3.1 Glossary of Oracle FLEXCUBE– Investor Servicing

3.1 Glossary of Oracle FLEXCUBE– Investor Servicing
Glossary User Guide
Oracle FLEXCUBE Investor Servicing
Release 12.1.0.0.0
Part Number E67272-01
October 2015
Glossary User Guide
October 2015
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Table of Contents
1.
About This Manual ................................................................................... 1-1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
2.
1-1
1-1
1-1
1-1
1-1
1-2
1-2
1-2
1-2
1-3
Appendix A – Glossary ........................................................................... 2-1
2.1
3.
Introduction..............................................................................................................
Related Documents .................................................................................................
Audience..................................................................................................................
Organization ............................................................................................................
Conventions Used in this Manual ............................................................................
1.5.1 General Conventions..................................................................................
1.5.2 Keyboard Conventions ...............................................................................
Glossary of Icons.....................................................................................................
Abbreviations and Acronyms...................................................................................
Getting Help.............................................................................................................
Glossary of Oracle FLEXCUBE Investor Servicing Terms ...................................... 2-2
Appendix B - Glossary ............................................................................ 3-1
3.1
Glossary of Oracle FLEXCUBE– Investor Servicing .............................................. 3-2
1. About This Manual
1.1
Introduction
Welcome to Oracle FLEXCUBE Investor Servicing ™, a comprehensive mutual funds
automation software from Oracle Financial Servicing Software Ltd. ©.
This Oracle FLEXCUBE Investor Servicing User Manual helps you use the system to achieve
optimum automation of all your mutual fund investor Servicing processes. It contains
guidelines for specific tasks, descriptions of various features and processes in the system and
general information.
1.2
Related Documents
The User Manual is organized in to various parts, each discussing a component of the Oracle
FLEXCUBE Investor Servicing system.
1.3
Audience
This Fund Manager User Manual is intended for the Fund Administrator users and system
operators in the AMC.
1.4
Organization
This volume of the Fund Manager User manual is organized under the following chapter
sequence:
1.5
Chapter 1
About This Manual explains the structure, audience, organization, and
related documents of this manual.
Chapter 2
Appendix – Glossary lists Glossary of Oracle FLEXCUBE Investor Servicing Terms.
Conventions Used in this Manual
Before you begin using this User Manual, it is important to understand the typographical
conventions used in it.
1-1
1.5.1
1.5.2
1.6
General Conventions
Convention
Type of Information
Italic type
Functional /foreign terms
Validations for fields on a screen
References to related Headings/Users Manuals
For emphasis
Numbered
Bullet
Step by step procedures
Keyboard Conventions
Convention
Type of Information
Keys
All keys of the keyboard are represented in capital letters. For example,
<CTRL>.
Shortcut
keys
All short cut keys are contained in brackets. For example,
<ALT+SHIFT>.
Glossary of Icons
This User Manual may refer to all or some of the following icons
Icons
Function
Exit
Add Row
Delete Row
Option List
1.7
Abbreviations and Acronyms
The following acronyms and abbreviations are adhered to in this User Manual:
Abbreviation/
Acronym
Meaning
ADMIN
User Administrator
AGY
The Agency Branch component of the system
AMC
Asset Management Company
BOD
Beginning of Day
CDSC
Contingent Deferred Sales Charge
CGT
Capital Gains Tax
1-2
1.8
Abbreviation/
Acronym
Meaning
CIF
Customer Information File
EOD
End of Day
EPU
Earnings per unit
FC-IS
Oracle FLEXCUBE Investor Servicing
FMG
The Fund Manager component of the system
FPADMIN
Oracle FLEXCUBE Administrator
ID
Identification
IHPP
Inflation Hedged Pension Plan
IPO
Initial Public Offering
LEP
Life and Endowment Products
LOI
Letter of Intent
NAV
Net Asset Value
REG
The Registrar component of the system
ROA
Rights of Accumulation
ROI
Return on Investment
SI
Standing Instructions
SMS
Security Management System
URL
Uniform Resource Locator
VAT
Value Added Tax
WAUC
Weighted Average Unit Cost
Getting Help
Online help is available for all tasks. You can get help for any function by clicking the help icon
provided or by pressing F1.
1-3
2. Appendix A – Glossary
This chapter contains the following section:

Section 2.1, "Glossary of Oracle FLEXCUBE Investor Servicing Terms"
2-1
2.1
Glossary of Oracle FLEXCUBE Investor Servicing
Terms
Account Closure:
Carried out after the unit holder wishes to close his account with the
fund. A unit holder account would be considered closed only after all
the units held by a unit holder in the fund are redeemed, current block
transactions are unblocked and any un-cleared checks are cleared
and given effect to. Until such time that these processes are completed, the account would be treated as Pending Closure.
Agency
Branch:
The branch which caters to the needs of the unit holders on the basis
of the geographical areas earmarked for their activities .The agency
branch helps the fund managers to generate more business for the
fund besides acting as a contact point for unit holders who need not
always approach the AMC directly for information required by them or
for transactions.
