IMPORTANT FAQS ON MUTUAL FUND INVESTEMENTS

What is KYC?

KYC is an acronym for Know your Client, a term commonly used for Client Identification Process. SEBI has prescribed certain requirements relating to KYC norms for Financial Institutions and Financial Intermediaries including Mutual Funds to know their Clients. This would be in the form of verification of identity and address, providing information of financial status, occupation and such other demographic information. Applicant must be KYC compliant while investing with any SEBI registered Mutual Fund.

What are the KYC requirements for a Mutual Fund Investor?

Individual investors will have to produce his Proof of identity (Photo PAN card copy or PAN card copy and copy of the passport, driving license etc.) and Proof of Address (any valid documents listed in section B of the KYC Application Form for Individuals). Non-Individual Investors will have to produce certain documents pertaining to its constitution/registration to fulfill the KYC process. A list of Mandatory Certified Documents to be submitted can be found in section C of the KYC application form for Non-Individual Investors.

KYC Compliant and process related

The Mutual Fund Industry has appointed CDSL Ventures Limited (CDSL), a wholly owned subsidiary of Central Depository Services (India) Limited, to carry out the KYC compliance procedure. CVL through its Points of Service (POS) will accept KYC Application Forms, verify documents and provide the KYC Acknowledgement (across the counter on a best effort basis). The list of PoS will be displayed on the websites of Mutual Funds, CDSL and AMFI. Once the KYC is duly completed in all respects, the investor needs to produce a copy of the acknowledgement to the fund where the investor desires to invest. There is no need to repeat the KYC individually for each mutual fund.

What is a KYC Application Form?

A KYC Application Form has been designed for Individual and Non-Individual Investors separately. The soft copy of these KYC forms will be made available on the website of all mutual funds, AMFI and Central Depository Services (India) Limited (CDSL). You may also approach your distributor for a form. It is important to read the instructions printed on the KYC Application Form while filling-up the form.

Should the investor visit PoS personally to obtain KYC Compliance?

No. If the investor is not in a position to visit PoS personally, the KYC Application Form along with the necessary documents (including originals if the copies are not attested) can be sent through the distributor or representative, who can arrange to fulfill the KYC obligation and obtain the KYC Acknowledgement through any of the PoS.

From what date is it mandatory for an investor to be KYC Compliant?

With effect from January 1, 2011, any investor investing in Mutual Fund schemes would be required to be KYC compliant.

To whom is a KYC applicable? Is there any exemption?

All investors (Individuals or Non Individuals) who wish to make new / additional investment of any amount in Mutual Fund Schemes from January 1, 2011 are required to be KYC Compliant. This would also apply to new Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP)/ Dividend Transfer Plan (DTP)/ switch transactions registered effective from January 1, 2011.
Joint Holders: Joint holders (including first, second and third if any, are required) to be individually KYC compliant before they can invest with any Mutual Fund. . e.g. in case of three joint holders, all holders need to be KYC compliant and copies of each holder’s KYC Acknowledgement must be attached to the investment application form with any Mutual Fund.
Minors: In case of investments in respect of a Minor, the Guardian should be KYC compliant and attach their KYC Acknowledgement while investing in the name of the minor. The Minor, upon attaining majority, should immediately apply for KYC compliance in his/her own capacity and intimate the concerned Mutual Fund(s), in order to be able to transact further in his/her own capacity.
Power of Attorney (PoA) Holder: Investors desirous of investing through a PoA must note that the KYC compliance requirements are mandatory for both the PoA issuer (i.e. Investor) and the Attorney (i.e. the holder of PoA), both of whom should be KYC compliant in their independent capacity and attach their respective KYC Acknowledgements while investing.
Financiers will have to be KYC compliant at the time of Lien Marking.
For transmission (In case of death of the unit holder): If the deceased is the sole applicant, the claimant should submit his/her KYC Acknowledgement along with the other relevant documents to effect the transmission in his/her favour.

How does the investor transact in Mutual Fund after completing the KYC process?

