Fund

ET in the Classroom: Mutual Fund KYC



Markets regulator SEBI has mandated KYC (Know Your Client) compliance for investors before starting investments in a mutual fund scheme.

WHAT IS THE PROCESS FOR COMPLETING KYC BEFORE STARTING MF INVESTMENTS?

To open a folio for investing in a mutual fund, an investor has to fill up the KYC form and attach valid proof of identity (POI) and proof of address (POA) documents as prescribed. The fund house or a SEBI-registered entity (SRI) will open a folio or an account and register the documents with one of the KRAs (KYC Registration Agencies) if not available in any of the KRA records. Valid POI documents include Aadhaar, passport, driving licence, voter ID card, NREGA job card or any other document notified by the Union government in consultation with the regulator. It is important to note that from April 1, bank statements or utility bills will not be considered as officially valid documents to complete the KYC process.CAN KYC BE DONE VIA DIGITAL MODE?
Investors can do their KYC online without having to visit any fund house, registrar or distributor using the Aadhaarbased e-KYC. This removes the hassle of physical in-person verification. Investors can log on to the mutual fund website, or its registrar or third-party distributor websites that allow investments in mutual funds to get this done. A validation of investor credentials is done by sending an OTP on the mobile number registered with Aadhaar. In addition, the investor should have a mobile device with permissions enabled to access the camera, location and microphone. The investor also needs to upload a self-attested copy of the PAN and an image of the signature on plain paper to complete this process. Once the KYC is done, an investor can start investing in mutual funds.

WHAT SHOULD INVESTORS WHO COMPLETED THEIR KYC WITH BANK STATEMENTS OR UTILITY BILLS DO NOW?

Investors who have done their KYC earlier with invalid documents and wish to open a new account or folio will have to undergo a fresh KYC and submit these physical documents to one of the registrars to comply with these norms. However, investors whose KYC record meets the PANAadhaar seeding validation and whose email and mobile number are validated by the KRA will be allowed to continue transactions in the securities market with their existing intermediary. This means such investors can continue with their systematic investment plan and systematic transfer or withdrawal plans or redeem from existing folios. WHY IS IT IMPORTANT TO BE KYC-COMPLIANT EVEN FOR OLD MF INVESTMENTS?
Many investors invested in MFs when KYC was not mandatory. Such investors must note that no fresh investments will be accepted without the completion of the KYC. Regulations now mandate an investor to be KYC compliant not only at the time of investment but also at the time of placing a redemption request. Any investor who had an old folio and was not KYC-compliant back then also needs to be KYC-compliant when placing a redemption request. In case of more than one holder in a folio, all of them need to be KYC-compliant. In the event of the demise of a unitholder, the beneficiary/ nominee too needs to be KYC-compliant for the transmission of units.



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