • The trading activity in the G-Sec. Market is also very concentrated currently (in terms of liquidity of the outstanding G-Secs.) with the top 10 liquid securities accounting for around 70% of the daily volumes. • The size of India’s corporate bond market is a mere 16% of GDP — compared with 46% in Malaysia, and 73% in South Korea. Friday, 15 July 2022 Investment Planning & Asset Management

Commodities Markets • Commodities are vital for the development and growth of any nation’s economy. • Alongside stocks and bonds, trading in commodities have significant contribution to the trade relation among countries. • Billions of dollars of trade in commodities occur globally every day. Agricultural products such as pulses and cereals, metals such as gold and silver etc. are traded on the exchanges and also through derivative contracts besides the traditional physical delivery. • With a variety of ways to trade, commodities are a suitable investment vehicle for diverse types of investors. Friday, 15 July 2022 Investment Planning & Asset Management

Commodities Markets • The National Commodity & Derivatives Exchange Limited (NCDEX) allows trading in commodities such as barley, chana, maize, moong, paddy (basmati), kapas, 29 mm, cotton, guar seed 1 mt, guar seed 10 mt, guar gum, castor seed, cotton seed oilcake, soybean, refined soy oil, mustard seed, crude palm oil, sugar, pepper, turmeric, jeera and coriander. • The Multi Commodity Exchange of India Limited (MCX) allows trading in bullion products (Gold, Gold Mini, Gold Guinea, Gold Petal, Silver, Silver Mini, Silver Micro), base metals (Aluminium, Aluminium Mini, Brass, Copper, Lead, Lead Mini, Nickel, Zinc, Zinc Mini), energy (Crude Oil, Crude Oil Mini, Natural Gas) and agri items (Black Pepper, Cardamom, Castor Seed, Cotton, Crude Palm Oil, Mentha Oil, RBD Palmolein, Rubber) • The SEBI regulates commodity market trading in India. The Commodity Derivatives Market Regulation Department (CDMRD) looks after day to day operations. • Recently, the SEBI has allowed mutual funds and PMS to trade in commodities derivatives segment. Friday, 15 July 2022 Investment Planning & Asset Management

Commodities Markets • Exchanges shall examine following basic parameters and the commodity may be permitted to be included under derivatives if such commodity satisfies these parameters. • The total supply value of the commodity in each year is taken as a measure of the physical market size of that commodity in that year • The commodity should be either Homogeneous or should be conducive to standardization • The commodity should be durable and storable for better price discovery • The commodity should ideally have a vast distribution across the country. The coverage can be in the form of production of commodity or the distribution of the commodity across the country Friday, 15 July 2022 Investment Planning & Asset Management

Commodities Markets • Commodities which have a strong correlation with the global market have higher need for price risk management. Such commodities are conducive for derivatives trading. • The Indian commodity sphere is characterized by seasonality. • The prices fluctuate with the supply season and the off season. The derivatives market is necessary to even out this fluctuation and facilitate better price discovery. • Thus the commodities with higher seasonality are conducive for derivatives trading. Commodities with high volatility of prices have high need for hedging. Such commodities are conducive for Derivatives trading. Friday, 15 July 2022 Investment Planning & Asset Management

Commodities Markets • For any commodity to continue to be eligible for Futures trading on Exchange, it should have annual turnover of more than Rs.500 Crore across all National Commodity Derivatives Exchanges in at least one of the last three financial years. • For validating this criteria, gestation period of three years is provided for commodities from the launch date/re-launch date, as may be applicable. • Once, a commodity becomes ineligible for derivatives trading due to not satisfying the retention criteria, the exchanges shall not reconsider such commodity for re-launching contract for a minimum period of one year. • Further, a commodity which is discontinued/suspended by the exchange from derivatives trading on its platform, shall not be re-considered by the concerned exchange for re-launching of derivatives contract on such commodity at least for a minimum period of one year. Friday, 15 July 2022 Investment Planning & Asset Management

