In order to stop fraudulent activity arising from third-party cheque payments, Amfi has asked mutual fund houses not to accept third party cheques. This decision was taken after Amfi found few cases of cheating in the past few months. Third party payments refer to payments made through instruments like cheques or demand drafts by individuals other than that of the investor.
Association of Mutual Funds in India (Amfi) has given a deadline of November 15, 2010 for doing away with third party payments. It added in its circular that, ?The third-party payments would only be accepted in case of payment on behalf of a minor for a value not exceeding Rs 50,000, payment by employer on behalf of employee under systematic investment plans (SIP) through payroll deductions and custodian on behalf of an FII or a client.?
Recently, few fraudulent cases were reported to us in regard to third party payments? said HN Sinor, CEO of Amfi. This step, he added, was a move to prevent such frauds in future. It was found that unscrupulous distributors collected a cheque from an investor (which is typically in favour of a mutual fund scheme). While submitting the form to the mutual fund house, he substituted the investor?s application form with his. This resulted in units getting allotted to the distributor instead of the investor.