There are several important documents that mutual fund subscribers should understand.
A mutual fund that offers its shares to the public is required to produce an official Offering Memorandum (OM) and to typically file it with the securities regulator in the country. This document discloses the details of the fund, including but not limited to:
- A Directory of all parties to the fund, such as Investment Manager, Auditor and Le-gal Advisors
- An outline of the legal structure of the fund along with its investment objective
- A list of the Fund Directors
- Fees and expenses
- Subscription and redemption process
- Investment restrictions
- A list of risk factors to consider
The purpose of the Offering Memorandum is to provide a complete picture of the fund, so investors can understand the investment objective of the fund, what it will invest in, exactly what the company can and cannot do, and who will operate it before they invest.
Mutual funds require subscribers to complete and sign a subscription form, which is considered the “contract” for the investment. Typical information required on a subscription form includes name, address, verification of the specific fund investment and amount, and the subscriber’s signature. The fund’s Administrator assures that the investment meets all the requirements of the fund, as outlined in the fund’s Offering Memorandum.
Subscriber Identification and Verification
Anti-money laundering legislation and know-your-client regulations in most countries require mutual funds to collect copies of various other documents to verify the identity of the subscriber and the source of the investment funds.
These documents typically include a current copy of the subscriber’s passport, a utility bill or Voter’s Card in the subscriber’s name to verify the physical home address, the subscriber’s national identity card, and a driver's license.