Commodities Futures and their Settlement Mechanism • Exchanges shall monitor the open position on a real time basis and shall endeavour that no client or member breaches the open position limits 'at end of the day' as well as 'during intra-day trading'. • Penalty shall be levied on those breaching the position limits at end of the day as well as during intra-day trading. • To facilitate larger participation by genuine hedgers by providing them with necessary incentives with a view to deepen the commodity derivatives market, the exchanges stipulate a Hedge Policy for granting hedge limits to their members and clients. • Exchanges shall impose initial margins sufficient to cover its potential future exposure to participants in the interval between the last margin collection and the close out of positions following a participant default. • Margins shall be computed at the level of portfolio of each individual client comprising his positions in futures contracts across different maturities. For Trading/Clearing Member level margins computation, margins would be grossed across various clients. The proprietary positions of the Trading Member would also Ibnveesttmreenat Ptleandninags&tAhssaettMoafnaagemcleinetnt for margin computation. Friday, 15 July 2022

Commodities Futures and their Settlement Mechanism • The margins should be computed on real time basis. The computation of portfolio initial margin would have two components. • The first is the computation of initial margin for each individual contract. • At the second stage, these contract initial margins would be applied to the actual portfolio positions to compute the portfolio initial margin. • Exchanges may levy Additional Margins based on their evaluation in specific situations as may be necessary. • All open positions of a futures contract would be settled daily, only in cash, based on the Daily Settlement Price (DSP). • DSP shall be reckoned and disseminated by the Exchange at the end of every trading day. • The mark to market gains and losses shall be settled in cash before the start of trading on T+1 day.. Friday, 15 July 2022 Investment Planning & Asset Management

Foreign Exchange Markets • The foreign exchange market is the market to determine the price of different currencies in terms of one another in order to enable trade between countries and to provide a way to transfer currency associated risks arising from economic transactions. • The legal framework for the conduct of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999.Foreign exchange transactions in India happens both on an OTC market and an exchange traded market. Friday, 15 July 2022 Investment Planning & Asset Management

Foreign Exchange Markets • The Indian foreign exchange market is a decentralised multiple dealership market comprising two segments – the spot and the derivatives market. • In the spot market, currencies are traded at the prevailing rates and the settlement or value date is two business days ahead. • The two-day period gives adequate time for the parties to send instructions to debit and credit the appropriate bank accounts at home and abroad. • The derivative segment of the foreign exchange market is assuming significance and the activity in this segment is gradually rising. • The foreign exchange derivative products that are now available in Indian financial markets can be grouped into three broad segments, • Forwards, • Options (foreign currency rupee options and cross currency options) • Currency swaps (foreign currency rupee swaps and cross currency swaps). Examples of Foreign Currency Swaps • A common reason to employ a currency swap is to secure cheaper debt. For example, European Company A borrows $120 million from U.S. Company B; concurrently, European Company A lends 100 million euros to U.S. Company B. The exchange is based on a $1.2 spot rate, indexed to the London InterBank Offered Rate (LIBOR). The deal allows for borrowing at the most favorable rate. • During the financial crisis in 2008 the Federal Reserve allowed several developing countries, facing liquidity problems, the option of a currency swap for borrowing purposes. Friday, 15 July 2022 Investment Planning & Asset Management

Foreign Exchange Markets • The principal participants in the foreign exchange market are the authorized dealers (AD), foreign exchange brokers and customers. • The authorized dealers are the market makers who give buy and sell quotes for different currency pairs. • The brokers act as intermediaries who find the best quotes for their clients who may be the end users of the currency. • For dealing in foreign exchange market, the intermediaries need to be registered with RBI. Friday, 15 July 2022 Investment Planning & Asset Management

Determinants of Exchange Rates • The foreign exchange rates constantly respond to a number of economic variables, both domestic and global, which have an impact on the demand and supply of foreign currency in the short-term and long term. • Some of the factors that affect the value of a currency in the foreign exchange market include the gross domestic product (GDP) growth rate, balance of payment situation, deficit situation, inflation, interest rate scenario, policies related to inflow and outflow of foreign capital. • It is also a function of factors like prices of crude oil, value of against other currency pairs and geopolitical situation. • These economic indicators, not only of the Indian economy but also of other countries, determine the exports and imports of the country, its attractiveness as a destination for investment through FDI as well as portfolio flows and the risks that are seen in the economy. • The flow of foreign currency in and out of the country as a result of the economic situation will determine the exchange rate. Friday, 15 July 2022 Investment Planning & Asset Management

Investment in other assets Real Estate • Direct • Mutual Fund Route • REITs Gold • Physical • Investment in Gold Funds/Gold ETFs Art, Paintings etc. Friday, 15 July 2022 Investment Planning & Asset Management