Agent:
The organization / entity entrusted with dealing directly with unit holders, a function performed in turn by its Agency Branches.
Aging:
The process of keeping track of the age of a transaction from the date
of its entry till the date of its being cleared in full from the account of a
unit holder. Two types of aging are supported within the system: FIFO
and Transaction Receipts
Allocation on
par with cash:
The fund manager has the option of waiting for payments made
through modes other than cash to be cleared before effecting allocation. Conversely, the fund manager may opt to provisionally allot the
units on receipt of the application, pending clearance of the payment in
the case of check, credit card and transfers. This option of provisional
allotment pending clearing can be enabled using the “allocation on par
with cash” option. It follows that when “allocation on par with cash” is
defined as “NO”, the units will be allocated only after the payment is
cleared, manually or through automatic clearing.
Allocation:
The process of creation / liquidation of units after a transaction ,net of
all loads, is referred to as allocation.
Amendment:
Transactions may be amended at the agency branch level on the
request of the unit holder to give effect to corrections pertaining to specific transactions. Fund rules can also be amended at the fund manager level on the basis of a decision made by the trustees or the board
of directors. Presently any transaction can be amended once while in
the case of fund rule amendment the fund manager has an option to
amend it to the funds necessity. Presently in the system any transaction can be amended once..
Authorization:
Every time data pertaining to fund rules or transactions is entered in
the system, it has to be authorized so as to give effect to it. An authorization is therefore the process of verification of the data entered as
also sanctioning the same. Presently the system supports authorization for the key processes like Funds, Fund Rule, Unit holders, Brokers, Transaction Amendment, Transaction Processing Rules etc.
2-2
Automatic
clearing:
While the agency branch initiating a transaction can manually clear /
reject a check / demand draft / credit card / transfer transaction on the
basis of the advice from the drawee bank, it is also possible for the
fund manager to define a maximum period beyond which all payments
which are pending clearing are cleared by the system, and allocation
of the same carried out. This concept of payment status being system
cleared is referred to as Automatic Clearing.
Block:
When a unit holder pledges units in favor of a corporate, person or
institution, a lien is required to be marked on these units in favor of the
recipient of the pledge. This is called a block and the unit holder cannot redeem, transfer or switch these units until the block is lifted
through an Unblock.
Board of Directors Meeting:
A meeting held to declare the results of the funds and the future strategies of the fund with respect to investments, profit sharing with unit
holders. Dividend and book closing dates are announced and fund
rules are amended if required with the directors approving such
amendments.
BOD:
Also known as beginning of the next working day. The system would
be online again after the completion of BOD and the agency branches
can do transaction entry.
Book Closing:
Having defined a freeze holdings date, the fund may also specify a
date or a pair of dates during which no new units would be issued to
unit holders in the funds or like wise transferred to new unit holders
effectively resulting in the register of unit holders being closed for the
period specified. This action of a fund is referred to as book closing
and the period is the difference between the book closing from and to
date(s). The unit holders whose names appear in the Registrars list on
the book closing from date are eligible for dividends if announced.
Broker:
An individual or a corporate entrusted with the role of marketing the
products offered by the fund. At present multiple level hierarchy could
be supported in the system.
Ceiling
Value(Loads):
Maximum value for a load which the fund manager may expect to pay
or receive. The system would recognize both floor and ceiling values
for a transaction.
Check allocation. On clearing date:
In cases where the fund is defined as having check allocation. on
clearing date, the transaction is allocated on the basis of the price prevailing on the date of clearing of the check.
Clearing:
Unit holders can pay for IPO subscriptions, subscriptions through
cash, check, demand draft, credit card and transfer from their bank
account. With exception of cash transactions, all the others have to be
presented to the drawee bank and credit received by the fund. This
process of presentation and receiving credit through bank is referred
to as clearing. A related concept is that of allocation on par with cash.
Confirmation:
A process carried out by the fund manager to ratify redemption transactions and is mandatory for check printing in respect of redemption
transactions to be enabled.
2-3
Consolidation:
In a situation where the unit holder requests for units issued under
separate certificates to be combined as certificates having a greater
denomination, a consolidation transaction is put through and units
generated in the unit holder defined denominations. Mainly corporate
and FII investors are interested in these type of certificates where the
denomination of the certificates are usually high. In other words these
are known as ‘Jumbo Certificates’. This function is supported in a
scrip-based fund.
Corporate
Actions:
This screen can be used by the AMC to define the pattern for processing corporate actions like dividend. A fund can have a profile for each
corporate action. The frequency of payoffs; price declaration as also
other payment related areas such as lead times and processing frequencies for statements for each corporate action type can be captured in the profile.
Custodian:
An entity which stores and keeps track of the physical securities pertaining to the fund, and applicable primarily in a scrip based scenario.
Declared NAV:
A fund may opt to declare a price at a pre-defined frequency. This
price is a function of the trading profits and losses of the fund and is
arrived at based on the policies defined by the fund in advance. This
net figure which the fund may publicly announce is referred to as the
declared NAV and is reckoned for the purposes of arriving at loads,
payoffs etc. subject to the floor and cap applicable for the same. Typically, in a user scenario, the declared NAV is determined by the fund
manager through the use of an investment management tool, such as
FLEXCUBE Investor Services - Asset Management or any other external mechanism from where the price is received and entered either
manually or through a specifically designed interface.
