It’s responsibility of AMCs to ensure that KYC of MF investor is completed: Regulator

Putting to rest the doubt that if prospective investors have to apply for Know Your Customer (KYC) separately first to become eligible to apply for investments in mutual fund (MF) schemes, Association of Mutual Funds in India (AMFI) has issued a clarification on behalf of the Securities and Exchange Board of India (SEBI), which makes it clear that – it is the responsibility of the Intermediary (i.e., the Asset Management Company (AMC)) to ensure that the KYC is completed as specified in various SEBI circulars / guidelines.

So, a prospective investor can submit the KYC form along with the MF investment form to an intermediary (AMC) and the AMC needs to get the KYC verified, before processing the investment, even as market regulator SEBI has made it mandatory that purchase, redemption, switch or any other MF transaction may only be done if the investor is KYC compliant.

According to SEBI’s guidelines, from March 1, 2020, no one will be able to invest, redeem or execute any financial transaction and make non-financial request, unless the investor is KYC compliant with valid PAN attached.

However, the market regulator has also made it clear that the AMCs may continue to accept subscriptions from new investors along with KYC form and KYC documents + PAN etc. as being done hitherto.

Once an investor submits KYC application form complete in all respects along with the necessary KYC documents (i.e. Identity proof and Address proof) and PAN to an Intermediary (AMC), and the same are found to be in order, the AMC needs to process the transaction after validating the PAN (i.e., PAN validation should be completed before processing the transaction), as it will be considered that the investor is deemed to have fulfilled his/her obligation with respect to KYC compliance once the application for KYC is submitted in proper order.

So, the AMC will be solely responsible to enter/update the KYC data in KRA system and upload the documents on KRA portal immediately and track the KYC status to ensure that KYC status of the investor gets updated to reflect ‘verified status’.

Hence it will not be the investors responsibility to get the KYC status ‘Verified’ and the client should not be asked to wait or made to get the verification done before processing of the transactions, since it is the responsibility of the AMC to do it.

So, even as the SEBI has made it mandatory that transactions may only be processed for KYC-compliant investors, AMCs may continue to accept subscriptions from new investors along with KYC form and KYC documents along with PAN, as being done hitherto.