Taxation of Reits • Taxation of Dividends: As per current rules, dividends obtained from REITs are completely taxable in the hands of the investor. Dividend payouts from REITs are included in the annual income of the investor and taxed according to the investor’s slab rate for the applicable Financial Year. • Taxation of Capital Gains: Capital Gains from the sale of REITs units are covered by Short Term Capital Gains (STCG) and Long Term Capital Gains (LTCG) applicable to equity investments. STCG is applicable if the holding period of units is 1 year or less from the date of unit allocation. The STCG tax rate is 15% of capital gains obtained from the sale of units. If the holding period exceeds 1 year from the date of unit allocation, LTCG taxation rules are applicable. The LTCG tax rate is 10% of gains in excess of Rs. 1 lakh (across all equity investments for the applicable FY) with no indexation benefit. • Taxation of Capital Gains for International REIT Fund of Funds: If Capital Gains are obtained from the sale of units of International REITs Fund of Funds, non-equity Capital Gains taxation rules are applicable. In this case, Short Term Capital Gains are applicable if the holding period is 3 years or shorter (calculated from the date of unit allocation). STCG in this case is as per the applicable slab rate of the investor for the FY. LTCG tax is applicable on units held for over 3 years Friday, 15 July 2022

Index Futures vs Index Options vs Index Funds Index futures and Index options are derivatives on a certain Index, say Nifty 50, Bank Nifty, etc. Index futures/options are different from specific stock futures/options in that one can have a consolidated view of the market than individual stocks, and hence avoid stock specific and Sectoral risk. It provides natural diversification when having a view on the directional movement of the market. The maximum period can be a 3-month trading cycles. On lower side they can be the near month (1 month) or the next month (2 months). If one is positive about the upward direction of equity markets, one can go long (buy) on index futures, and vice versa. Friday, 15 July 2022 Investment Planning & Asset Management

Index Futures vs Index Options vs Index Funds Index futures have a future level or index and an expiry date (settlement date). While dealing in index futures, margins are paid, per traded lot size basis, to the exchange by the seller as well as the buyer to enter a futures contract. They are exchange settled, i.e. the counterparty in every futures transaction is the exchange. Because of margins which allow bets of value in high multiples, the total outlay involved in trading is low while taking large directional stakes. The margins on index futures are even lower than individual stock futures. The purpose of index futures is to have speculative bets on market direction. Friday, 15 July 2022 Investment Planning & Asset Management

Index Futures vs Index Options vs Index Funds • Index funds or Exchange Traded Funds by mutual funds are in the form of units issued. • The new fund offers (NFO) for index funds are at par value Rs 10 which represents the level of an underlying index (Nifty50, Bank Nifty, Sensex, etc.) at the time of NFO. • The subsequent levels of index fund price are represented by the net asset value (NAV) which closely corresponds to the underlying index level (rise/fall). Friday, 15 July 2022 Investment Planning & Asset Management

Physical Gold vs. Gold Funds vs. Sovereign Gold Bonds vs Gold ETF • Gold is a favourite commodity which Indians consume as well as invest into. • This may be due to a natural love for this precious metal, ingrained through ages, and due to customs and ceremonies across regions where gold is exchanged as gift. • An estimate has it than the gold residing in Indian homes would be to the extent of 25,000 tonnes • Other steps to reduce the tendency of public to buy physical gold at least for long-term investment purposes are: Sovereign Gold Bonds (SGB) by the government and Gold Funds and Gold ETFs by mutual funds. Friday, 15 July 2022 Investment Planning & Asset Management

Physical Gold vs. Gold Funds vs. Sovereign Gold Bonds vs Gold ETF SGBs are RBI issued digital units denominated in grams of gold, allowing individuals, HUFs, trusts, charitable institutions and universities to take exposure to gold. These tranches of SGB are for 8-year duration, carry in general 2.5% interest on the subscribed amount and offer gold linked returns, tax-free if held for those 8 years to maturity/redemption. They seek to shift a part of the domestic savings that were used for the purchase of yellow metal. The SGB units are added to an individual’s demat account and can be traded in the market. On sale in the secondary market within the maturity period, the long-term capital gains come with indexation benefits, akin to debt mutual fund products. Friday, 15 July 2022 Investment Planning & Asset Management