Dividend:
A portion of profits that are divided among the unit holders according
to their respective holdings at a pre-defined frequency.
Entity:
An individual, corporate or institution with which a fund interacts in the
course of its daily activities. At present the following entities are recognized in the system: unit holders, asset management companies
(AMC's), registrars, brokers, agents, agency branches, trustees.
EOD
The procedures that are undertaken to close out a logical day and prepare the system for the next working day are collectively termed as
EOD or End of Day Procedures. They are menu-driven, as well as
automated.
Export - Import
Processing:
Offline branches need to forward data to the fund manager on a daily
basis and then receive the same back after it is processed. Data is forwarded to the fund manager by offline branches through the export
process and received through the import process. This exchange of
data between the fund manager and the offline branches is referred to
as export / import processing.
FIFO:
In the case of a scrip-less fund, when the unit holder asks for any one
of three transaction types (redemption, switch or transfer), and the
aging for that fund is based on FIFO, the system would automatically
put through the transaction taking into account the balances in earlier
acquisition transactions, starting with the unit holder’s oldest transaction in the fund and progressively going through to the last until the
entire requirement of the transaction is met.
2-4
Floor Price:
The minimum price offered by the AMC for the units in a fund. This
would apply in the case of redemption payoffs, and in the computation
of loads for a transaction by a unit holder in a fund.
Floor Value
(Loads):
Minimum value for a load which the fund manager may expect to pay
or receive.
Freeze Holdings:
When dividends are declared by a fund, it would like to payoff these
dividends to unit holders on the basis of their holdings as of a particular date. The holdings as of this date are eligible for the computation of
dividend.
Information
Change:
Carried out whenever the unit holder wants to change information
related to his address, telephone number, identification details, joint
holders, etc.
IPO:
Initial public offering is done by the fund manager to garner subscriptions when a new fund is floated. This operation is typically a primary
market operation that involves broker, agent and its agency branch
that helps the fund manager to get maximum funds from the investors
while starting the fund.
Lags:
A lag can be defined as the lead time which would be applicable to a
particular transaction in respect of:
a) Price: When a price lag is defined for a transaction type, it means
that the price applicable for the transaction would be the price
declared on a date that is the transaction date minus the number of
days of lag,
b) Allocation: When an allocation lag is defined, the allocation of the
transaction may take place only after the expiry of the number of days
of lag, from the date of the transaction,
c) Confirmation: For redemption transactions, a confirmation is
required to enable printing of the payoff check. Such a confirmation for
the transaction can only be done after the expiry of the number of days
of lag.
Letter of Intent:
A type of instruction given by a client to the fund manager to buy, sell,
redeem at a particular date or rate specified by the unit holder. It is a
commitment by the unit holder to invest a specified amount within a
specified time period.
Load to Price:
In the event of a load being defined as a percentage of a transaction
amount, the fund manager may prefer to let the effect of such a load
reflect on the price applicable to the transaction. This practice of
increasing or decreasing the price for a transaction is referred to as
“loading to price”.
Loads:
Fees charged from or incentives paid to the parties that the fund interacts with during the course of its daily operations. These may be
defined as a percentage or as a straight amount depending on predefined slabs.
Name Change:
Carried out when a unit holder wants to change his / her name as
appearing in the list of members for that fund. The fund manager
effects a name change only after authorization.
2-5
NAV or Net
Asset Value:
The price of the fund units is determined by this method. This calculation is appropriate for the open-ended funds because they are sold to
the owners of the fund, and traded at net asset value. The formula of
NAV is as follows
NAV =
Value of the fund portfolio + funds cash awaiting investmentsExpenses/
Number of Units Outstanding
The higher the NAV, the stronger is the fund but for close ended funds
the price is determined by the demand and supply factors in the secondary markets.
Online & Offline
branches:
Data in the system resides on the backend database that can be
accessed by agency branches that are connected to it through leased
lines or some other form of networking. Branches that are so connected to the server are referred to as online branches.
On the other hand, there may be agency branches that are not connected to the backend database. These branches may have access to
fewer services within the system. Also these branches will have to
send data to the fund manager and receive the processed data from
the fund manager on a daily basis, through export – import processing.
Par Value:
Whenever a fund makes an initial public offering, it would be required
to specify the face value at which the units are being offered to prospective investors. This face value at which the units are being offered
is referred to as the par value.
Post priced
funds:
The fund manager may opt for price declaration for a fund after taking
into account the transactions for the day. This can only be done at
close of a day's business hours, and such a fund would be referred to
as a post-priced fund.
Pre-EOD:
Also known as Pre-End of Day Processing, at the fund manager is the
first step in the closing of books for the day. Prior to taking up preEOD, the fund manager has to ensure that all the agency branches
are signed off, fund prices are entered for the day for all the funds (as
per pre-defined frequency). The system displays a list of activities that
are classified as mandatory or optional and the user has to ensure that
the same are completed before taking up pre-EOD processing at fund
manager. This is followed by EOD.
