Fund Administration & Compliance

NAV = (Total Assets - Total Liabilities) / Number of Units Outstanding. Total Assets = Market Value of Portfolio (securities at closing price) + Cash & Equivalents + Accrued Income (dividends declared but not received, interest accrued). Total Liabilities = Accrued Expenses (TER accrual, management fees, audit fees, custodian charges). TER is deducted daily = Annual TER / 365. Example: Portfolio = ₹100 Cr, Cash = ₹2 Cr, Accrued Income = ₹50L, Expenses = ₹10L, Units Outstanding = 1 Cr → NAV = (100 + 2 + 0.5 - 0.1) Cr / 1 Cr = ₹102.40. For debt funds, bonds are marked using prevailing yield curves (AMFI's valuation matrix), not market price.

SEBI specifies cut-off times to determine which NAV applies. Equity/hybrid funds: Purchase before 3 PM → same-day NAV (if funds realized). Redemption before 3 PM → same-day NAV. Liquid/overnight funds: Different rules — 1:30 PM cut-off for same-day NAV. Key principle: Fund must have realized funds (money in AMC account) for the cut-off to apply. For investments via NACH (SIP), the NAV is of the day funds are received in the AMC pool account. System impact: All transactions must be time-stamped precisely, cut-off logic must handle time zones, holidays, and debit confirmation timing correctly.

Challenge: Millions of SIPs debit on the same date. Process: 1) Night before: Generate NACH file with all SIP mandates due — submitted to NPCI via sponsoring bank. 2) 5th morning: NACH debit processed — banks debit investor accounts, funds aggregated in SIP collection account. 3) Payment confirmation: NPCI sends success/failure file — CAMS reconciles. 4) Transaction creation: For each successful debit, create purchase transaction with cut-off time stamp. 5) Failed debits: Marked, investor notified, SIP pause counter incremented (3 consecutive failures → SIP cancelled). 6) Bulk NAV application: After NAV published, batch process applies NAV to all transactions. 7) Unit allotment: Batch unit credit to all folios. System must be horizontally scalable — CAMS processes 30M+ SIP transactions monthly.

AMC (Asset Management Company): Manages the fund — investment decisions, research, portfolio construction. Examples: HDFC AMC, SBI MF, Nippon MF. RTA (Registrar & Transfer Agent): CAMS/KFintech — handles all investor servicing. They maintain: Unit registry (who owns what units), Process all transactions (purchase, redemption, switch), KYC validation, SIP mandate management, SOA/CAS generation, Dividend (IDCW) processing, Compliance reporting to AMFI/SEBI. Business model: AMC pays RTA service fee (bps on AUM). CAMS serves ~67% market, KFintech ~33%. Conflict check: An AMC cannot have its own RTA (independence requirement). MF Central (SEBI mandate) now provides single consolidated view across RTAs.

Key SEBI requirements: 1) Daily NAV disclosure — all NAVs uploaded to AMFI by 9 PM, 2) Monthly portfolio disclosure — holdings by 10th of following month, 3) Half-yearly scheme portfolio — full portfolio twice a year, 4) CAS (Consolidated Account Statement) — monthly statement to investors transacting in that month, 5) FATCA/CRS — foreign investors' account info to Income Tax dept, 6) Load structure disclosure — entry/exit loads on scheme pages, 7) Expense ratio cap — SEBI limits TER (e.g., equity: 2.25% max for small AMCs), 8) Insider trading — monitoring of employees dealing in schemes they manage, 9) Stress testing — monthly liquidity analysis for open-end debt schemes, 10) SCORES portal — investor grievance redressal within 21 days. Technology required: Compliance workflow systems, automated report generation, regulatory API integrations, grievance management system.