How to seamlessly convert mutual fund units between SOA and DEMAT

Why is dematization important?

Years ago, investing was a matter of a lot of paperwork. Share certificates were physical documents and losing one meant a world of trouble. Then came dematerialization, the process of converting physical certificates into electronic records. This change was a game-changer, offering investors security, convenience and a simplified way to manage their portfolios.

Mutual funds followed a similar path. While fund houses today offer you SOA, the industry gradually introduced the option of holding mutual fund units in demat form. Think of it as holding your investments in a format that is easier to manage and track, just like stocks and bonds. Holding mutual fund units in your demat account gives you a centralized view of all your investments and simplifies transactions.

How to dematerialize MF units

If you’re thinking about making the switch, the process isn’t as complicated as it seems. Here’s a step-by-step guide to help you make the transition:

Open a demat account: If you don’t have a demat account yet, this is the first step. It’s similar to opening an online account – it’s simple, straightforward, and usually done with a depository participant (DP), such as a bank or brokerage firm.

Obtain a Conversion Request Form (CRF) from your broker: Your DP acts as an intermediary between you and the financial markets. You can easily obtain a CRF from them, either online or at your branch.

Fill out the CRF and sign it: Make sure your signature matches the one your DP has on file. This is critical to ensuring the process goes smoothly.

Make sure the retention pattern matches: The names on your SOA must exactly match the names on your DP account. For example, if Mr. A is the first account holder and Mrs. A is the second account holder on your DP account, the SOA must reflect the same order.

Submit the CRF along with a self-certified copy of your SOA: Submit the completed CRF form and a certified copy of your SOA to your broker. The CRF must be physically delivered to the broker.

Please state the correct folio number: Please enter your SOA folio number accurately into the CRF. This ensures that the correct units are converted.

DP sends the CRF to the Registrar and Transfer Agent (RTA): Your DP will send the CRF details to the RTA, along with your Client Master Copy, which contains your account details.

RTA verifies and confirms the conversion: After verification, the RTA will process the conversion request. Once approved, your mutual fund units will be credited to your demat account.

The entire process of converting your mutual fund units to demat may take between 20-25 days.

Dematerialization of blocking funds

Before dematerialising lock-in schemes such as equity-linked savings schemes (ELSS) or retirement funds, it is essential to stop or pause any ongoing SIP. Failure to do so will result in investments continuing in physical or non-demat mode and can only be traced through the RTA or asset management company (AMC).

If you have units in lock-up schemes with different lock-up dates, you will need to fill separate CRF forms for each scheme and lock-up date. Your broker will generate a Demat Request Number (DRN) for each purchase date.

In case of SIP investments in lock-in schemes, dematerialisation charges apply to each instalment. For example, if you have 10 monthly SIPs in a lock-in scheme and you submit a request for dematerialisation, charges will apply for each individual SIP instalment.

Key Considerations

Conversion of SOA units to demat may involve charges which vary from broker to broker. Dematerialisation charges are deducted from the broker’s account balance and can be seen in the fund account statement.

However, there are times when you may want to convert those drives back to physical mode, also known as rematerialization. This could be due to personal preference, cost reduction, or simply to keep a separate record.

Back to SOA

Rematerialisation is the process of converting mutual fund units from electronic form (demat) to physical form, meaning they are issued as SOAs. If you are considering this change, here is a simple guide to help you with the process.

Obtain and complete the Repossession Request Form (RRF): The first step to rematerialize your mutual fund units is to approach your broker, request and complete the Redemption of Funds (RRF) Request Form for each International Securities Identification Number (ISIN), fund or folio you wish to rematerialize. Please ensure that the details you provide match your DP’s records, including your name, folio number and other relevant information. Completing this form accurately is critical to avoid any delays in processing.

Send the form and documents to your broker: Along with the RRF form, you must submit a set of self-certified documents to support your application. These documents include:

Proof of address: A self-certified copy of any of the following documents: Voter ID, Driving Licence, Passport, Aadhaar card (ensure that the Aadhaar number is masked – only the last four digits should be visible) or Bank statement.

PAN: A self-certified copy of your Permanent Account Number (PAN) card is also mandatory.

The broker forwards the request to AMC/RTA: After verifying your application, your DP will send the RRF and supporting documents to the relevant AMC or RTA. The AMC or RTA will process your rematerialisation application.

Processing and issuance of SoA: Once the AMC or RTA receives your application, they will initiate the rematerialization process. After successful verification, your mutual fund units will be converted back into physical form and you will receive an SOA reflecting your holdings. This document will serve as an official record of your mutual fund investments.

Final thoughts

If you own multiple mutual funds or investments in different folios, you will need to file a separate RRF for each one. The entire process may take a few weeks, depending on the processing time of the AMC or RTA and the accuracy of the information you have provided. It is important that you contact your DP if you do not receive your SOA within the expected time frame.

While there are no underlying costs involved in the rematerialization process, some DPs may charge a nominal fee for handling the request. It is advisable to check with your DP regarding the associated costs.

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That said, choosing SOA or switching to Demat will depend on how you prefer to manage your investments. Understanding the advantages and disadvantages will help you make the best decision for your financial journey.