Pre-priced
funds:
A pre-priced fund is one in which the last available price declared
would be applicable for transactions which would be the price declared
the day before the transaction date where price declaration frequency
is daily.
The system presently requires that the frequency of price declaration
for a post-priced fund necessarily be daily whereas a pre-priced fund
can have daily, weekly, monthly, half-yearly, yearly frequencies of price
declaration.
Redemption
Transactions:
An option given in the open-ended funds where the fund may buy back
units from unit holders either on the closure of the fund or at predefined intervals. . Rules of the redemption are fund specific.
Redemption would result in reducing the outstanding units in the fund.
2-6
Registered
Capital:
The product of the total outstanding units in a fund by the price of
issue.
Reinvestment:
In addition to the returns earned by them on initial investment made,
unit holders may also opt to increase their returns by putting their earnings back in the same fund or in other funds which would increase
their holding in the fund where such returns are re-deployed. This process of re-deploying returns for earning incremental returns is referred
to as reinvestment. Currently in the system reinvestment option is
extended to the brokers and the unit holders.
Reissue:
If a certificate is destroyed or misplaced, the fund manager can reissue the misplaced certificates as duplicates after a formal announcement. This is applicable to scrip based funds.
Rejection:
Just as a transaction is authorized, it can also be rejected by the fund
manager using the discretion provided in the prospectus, resulting in
the transaction being disallowed.
Rule Effective
date:
This is one of the most frequently occurring terms in the system.
Whenever a new rule is defined within the system, the user would be
required to specify a rule effective date for the same; this would be
accepted by the system and the new rule would become current from
the rule effective date that the user defines. In other words, rule effective date is that date from which a new fund related rule defined would
become current.
Scrip-based
funds:
Funds which issue certificates to unit holders for their holdings in a
fund. Consequently, every transaction by a unit holder in a scrip-based
fund involves certificates being exchanged.
Scrip-less
funds:
Funds which do not issue certificates to unit holders. The balances
held by the unit holders in these funds are tracked either through passbooks or periodically generated account statements. Certificates can
be printed in the case of scrip-less funds for block transactions of unit
holders.
Sign off:
Sign off is a mandatory requirement for the fund manager to take up
pre-EOD processing. By signing off a branch, the fund manager
ensures that all the data pertaining to the agency branch has been
accepted by the fund manager, while also ensuring that no further
transaction entry can be done by the agency branches until completion
of EOD processing.
Split:
A reverse of a consolidation, whereby unit holder can reduce the certificate denominations.
Standing
Instructions:
Instead of having to repeat a transaction periodically, the unit holder
may request the fund manager to put through the same on his behalf
at pre-defined intervals. Such requests are referred to as Standing
Instructions.
Subscriptions:
Investments made by investors in a specified period falling outside the
IPO period. In a close-ended fund subscriptions are limited to the
required corpus of the fund.
2-7
Summary
reports:
As part of EOD processing every day, the system generates a report
for each transaction type in each fund, giving the details of the loads
applicable and applied for the transactions, the unit holder names,
along with advices to the registrar, accounting section and the trustees
regarding payoffs, credits, debits and transfers for the transactions.
Such reports are referred to as Summary reports. There is also a separate menu option available to the fund manager for the generation of
such reports.
Switch:
An option where a unit holder could move investments from one fund
to any other fund belonging to the same fund family. It should be noted
that unit holders cannot switch from one fund family to another.
Transaction
base price:
In defining a fund, the fund manager may specify the transaction types
that are available to the unit holders in the fund. At the same time, the
fund may also specify the price that would be applicable to that transaction type. At present, the values supported for this would be Par
Value, Declared NAV and ROI Value.
Transaction
receipts:
In the case of a scrip-less fund having aging based on transaction
receipts, the unit holder can select the earlier transaction to which he
would like the transaction aged, and the units allotted would be
reduced from that particular transaction only.
Transfer:
This process is normal in open and close-ended funds where the unit
holder sells his holdings to another unit holder or to a new unit holder.
The buyer gets the unit registered and the holding of the seller is
reduced to the extent of the transfer.
Trustee:
An individual or group of persons overseeing the activities of the AMC
with to safeguard the interests of the Unit holder.
Unblock:
When the unit holder gets the pledged units released, he is free to
carry out all transactions pertaining to the units in that fund. This freeing of pledged units is referred to as Unblock.
Unit holder:
Is an individual or a corporate that subscribes to the units of the fund,
on the basis of the information provided by the brokers, by making an
application to the agency branch attached to the fund.
The terms that follow are sought to be explained with the assistance of the following chart:
Fund Manager
Finance 2000 AMC
Industry
AA FUND
Open Ended
Growth
Barton Hill AMC
Commemorative
GC FUND
Close Ended
Income
IN FUND
Close Ended
Income+Growth
CN FUND
Open Ended
Income+Growth
Edward OakesAMC
General
Money Market
SB FUND
Open Ended
Growth
Portfolio Type
MM FUND
Close Ended
Money Market Fund
In the figure given above, the AMC's are defined as Finance 2000 AMC, Barton Hill AMC and
Edward Oakes AMC.