Physical Gold vs. Gold Funds vs. Sovereign Gold Bonds vs Gold ETF • Gold ETFs also have the feature of gold-linked returns as in the SGB. But they do not carry any interest and have a definite cost structure toward management. • They can be exchanged in digital form as well and have structure of taxation akin to mutual fund debt products for short-term and long-term holding periods. • Gold funds however are of different nature in the sense of their investment logic. • The pooled money of investors in Gold Funds is invested in the stocks of gold mining companies, distribution channels, etc. on the global level. • The performance of such invested stocks would vary greatly depending on dynamics of demand supply and other industry logistics, and hence the returns from Gold Funds can be not just linked to gold prices but can outperform or even underperform. • The taxation is as applicable to Gold ETFs. Friday, 15 July 2022 Investment Planning & Asset Management

Gold Futures vs Gold ETFs • Gold has a tendency of negative correlation with the equity movement. • It has become an active asset class in diversifying portfolios, even at institutional level, say mutual funds and Portfolio Management Schemes, etc. • It is sort of a hedge against an economic downturn. Gold is said to be a hedge against inflation as well. • There is good negative correlation reported between gold and the US dollar. • A strong dollar, and hence presumably a healthy state of the US economy, will make the gold prices tend lower. Friday, 15 July 2022 Investment Planning & Asset Management

Gold Futures vs Gold ETFs • Gold exposure can be had in several ways, buying bullion in pure form or through digital means such as buying Gold ETFs or buying Sovereign Gold Bonds (SGBs). A gold future is another form of taking exposure to gold. • It is a hedging tool worldwide for those in the business of gold and for commercial producers. It helps in the price discovery of gold. • Gold futures are traded on international exchanges, the New York Mercantile Exchange, the Tokyo Commodity Exchange, CME Group, COMEX, and in India, the Multi Commodity Exchange (MCX), National Commodities and Derivatives Exchange (NCDEX), Indian Commodity Exchange (ICEX) and National Multi Commodity Exchange (NMCX). • MCX is the largest exchange. Friday, 15 July 2022 Investment Planning & Asset Management

Gold Futures vs Gold ETFs • Gold futures are a safe mode of trading in gold, because of safety and purity concerns and convenience. • These futures can be held till maturity where physical delivery can be pressed upon, or they can be squared off prior to expiry. On MCX, The gold futures contracts are of three months’ rolling cycle. • The settlement of Gold futures takes place on the 5th of every month (preceding trading day if 5th is a holiday) but in case of no delivery the squaring off has to be effected before the 1st of the month. • The buyer’s delivery intention therefore has to be notified 5 working days prior to expiry of the contract including expiry day. • Incremental margin of 4% for last 5 days on all outstanding positions is applicable toward tender period margin. Such margin will be in addition to initial, additional and special margin as applicable. Friday, 15 July 2022 Investment Planning & Asset Management

Gold Futures vs Gold ETFs • Gold is the most popular and liquid contract. Sizeable positions can be taken as the margins are just 4 per cent. Gold options are also available on the MCX now. • Several players ranging from gold producers, large gold companies and users of gold, industrial users, institutions, fund managers to even individuals can trade in gold futures to optimize on respective utilities, especially hedging. • Gold futures settled in cash shall involve taxes payable as applicable to trading business. Individual investors have this at their applicable tax slabs. • If settled by delivery, GST and stamp duty may be applicable besides logistics such as block conversion to coins, bars, etc. Friday, 15 July 2022 Investment Planning & Asset Management

Gold Futures vs Gold ETFs • For individual investors and fund managers, Gold Exchange Traded Funds (Gold ETFs) present a safer opportunity to invest in Gold. • A Gold ETF is a mutual fund product issued in units representing 1 gm of gold (purity usually of 995). • The gold equivalent to the issued units is deposited with a custodian. Gold ETFs are listed therefore facilitating liquidity. • It is feasible to buy small amounts of Gold ETFs in digital form without incurring costs toward making, storage and other concerns toward purity. Friday, 15 July 2022 Investment Planning & Asset Management

Art, Antiquities and Collectibles • As you have seen so far, asset classes are many but all of them are not for everyone and some are not within the reach of many investors and if they are, they do not match the risk profile and goal time horizon of the investors. • Art, photographs, antiquities, vintage cars, collectibles such as stamps and coins etc. are high-risk investments. • They can take many years to appreciate, conversely suffer from probable erosion in value overtime, exposed to physical damage or wear and-tear, theft and other kinds of risks. • Also, returns from these asset classes can vary greatly over different periods, across geographies and several factors such as rarity, quality and condition. • One must study all these factors thoroughly before investing or recommending these investments to an investor, whether or not such investment is linked to a need or goal Friday, 15 July 2022 Investment Planning & Asset Management