Investors must attach their KYC Acknowledgement along with the Investment Application Form(s) /Transaction Slip(s) while investing for the first time in every folio. Applications Forms / Transaction Slips not accompanied by KYC Acknowledgement are liable to be rejected by the Mutual Funds. If you do not obtain a KYC Acknowledgement, you will not be able to invest in a Mutual Fund.

In case of existing investors when and how will the KYC norms be introduced?

KYC norms are applicable to all investors. It is in the interest of all Investors to obtain KYC Acknowledgement and submit it to the Mutual Fund to avoid any inconvenience in future.
Once an account is opened with a Mutual Fund by 1st, 2nd & 3rd holders by completing the necessary formalities and the investor’s return to make a fresh investment, do they need to furnish the necessary documents again?
Investors must attach their KYC Acknowledgement along with the Investment Application Form(s) / Transaction Slip(s) while investing for the first time in every folio.

What are the consequences of KYC cancellation/rejection?

In the event of any KYC Application Form being found deficient for lack of information / insufficiency of mandatory documentation, further investments will not be permitted.

Does the KYC Acknowledgement have an expiry date?

No. Once the KYC Acknowledgement is obtained and informed to a Mutual Fund, it will be registered against the folio and quoted in all future account statements. The same will exist in perpetuity, unless cancelled by CVL.

What happens if I have multiple folios/ accounts with a Mutual Fund?

You can inform the Mutual Fund to update the KYC Acknowledgement against all the folios/accounts you have with it. However, each of the holders in these folios/accounts should be KYC Compliant.
Is there a charge I need to pay to get myself KYC Compliant?
Currently, KYC is being done free of cost.

I am an NRI residing outside India. How do I get myself KYC Compliant?

The soft copy of these KYC forms will be made available on the website of all Mutual Funds, AMFI and Central Depository Services (India) Limited (CDSL). You may also approach your distributor for a form. The same duly completed along with the necessary attested documents can be submitted at the PoS or mailed to your representative or Distributor who can complete the KYC formalities for you.

Are there any special requirements for an NRI?

Yes. In addition to the certified true copy of the passport, certified true copy of the overseas address and permanent address will also be required. If any of the documents (including attestations/ certifications) towards proof of identity or address is in a foreign language, they have to be translated to English for submission. The documents can be attested, by the Consulate office or overseas branches of scheduled commercial banks registered in India

Is there any special requirement for a PIO (Person of Indian Origin)?

The requirements applicable to an NRI will also apply to a PIO. However, additionally, he will need to submit a certified true copy of the PIO Card.

What about Minor becoming Major?

Upon a Minor attaining the age of majority (i.e. on completing 18 years of age), he/she must be KYC Compliant and have KYC Acknowledgement of their own. The same should be informed to the Mutual Fund where he/she holds an investment, along with other details such as the Bank Details, Signature, etc as per the present requirements of such Mutual Fund.

Whom do I inform about change of Name/Address/Status/Signature etc?

You should intimate your change of Name / Address / Status /Signature etc. to any convenient PoS. You need to quote / submit a copy of your KYC Acknowledgement, and proof (in case of new address). You should provide for at least 7 days for the change of address to take effect with all the Mutual Funds with whom you are invested. Please note that you should not write to the Mutual Fund or its Registrar for the change of address (unless as a designated PoS). The specified form can be obtained from the AMFI/Mutual Fund website. All details of the holders in the Mutual Fund records will be replaced by the address details available in the CVL record.

Is PAN mandatory for Mutual Fund investments?

Yes PAN CARD is mandatory for all Mutual Fund Investments. However, only KYC is required for MICRO SIPs (where annual investment commitment is not greater than Rs. 50000).

KYC requirements

The requirement of providing your PAN along with proof is sufficient for proof of identity. However, the current requirement for KYC requires the Mutual Fund to verify identity, address as well as obtain further information about the investor.

Why do I need to give my Income details? How can I be sure that it will not be misused?