Fund
Class:
Funds floated by an AMC may be classified as Open ended or Close
ended funds.
2-8
Open
Ended
Funds:
An open ended fund makes an offering of its units to the public and has an
option to buyback (redeem) its units from the unit holder who wishes to liquidate his holdings at a given point of time. Similarly, unit holders are
allowed entry at any time during the life of the fund.
Close
Ended
Funds:
A close-ended fund issues its units up to a pre-determined number
through an initial public offering. Once the units are issued, they may be
redeemed only upon the closure of the fund. Further, unit holders also
have the option of switching their holdings, upon closure of the fund, to
funds which are part of the same Fund Family.
Fund Family:
Comprises of one or more funds, and permits inter-fund activity. Fund families are defined by the AMC and a given fund can only belong to one fund
family. Industry, Commemorative, General and Money Market constitute
the four fund families in the figure above.
Unit holders in GCFund may switch their holdings to AAFund upon closure
of GCFund. Similarly, unit holders in INFund may switch their units into
CNFund on closure of their fund.
Fund Type:
An AMC may define in advance the type of funds that it would float. In the
figure above, three fund types are defined - Income, Growth and Incomecum-Growth.
Earnings
Per Unit
(EPU)
This is the income on a per unit basis from a fund which the Fund Manager proposes to distribute for eligible investors holding balances in the
fund
Bulk Import
The generic facility to import all transactions (IPO and subscription) and
client details into FLEXCUBE Investor Services. The transactions could
be imported as authorized and unauthorized transactions where the unauthorized. ones are put through normal authorizations.
2-9
3. Appendix B - Glossary
This chapter contains the following section:

Section 3.1, "Glossary of Oracle FLEXCUBE– Investor Servicing "
3-1
3.1
Glossary of Oracle FLEXCUBE– Investor Servicing
Account
Closure:
Carried out after the unit holder wishes to close his account with the
fund. A unit holder account would be considered closed only after all
the units held by a unit holder in the fund are redeemed, current
block transactions are unblocked and any uncleared checks are
cleared and given effect to. Until such time that these processes are
completed, the account would be treated as Pending Closure.
Agency
Branches :
The branch which caters to the needs of the unit holders on the
basis of the geographical areas earmarked for their activities .The
agency branch helps the fund managers to generate more business
for the fund besides acting as a contact point for unit holders who
need not always approach the AMC directly for information required
by them or for transactions.
Agent:
The organization / entity entrusted with dealing directly with unit
holders, a function performed in turn by its Agency Branches.
Aging:
The process of keeping track of the age of a transaction from the
date of its entry till the date of its being cleared in full from the
account of a unit holder. Two types of aging are supported within the
system :FIFO and Transaction Receipts
Allocation on
par with cash:
Allocation on par with cash is maintained in Fund Rules, General
Operating Rules. The fund manager has the option of waiting for
payments made through modes other than cash to be cleared before
effecting allocation. Conversely, the fund manager may opt to provisionally allot the units on receipt of the application, pending clearance of the payment in the case of check, credit card and transfers.
This option of provisional allotment pending clearing can be enabled
using the “allocation on par with cash” option. It follows that when
“allocation on par with cash” is defined as “NO”, the units will be allocated only after the payment is cleared, manually or through automatic clearing.
Allocation:
The process of creation/ liquidation of units after a transaction net of
all loads is referred to as allocation.
Amendment:
Transactions may be amended at the agency branch level on the
request of the unit holder to give effect to corrections pertaining to
specific transactions. Fund rules can also be amended at the fund
manager level on the basis of a decision made by the trustees or the
board of directors. Presently any transaction can be amended as
many times as required while in the case of fund rule amendment
the fund manager has an option to amend it to the funds necessity.
Presently in the system any transactions can be amended as many
times as required.
Authorization:
Every time data pertaining to fund rules or transactions is entered in
the system, it has to be authorized so as to give effect to it. An
authorization is therefore the process of verification of the data
entered as also sanctioning the same. Presently the system supports authorization for the key processes like Funds, Fund Rule, Unit
holders, Brokers, Transaction Amendment, Transaction Processing
Rules etc.
3-2
Automatic
clearing:
While the agency branch initiating a transaction can manually clear /
reject a check / demand draft / credit card / transfer transaction on
the basis of the advice from the drawee bank, it is also possible for
the fund manager to define a maximum period beyond which all payments which are pending clearing are cleared by the system, and
allocation of the same carried out. This concept of payment status
being system cleared is referred to as Automatic Clearing.
Block:
When a unit holder pledges units in favor of a corporate, person or
institution, a lien is required to be marked on these units in favor of
the recipient of the pledge. This is called a block and the unit holder
cannot redeem, transfer or switch these units until the block is lifted
through an unblock.
