Transaction slip

The application form exists to capture an investor for the first time. Once the folio exists, repeating all of that is waste. The transaction slip is the short form that replaces it.

Its one indispensable feature is the pre-printed folio number. That number is what tells the registrar's system whose units to move, whose signature to check the slip against, and where to send the confirmation.

Most AMCs print the slip as a counterfoil to the account statement, so the investor's next instruction arrives already identified. A blank slip is also available at AMC branches, distributors and ISCs, with a space to write the folio number in.

One slip handles many kinds of instruction. Investors use it for additional purchases, redemptions, switches, and also for non-financial transactions such as a change of address or change of bank details.

Validity turns on one thing: it must be signed according to the mode of holding of the folio. A joint folio held "jointly" needs every holder; one held on either-or-survivor basis does not. The registrar verifies each signature against the scanned specimen held in the R&T system.

The time stamping rules differ by what the slip is for, and this is examinable:

• Purchase — impressions on the face of the application form or transaction slip, and on the back of the payment instrument. The two must carry identical time stamp serial numbers, which is why form and cheque have to be received together.
• Redemption, switch or transfer — no payment instrument, so impressions go on the face of the request and on the investor's acknowledgement copy. If no acknowledgement is issued, the request is stamped twice.
• Non-financial transaction — all impressions go on the request itself.

If a basic check shows the document is incomplete, it must not be time stamped — it is returned over the counter for correction. But once a request has been accepted and stamped, it is not returned even if it turns out to be unacceptable.

Mr Bose holds units in a scheme at NAV Rs 20 and wants money out. He tears off the transaction slip attached to his last account statement — folio number already printed — ticks "Redemption", and hands it in at an ISC before the 3.00 pm cut-off. The counter stamps the face of the slip and his acknowledgement copy with the same serial number. The scheme has a 1 percent exit load.

If he redeems 1,000 units:

Redemption price = Rs 20 − (1% × Rs 20) = Rs 19.80
Proceeds          = 1,000 × Rs 19.80   = Rs 19,800

He asked for 1,000 units and got Rs 19,800, not Rs 20,000.

If instead he writes "Rs 20,000" in the amount box, the arithmetic runs the other way — the registrar has to redeem more units to net him that sum:

Units required = 20,000 ÷ 19.80 = 1,010.10 units

Same slip, same load, same NAV. Specifying units fixes what leaves the folio and lets the proceeds vary; specifying an amount fixes the proceeds and lets the folio take the hit. The registrar simply does what the box says.

Chapter 14 (Financial Transactions) opens with "Application Form Vs Transaction Slip" and its sample questions test the distinction from both ends — a transaction slip is used when the investor knows his own folio number, and it is the preferred mode for an existing investor making an additional purchase in the same scheme. Chapter 11 supplies the time stamping rules for where the impressions go. The exit load arithmetic above, including the 1,010.10 units, is the workbook's own worked example.

• The transaction slip is not only for redemptions. Additional purchases, switches and non-financial requests all ride on it.
• What identifies the slip is the folio number, not the scheme name. Without it the registrar cannot place the request, and a new application form means a new folio.
• The signature requirement follows the mode of holding of the folio, not the size of the transaction. A fresh purchase application, by contrast, must be signed by all joint holders.
• A purchase slip and its cheque must carry identical time stamp serial numbers — so they must be presented together. A redemption request has no payment instrument and is stamped on the request and the acknowledgement, or twice if no acknowledgement is given.
• An incomplete document is never time stamped. It goes back over the counter. But once stamped, it is not returned even if found unacceptable.
• Specifying an amount is not the same as specifying units when a load applies — the unit count changes, as the 1,010.10 figure shows.