As per PMLA, it is mandatory for Mutual Funds to obtain financial status details from its investors. It is for this reason that the Income details are sought. Please note that no proof / income documents are required. The information given you in the KYC Application form will be treated in a confidential manner and used for regulatory purposes if called for.

Do I need to inform about my change of Income status?

Yes. I you find an increase /decrease in your income, which would effectively, changed the income bracket that you have declared in the KYC Application form, you should apply to any convenient PoS in the specified form. No proof is needed.

Can an investor give a COA (Change of Address) along with redemption request?

The redemption transaction accompanied by a KYC Acknowledgement form is likely to be processed without effecting the change of address request.

Know about KYC Acknowledgement form

KYC Acknowledgement will be done on the photocopy of the form. Time stamping is not required on the KYC Acknowledgement.

What do I do once I have received my KYC Acknowledgement?

Once the investor is KYC compliant, it will be required to intimate his KYC details to all the Mutual Funds with whom it has investments. The same will be updated in the records of the Mutual Fund.

Know about signature difference

Signature verification is done by Mutual Funds to protect an investor from losses. As such, Mutual Funds may follow extra due-diligence if signatures are not matching, such as getting Bank attestation for such transactions. This could be independent of the KYC procedure.

What if I have already completed the earlier KYC (MIN) procedure with CVL?

Scenario 1 : If the KYC (MIN) was completed by submitting the PAN, the Acknowledgement obtained at that time can be enclosed along with the Investment Application Form(s) / Transaction Slip(s) while investing for the first time in every folio as the PAN number will be stated on the said acknowledgement. You need not repeat the process now.
Scenario 2 : If the KYC (MIN) was completed without submitting the PAN but with other proof of identity documents, for such cases, CVL will send out a communication to the respective investors requesting them to submit self attested copy of PAN card for KYC compliance.

What is the purpose of SEBI laying down the KRA guidelines with effect from January 01, 2012 ?

To bring uniformity in securities markets, SEBI vide its circular MIRSD/SE/Cir-21/2011 dated 05th October 2011 has prescribed uniform KYC form and supporting documents to be used by SEBI registered intermediaries such as DPs, MFs, AMFI, PMs, Collective Income Schemes and Venture Capital Funds. For this purpose, KYC registration is centralized through KYC Registration Agencies (KRAs) registered with SEBI. Thus each investor has to undergo a uniform KYC process only once in the securities market and the details would be shared with other intermediaries by the KRAs.

What are the Key changes in the KYC norms, effective January 01, 2012?

In-Person Verification (IPV) - Information provided in the KYC form has to be verified in person by the AMC, its Registrar and Transfer Agent (RTA) or distributors who are AMFI / NISM certified and compliant with Know Your Distributor (KYD) guidelines.
KYC Application Forms – Some changes have been made in the KYC application form and are listed below for ready reference.
Individual investors:
  • Marital status to be provided

    Proof to be submitted for PAN exempt investors has been listed.

    Income details – the slabs have been modified and an option of providing net worth as on a recent date in lieu of gross annual income has been provided.

    Proof of Address and Identity – there are some changes in the list of acceptable documents.

Non-individual investors:
  • Place of incorporation, date of commencement of business have been added.

    Income details – the slabs have been modified, and additional information on the net worth as on a recent date has been sought. Proof to be submitted for PAN exempt investors has been listed.

    Following details of Promoters / Partners / Karta / Trustees / Whole time directors are required: Name, PAN with proof, DIN (for directors) / UID, if any (for others), address proof and photographs.

    Photograph of any one of the authorized signatories on the KYC application form.

    Copy of the balance sheets for the last 2 financial years and thereafter to be submitted every year.

    Copy of latest share holding pattern.

What is ‘missing KYC information’ that needs to be provided?