Board of
Directors
Meeting:
A meeting held to declare the results of the funds and the future
strategies of the fund with respect to investments, profit sharing with
unit holders. Dividend and book closing dates are announced and
fund rules are amended if required with the directors approving such
amendments.
BOD:
Also known as beginning of the next working day. The system would
be online again after the completion of BOD and the agency
branches can do transaction entry.
Book Closing:
Having defined a freeze holdings date, the fund may also specify a
date or a pair of dates during which no new units would be issued to
unit holders in the funds or like wise transferred to new unit holders
effectively resulting in the register of unit holders being closed for the
period specified. This action of a fund is referred to as book closing
and the period is the difference between the book closing from and
to date(s). The unit holders whose names appear in the Registrars
list on the book closing from date are eligible for dividends if
announced.
Broker:
An individual or a corporate entrusted with the role of marketing the
products offered by the fund. At present multiple level hierarchies
could be supported in the system.
Ceiling
Value(Loads):
Maximum value for a load which the fund manager may expect to
pay or receive. The system would recognize both floor and ceiling
values for a transaction.
Check
allocation. On
clearing date:
In cases where the fund is defined as having check allocation. on
clearing date, the transaction is allocated on the basis of the price
prevailing on the date of clearing of the check.
Clearing:
Unit holders can pay for IPO subscriptions, subscriptions through
cash, check, demand draft, credit card and transfer from their bank
account. With exception of cash transactions, all the others have to
be presented to the drawee bank and credit received by the fund.
This process of presentation and receiving credit through bank is
referred to as clearing. A related concept is that of allocation on par
with cash.
Confirmation:
A process carried out by the fund manager to ratify redemption
transactions and is mandatory for check printing in respect of
redemption transactions to be enabled.
3-3
Consolidation
:
Corporate
Actions
In a situation where the unit holder requests for units issued under
separate certificates to be combined as certificates having a greater
denomination, a consolidation transaction is put through and units
generated in the unit holder defined denominations. Mainly corporate and FII investors are interested in these type of certificates
where the denomination of the certificates are usually high. In other
words these are known as ‘Jumbo Certificates’. This function is supported in a scrip-based fund.
The Corporate Actions screen can be used by the AMC to define the
rules for corporate actions processing for the fund. For the corporate action dividend, you can define the frequency of payoffs; price
declaration as also other payment related areas such as lead times
and processing frequencies for statements, for both cash and stock
dividends.
For a fund, a separate corporate action profile can be maintained for
each dividend type, stock and cash.
Custodian:
An entity which stores and keeps track of the physical securities pertaining to the fund, and applicable primarily in a scrip based scenario.
Declared NAV:
A fund may opt to declare a price at a pre-defined frequency. This
price is a function of the trading profits and losses of the fund and is
arrived at based on the policies defined by the fund in advance. This
net figure which the fund may publicly announce is referred to as the
declared NAV and is reckoned for the purposes of arriving at loads,
payoffs etc. subject to the floor and cap applicable for the same. Typically, in a user scenario, the declared NAV is determined by the fund
manager through the use of an investment management tool, such
as Oracle FLEXCUBE Investor Servicing - Asset Management or
any other external mechanism from where the price is received and
entered either manually or through a specifically designed interface.
Dividend:
A portion of profits that are divided among the unit holders according
to their respective holdings at a pre-defined frequency.
Entity:
An individual, corporate or institution with which a fund interacts in
the course of its daily activities. At present the following entities are
recognized in the system: unit holders, asset management companies (AMCs), registrars, brokers, agents, agency branches, trustees.
EoD
The procedures that are undertaken to close out a logical day and
prepare the system for the next working day are collectively termed
as EoD or End of Day Procedures. They are menu-driven or automatically processed.
Export Import
Processing:
Offline branches need to forward data to the fund manager on a daily
basis and then receive the same back after it is processed. Data is
forwarded to the fund manager by offline branches through the
export process and received through the import process. This
exchange of data between the fund manager and the offline
branches is referred to as export / import processing.
3-4
FIFO:
In the case of a scrip-less fund, when the unit holder asks for any
one of three transaction types (redemption, switch or transfer), and
the aging for that fund is based on FIFO, the system would automatically put through the transaction taking into account the balances in
earlier acquisition transactions, starting with the unit holder’s oldest
transaction in the fund and progressively going through to the last
until the entire requirement of the transaction is met.
Floor Price:
The minimum price offered by the AMC for the units in a fund. This
would apply in the case of redemption payoffs, and in the computation of loads for a transaction by a unit holder in a fund.
Floor
Value(Loads):
Minimum value for a load which the fund manager may expect to
pay or receive.
Freeze
Holdings:
When dividends are declared by a fund, it would like to payoff these
dividends to unit holders on the basis of their holdings as of a particular date. The holdings as of this date are eligible for the computation of dividend.
Information
Change:
Carried out whenever the unit holder wants to change information
related to his address, telephone number, identification details, joint
holders, etc.
IPO:
Initial public offering is done by the fund manager to garner subscriptions when a new fund is floated. This operation is typically a primary
market operation that involves broker, agent and its agency branch
that helps the fund manager to get maximum funds from the investors while starting the fund.
