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  1. Here is how to assign power of attorney for mutual fund investments

Here is how to assign power of attorney for mutual fund investments

In many situations, the mutual fund agents have used this POA to their advantage. So you need to be extra cautious about selecting the right person to give POA. However, you can give restricted POA.

Published: April 17, 2018 2:54 AM
power of attorney, mutual fund, NRI, KYC requirements An individual will prefer to invest in a mutual fund through a power of attorney (POA) if he is a frequent traveller, or wants the investments to be managed by his or her spouse or if he becomes an NRI. (PTI)

An individual will prefer to invest in a mutual fund through a power of attorney (POA) if he is a frequent traveller, or wants the investments to be managed by his or her spouse or if he becomes an NRI. However, one should give POA only to a trustworthy person. It is generally not advisable for an investor to give POA to his mutual fund agent. In many situations, the mutual fund agents have used this POA to their advantage. So you need to be extra cautious about selecting the right person to give POA.
However, you can give restricted POA.

That is, you can specify that the POA holder can only transact in mutual funds and not in any other assets. Some of the older formats of POA do not have the signature of the POA acceptor. It will carry only the signature of the POA giver. This format of POA without the signature of POA acceptor is not accepted by mutual fund companies. Mutual fund companies expect the POA to be signed by both the POA giver and acceptor. So, when you are preparing a POA make sure that it has both the signatures of the giver and acceptor. It is not mandatory that POA has to be registered. Mutual fund companies accept even the unregistered POA.

KYC requirements

To transact in mutual funds through a POA, both the investor as well as the POA should have completed KYC. An investor can register the POA when opening a fresh mutual fund folio. You need to write the name of the POA holder in the specified column on the application form. Also, you need to mention the PAN number of POA holder. KYC of the POA holder needs to be attached. Notarised copy of the POA also needs to be enclosed with the application.

Though this folio is opened by the investor, as the POA is registered, subsequent transactions can be done by the POA holder as well as the investor. POA holder can open a fresh mutual fund folio on behalf of the POA giver. Same set of the above mentioned documents needs to be attached and the same details as mentioned above need to be filled in the application form. POA holder can sign in the column specified for applicant signature. Below the signature, clearly indicate that the signature is on behalf of the applicant by the Constituted Attorney.

POA in an existing MF folio

The investor can register the POA in his existing mutual fund folio by giving separate letter. In the letter he can mention the details of POA holder and request to register the POA in the folio. Copy of PAN card, KYC copy of the POA holder along with the notarised POA need to be submitted.

Once this POA registration is accepted in the folio, the POA holder can start transacting on behalf of the investor. Cancelling POA can be done by giving a letter to the respective mutual fund company. Both the POA registration and cancellation will be reflected on the account statement as a non-financial transaction. Investors are advised to give POA to their spouse to transact on behalf of them in mutual funds. This comes in handy when you are sick or need to travel all of a sudden. During emergency and contingency, POA to the spouse will be of immense help.

By: Ramalingam K

The writer is director, Holistic Investment Planners
Extracted excerpts from Tax Guru

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