` • Chapter-2 -India Specific ends here Friday, 15 July 2022 Investment Planning & Asset Management

Chapter-3 Investing in Capital Markets and Investment Products • Learning Objectives • Identify the needs and objectives of your clients and their specific category • Understand norms and operations for introducing clients to various investments • Discuss direct investments in equity and debt products • Understand mutual funds and other pooled investments • Explain small savings instruments and other schemes Friday, 15 July 2022 Investment Planning & Asset Management

Introduction • It becomes very important for a market intermediary to know one’s client before initiating any financial or investment advice or a product sale. • The regulators across the domains of banking and finance, securities and investment, insurance and pension have laid down guidelines that intermediaries must comply with know-your-client (KYC) norms with regard to their clients. • Besides the statutory maintenance of basic records which identify a client, an intermediary must disclose to the client his/her capacity, viz. a certification or license, which authorizes him/her to deal with the client. • The intermediary should know the product features, operational norms and market dynamics of different financial products which are found suitable for a client. • The suitability of the product being advised with respect to the financial situation of a client has to be strictly adhered with. • The client should also be made aware of its various rights and obligations while an act of advice or sale is initiated/ completed. Friday, 15 July 2022 Investment Planning & Asset Management

Operational Aspects KYC/FATCA requirement • The customer due diligence is at the base of every Know Your Customer (KYC) norm and is south to be completed by collecting and verifying the Proof of Identity (PoI) and Proof of Address (PoA) of a client or investor. • These lay the foundation of Anti-Money Laundering (AML) process. The need of physical documents is slowly giving way to completing KYC process online. • India is one of the countries with which the United States has an agreement regarding FATCA, which stands for Foreign Account Tax Complaint Act. • This Act was introduced in the USA in 2010 to prevent tax evasion through offshore investments that some US citizens may have. • As per the Act, by virtue of India agreeing to FATCA, financial institutions in India are required to disclose details of their client’s income if they are residents of the US or financially connected to the USA or have tax residency in the US (including green card holders). FATCA applies to individual as well as non-individual investors Friday, 15 July 2022 Investment Planning & Asset Management

Investor types and their on boarding processes • The KYC compliance is the first need when on boarding a client. It can be completed online as given below: • • Log on to the website of any KYC Registered Agency. • • Create an account and fill in all the details on the online form. • • You will have to provide your registered mobile number, PAN Card and other identification details. • • Upload self-attested documents online. • You may invest a lump sum amount in a mutual fund through a direct plan with the asset management company. You could opt for the offline or online mode of investment. • You must complete your KYC by submitting a self-attested identity and address proof along with passport size photographs at the branch of the mutual fund house. Friday, 15 July 2022 Investment Planning & Asset Management

Investor types and their on boarding processes • Hindu Undivided Family or HUF consists of individuals from a common family tree or who have descended (lineally) from the same ancestor. • It also includes wives and daughters who are unmarried. The “karta” is considered as the head of the HUF. • He/she is legally allowed to take decisions for the HUF. Contrary to popular belief even a woman can be a karta. • The following steps need to be completed by the karta in order to make any investments. First complete the KYC formalities. While filling the KYC Form, the karta needs to opt for the “Non-Individual” category and mention HUF along with his or her name Friday, 15 July 2022 Investment Planning & Asset Management

Platforms for submission of mutual fund application • Website or digital portal of the concerned Asset Management Company • R&T Agents- Registrar and Transfer Agents refer to institutions that handle the paperwork and other formalities involved in investor servicing (Karvy, CAMS etc.) • Mutual Fund Utilities- MF Utilities is a common infrastructure shared by the Asset Management Companies in our country. • It significantly helps in improving process efficiency by reducing duplication. • This aggregator portal enables investors to transact in different schemes across AMCs • Robo-Advisors-These are online advisors that provide automated and customized investment plans without any human intervention Friday, 15 July 2022 Investment Planning & Asset Management