A lag can be defined as the lead time which would be applicable to a
particular transaction in respect of :
a) Price: When a price lag is defined for a transaction type, it means
that the price applicable for the transaction would be the price
declared on a date that is the transaction date minus the number of
days of lag,
Lags:
b) Allocation: When an allocation lag is defined, the allocation of the
transaction may take place only after the expiry of the number of
days of lag, from the date of the transaction,
c) Confirmation: For redemption transactions, a confirmation is
required to enable printing of the payoff check. Such a confirmation
for the transaction can only be done after the expiry of the number of
days of lag.
Letter of
Intent:
A type of instruction given by a client to the fund manager to buy,
sell, redeem at a particular date or rate specified by the unit holder. It
is a commitment by the unit holder to invest a specified amount
within a specified time period.
Load to Price:
In the event of a load being defined as a percentage of a transaction
amount, the fund manager may prefer to let the effect of such a load
reflect on the price applicable to the transaction. This practice of
increasing or decreasing the price for a transaction is referred to as
“loading to price”.
3-5
Loads:
Fees charged from or incentives paid to the parties that the fund
interacts with during the course of its daily operations. These may be
defined as a percentage or as a straight amount depending on predefined slabs.
Name
Change:
Carried out when a unit holder wants to change his / her name as
appearing in the list of members for that fund. The fund manager
effects a name change only after authorization. It is also essential for
the name change to be accepted by the Registrar to become effective.
The price of the fund units is determined by this method. This calculation is appropriate for the open-ended funds because they are sold
to the owners of the fund, and traded at net asset value. The formula
of NAV is as follows
NAV =
NAV or Net
Asset Value:
Value of the fund portfolio + funds cash awaiting investmentsExpenses
Number of Units Outstanding
The higher the NAV, the stronger is the fund but for close ended
funds the price is determined by the demand and supply factors in
the secondary markets.
Online &
Offline
branches:
Data in the system resides on the backend database that can be
accessed by agency branches that are connected to it through
leased lines or some other form of networking. Branches that are so
connected to the server are referred to as online branches.
On the other hand, there may be agency branches that are not connected to the backend database. These branches may have access
to fewer services within the system. Also these branches will have to
send data to the fund manager and receive the processed data from
the fund manager on a daily basis, through export – import processing.
Par Value:
Whenever a fund makes an initial public offering, it would be
required to specify the face value at which the units are being offered
to prospective investors. This face value at which the units are being
offered is referred to as the par value.
Post priced
funds:
The fund manager may opt for price declaration for a fund after taking into account the transactions for the day. This can only be done
at close of a day's business hours, and such a fund would be
referred to as a post-priced fund.
Pre-EOD:
Also known as Pre-End of Day Processing, at the fund manager is
the first step in the closing of books for the day. Prior to taking up
pre-EOD, the fund manager has to ensure that all the agency
branches are signed off, fund prices are entered for the day for all
the funds (as per pre-defined frequency). The system displays a list
of activities that are classified as mandatory or optional and the user
has to ensure that the same are completed before taking up preEOD processing at fund manager. This is followed by EOD.
3-6
Pre-priced
funds:
A pre-priced fund is one in which the last available price declared
would be applicable for transactions which would be the price
declared the day before the transaction date where price declaration
frequency is daily.
Note: The system presently requires that the frequency of price declaration for a post-priced fund necessarily be daily whereas a prepriced fund can have daily, weekly, monthly, half-yearly, yearly frequencies of price declaration.
Redemption
Transactions:
An option given in the open-ended funds where the fund may buy
back units from unit holders either on the closure of the fund or at
pre-defined intervals. . Rules of the redemption are fund specific.
Redemption would result in reducing the outstanding units in the
fund.
Registered
Capital:
The product of the total outstanding units in a fund by the price of
issue.
Registrar:
An entity which records all the unit holder related details including
name and address, transactions, history of dealings with the AMC,
besides performing the role of monitoring and collating IPO subscription and subscription details, and giving effect to redemption payoffs,
switch transactions, transfers between unit holders, unit holder
account closures etc. Also responsible for answering unit holder
queries and redress of unit holder grievances.
Reinvestment:
In addition to the returns earned by them on initial investment made,
unit holders may also opt to increase their returns by putting their
earnings back in the same fund or in other funds which would
increase their holding in the fund where such returns are redeployed. This process of re-deploying returns for earning incremental returns is referred to as reinvestment. Currently in the system
reinvestment option is extended to the brokers and the unit holders.
Reissue:
If a certificate is destroyed or misplaced, the fund manager can reissue the misplaced certificates as duplicates after a formal announcement. This is applicable to scrip based funds.
Rejection:
Just as a transaction is authorized, it can also be rejected by the
fund manager using the discretion provided in the prospectus, resulting in the transaction being disallowed.
Rule Effective
date:
This is one of the most frequently occurring terms in the system.
Whenever a new rule is defined within the system, the user would be
required to specify a rule effective date for the same; this would be
accepted by the system and the new rule would become current
from the rule effective date that the user defines. In other words, rule
effective date is that date from which a new fund related rule defined
would become current.