Pursuant to SEBI Circular issued on April 13, 2012, all intermediaries are required to obtain ‘certain missing KYC information’ afresh as and when new clients intend to invest/trade/deal with the intermediary. This is the KYC information that has been prescribed by SEBI as part of minimum KYC requirements vide SEBI circular dated 5th October 2011, but was not prescribed earlier for any intermediary including Mutual Funds. In case of Individuals are, details to be taken afresh are:
  • Father’s/Spouse Name,

  • Marital Status,

  • Nationality,

  • Gross Annual Income Or Net worth as on recent date ,

  • In-Person Verification (IPV)

In case of Non Individuals, full KYC needs to be done afresh due to significant and major changes in KYC requirements

Will the new KYC requirement effective 01st Jan 2012 be applicable to both New & Existing investors?

The KYC requirement which is effective from 01st Jan 2012 will be applicable to New investors only. However, if the existing KYC compliant investor would like to deal with any SEBI registered intermediary other than mutual funds, they will have to follow the new KYC compliance procedure.

What will be the steps followed by an investor to be KYC compliant starting 01st Jan 2012?

The investor has to follow the below steps for being KYC Compliant starting 01st Jan 2012
  • Fill up the new KYC Application form as available on any of the KRA’s web site.

  • The investor has to submit the application form in person at any of the offices designated as Intermediaries by the KYC Registration Agency (KRA).

  • Obtain a temporary acknowledgement for submission of all the documents and completion of IPV; Once all the documents are verified by a KRA, they will send the investor a letter within 10 working days from the date of receipt of necessary documents by them from the Fund or its Registrar and Transfer Agent informing the investor either about compliance by the investor of the new KYC compliance procedure (“final acknowledgement”) or any deficiency in submission of details or documents.

Who can do IPV?

The investor has to follow the below steps for being KYC Compliant starting 01st Jan 2012
  • In case of Stock brokers, their sub‐brokers or Authorized Persons (appointed by the stock brokers after getting approval from the concerned Stock Exchanges in terms of SEBI Circular No. MIRSD/DR‐1/Cir‐16/09 dated November 06, 2009) can perform the IPV.

  • In case of Mutual Funds, their Asset Management Companies (AMCs) and the distributors who comply with the certification process of National Institute of Securities Market (NISM) or Association of Mutual Funds (AMFI) and have undergone the process of ‘Know Your Distributor’ (KYD) can perform the IPV. However, in case of applications received by the mutual funds directly from the clients (i.e. not through any distributor), they may also rely upon the IPV performed by the scheduled commercial banks.

  • Distributors who are NISM /AMFI certified and have done their KYD

  • For direct applications received, IPV may be done by Scheduled Commercial Banks

Which are the Intermediaries as per the SEBI Circular?

  • KYC Registration Agencies (KRAs)

  • Stock Brokers through Stock Exchanges.

  • Depository Participants (DPs) through Depositories.

  • Mutual Funds (MFs)

  • Portfolio Managers (PMs)

  • Venture Capital Funds (VCFs)

  • Collective Investment Schemes (CIS)

What is the new KRA regulation issued by SEBI and what is the effective date?

Presently for a client to invest with different intermediaries in the security market, he / she had to undergo the process of KYC separately with each of them. To create standardization and avoid duplication, SEBI has mandated uniform KYC for the securities market effective Jan 1st, 2012 thru the KYC Registration Agency(s) (KRA).

How long does the KYC formalities take for the investor to invest?

The KYC acknowledgement letter will be generated immediately by the intermediary, if the requisite documentation is in place. The communication from the KRA will take 10 working days from the date of receipt of the original documents from the intermediary.

Can the investor use the old KYC Application forms starting 01st Jan 2012?

No the investor has to use the new KYC Application form as available on the Fund’s, AMFI’s as well as any of the KRA’s web site.

Which agency will act as a KRA for processing the KYC Application forms effective 01st Jan 2012?

As of now CDSL Ventures Limited (CVL), NDML, CAMS and DOTEX will act as the KRA for processing the KYC Application forms effective 01st Jan 2012.

Is “In Person Verification” mandatory (IPV) for all the KYC Applications received effective 01st Jan 2012?

Yes
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