Account opening of Non-Resident Investors (NRIs) Types of Accounts • NRE Account (Repatriable facility available) • NRO Account ( Non Repatriable account) • FCNR (Foreign Currency Non-Resident) Account  NRIs/PIOs/OCBs open this account in US Dollar, Canadian Dollar, Australian Dollar, Yen, Euro, and Sterling Pounds.  The account is opened only in form of term deposits with maturity period varying from one to five years, respectively.  Interest earned is entirely tax free if the NRI status remains intact Friday, 15 July 2022 Investment Planning & Asset Management

Various Investment Products and Vehicles Friday, 15 July 2022 Investment Planning & Asset Management

Various Investment Products and Vehicles • Equity Investments NRIs can invest in Indian stock markets, mutual funds, PMS etc. under the portfolio investment scheme (PIS) of the Reserve Bank of India (RBI). • Public Provident Fund (PPF): The Public Provident Fund is a scheme backed by the Indian government. Any Indian or non-Indian resident is permitted to invest in the Public Provident Fund. The present return rate on the investment of PPF is 7.1% per annum (as of April 1, 2021). The Public Provident Fund comes in with a lock-in period of 15 years. The maximum sum that can be invested is Rs 1.5 lakh each year. Moreover, investing in the Public Provident fund also offers tax deductions within Section 80C of the IT Act. Friday, 15 July 2022 Investment Planning & Asset Management

Various Investment Products and Vehicles • National Pension Scheme (NPS) • The National Pension Scheme is another reliable investment option as it is government-backed. • Just like the Public Provident Fund, investing in the National Pension Scheme comes along with tax benefits. • The accumulated amount during maturity remains tax-exempt. Investing in the NPS is as safe as investing in the FD or a PPF. • Any individual aged between 18 years and 60 years can invest in the NPS and offers yearly interest of 09per cent to 12 per cent. • So, Investment in NPS can be made by Citizen of India living in India or NRI who holds an Indian citizenship. Friday, 15 July 2022 Investment Planning & Asset Management

Various Investment Products and Vehicles • Real Estate • Bonds/Government Securities • Certificate of Deposits: NRIs also have the option to subscribe to Certificate of Deposits but on a repatriable basis. • Certificate of Deposits is non-negotiable money market instruments issued in Demat form or the form of promissory notes. • CDs yield a higher rate of interest as compared to bank deposits. Their maturity period ranges from 7 days to 1 year and is best suited for people having short-term financial goals • Ramifications of PMLA and FEMA Friday, 15 July 2022 Investment Planning & Asset Management

Foreign Exchange Management Act, 1999 • FEMA classifies two types of NRIs • Non-Resident Indian holding Indian Passport (NRI) • Person of Indian Origin (PIO), i.e. Non-Resident Indians holding foreign passports. • From FEMA’s point of view, we must see who NRI is and who is not an NRI? Certain sub-sections of Sec. 2 of FEMA have dealt with the definitions of ‘person resident outside India’ and ‘person resident in India’. Friday, 15 July 2022 Investment Planning & Asset Management

Prevention of Money Laundering Act, 2002 • Money laundering has been defined as “any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property”. The sources of funds invested by an NRI are subject to fulfilment of the following conditions: • The amount invested by NRI should be of remittance from abroad through normal banking channels or by transfer of funds from the investor’s NRE/FCNR/NRO accounts with a bank in India • The proprietary or partnership concern in India is not engaged in any agricultural/ plantation activity or real estate business, i.e., dealing in land and immovable property to earn profit or earn income therefrom. Friday, 15 July 2022 Investment Planning & Asset Management

Operational aspects of managing account folios Nominations, Addition/deletion of name or bank account • The statement of account should highlight the need to nominate if the account does not have the nomination. • The nomination should be maintained at the folio or account level and should be applicable for investments in all schemes in the folio or account. • Where a folio has joint holders, all joint holders should sign the request for nomination/cancellation of the nomination, even if the mode of holding is not “joint”. The nomination form cannot be signed by Power of attorney (POA) holders. • Every new nomination for a folio/account will overwrite the existing nomination. • The nomination shall be mandatory for new folios/accounts opened by individuals especially with sole holding and no new folios/accounts for individuals in single holding should be opened without nomination. • Even those investors who do not wish to nominate must sign separately confirming their non- intention to nominate. • The nomination form/section in the application form should also have a provision for the signature of the nominee (or guardian of the nominee), though this may not be mandatory. It should be not allowed in a folio held on behalf of a minor. Friday, 15 July 2022 Investment Planning & Asset Management