Scrip-based
funds:
Funds that issue certificates to unit holders for their holdings in a
fund. Consequently, every transaction by a unit holder in a scripbased fund involves certificates being exchanged.
3-7
Scrip-less
funds:
Funds that do not issue certificates to unit holders. The balances
held by the unit holders in these funds are tracked either through
passbooks or periodically generated account statements. Certificates can be printed in the case of scrip-less funds for block transactions of unit holders.
Sign off:
Sign off is a mandatory requirement for the fund manager to take up
pre-EOD processing. By signing off a branch, the fund manager
ensures that all the data pertaining to the agency branch has been
accepted by the fund manager, while also ensuring that no further
transaction entry can be done by the agency branches until completion of EOD processing.
Split:
A reverse of a consolidation, whereby unit holder can reduce the
certificate denominations.
Standing
Instructions:
Instead of having to repeat a transaction periodically, the unit holder
may request the fund manager to put through the same on his behalf
at pre-defined intervals. Such requests are referred to as Standing
Instructions.
Subscriptions
:
Investments made by investors in a specified period falling outside
the IPO period. In a close-ended fund subscriptions are limited to the
required corpus of the fund.
Summary
reports:
As part of EOD processing every day, the system generates a report
for each transaction type in each fund, giving the details of the loads
applicable and applied for the transactions, the unit holder names,
along with advices to the registrar, accounting section and the trustees regarding payoffs, credits, debits and transfers for the transactions. Such reports are referred to as Summary reports. There is
also a separate menu option available to the fund manager for the
generation of such reports.
Switch:
An option where a unit holder could move investments from one fund
to any other fund belonging to the same fund family. It should be
noted that unit holders cannot switch from one fund family to
another.
Transaction
base price:
In defining a fund, the fund manager may specify the transaction
types that are available to the unit holders in the fund. At the same
time, the fund may also specify the price that would be applicable to
that transaction type. At present, the values supported for this would
be Par Value, Declared NAV and RoI Value.
Transaction
receipts:
In the case of a scrip-less fund having aging based on transaction
receipts, the unit holder can select the earlier transaction to which he
would like the transaction aged, and the units allotted would be
reduced from that particular transaction only.
Transfer:
This process is normal in open and close-ended funds where the
unit holder sells his holdings to another unit holder or to a new unit
holder. The buyer gets the unit registered and the holding of the
seller is reduced to the extent of the transfer.
Trustee:
An individual or group of persons overseeing the activities of the
AMC with to safeguard the interests of the Unit holder.
3-8
Unblock:
When the unit holder gets the pledged units released, he is free to
carry out all transactions pertaining to the units in that fund. This
freeing of pledged units is referred to as Unblock.
Unit holder:
An individual or a corporate that subscribes to the units of the fund,
on the basis of the information provided by the brokers, by making
an application to the agency branch attached to the fund.
The terms that follow are sought to be explained with the assistance of the following chart:
Fund Manager
Finance 2000 AMC
Industry
AA FUND
Open Ended
Growth
Barton Hill AMC
Commemorative
GC FUND
Close Ended
Income
IN FUND
Close Ended
Income+Growth
CN FUND
Open Ended
Income+Growth
Edward OakesAMC
General
Money Market
SB FUND
Open Ended
Growth
Portfolio Type
MM FUND
Close Ended
Money Market Fund
In the figure given above, the AMCs are defined as Finance 2000 AMC, Barton Hill AMC and
Edward Oakes AMC.
Fund
Class:
Funds floated by an AMC may be classified as Open ended or Close
ended funds.
Open
Ended
Funds:
An open ended fund makes an offering of its units to the public and has
an option to buyback (redeem) its units from the unit holder who wishes
to liquidate his holdings at a given point of time. Similarly, unit holders are
allowed entry at any time during the life of the fund.
Close
Ended
Funds:
A close-ended fund issues its units upto a pre-determined number
through an initial public offering. Once the units are issued, they may be
redeemed only upon the closure of the fund. Further, unit holders also
have the option of switching their holdings, upon closure of the fund, to
funds which are part of the same Fund Family.
Fund
Family:
Comprises of one or more funds, and permits inter-fund activity. Fund
families are defined by the AMC and a given fund can only belong to one
fund family. Industry, Commemorative, General and Money Market constitute the four fund families in the figure above.
Unit holders in GCFund may switch their holdings to AAFund upon closure of GCFund. Similarly, unit holders in INFund may switch their units
into CNFund on closure of their fund.
Fund Type:
An AMC may define in advance the type of funds that it would float. In the
figure above, three fund types are defined - Income, Growth and Incomecum-Growth.
Earnings
Per Unit
(EPU)
This is the income on a per unit basis from a fund which the Fund Manager proposes to distribute for eligible investors holding balances in the
fund
Bulk Import
The generic facility to import all transactions and client details into Oracle
FLEXCUBE Investor Servicing.The transactions could be imported as
authorized and unauthorized transactions where the unauthorized ones
are put through normal authorizations.
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