Mutual Fund: Can you submit KYC and investment forms together?

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Published: February 28, 2020 6:18 PM

The apprehension was that, as per SEBI's communication to AMFI, only KYC compliant applicants would apply for investment in any MF scheme.

Mutual Fund, MF, Know Your Customer, KYC, KYC application form, Securities and Exchange Board of India, SEBI, Association of Mutual Fund in India, AMFI, mutual fund investment, MF investment form, AMCThere was a confusion over directive of SEBI regarding KYC status of applicants at the time of submitting application to invest in MF schemes.

There was a confusion over directive of market regulator Securities and Exchange Board of India (SEBI) regarding Know Your Customer (KYC) status of applicants at the time of submitting application to invest in mutual fund (MF) schemes. The apprehension was that, as per SEBI’s communication to Association of Mutual Fund in India (AMFI), only KYC compliant applicants would apply to an Asset Management Company (AMC) for investment in any MF scheme.

So, to submit an application from to invest in a MF scheme, should a prospective investor first apply for KYC separately?

According to IDFC AMC, such an investor may still submit the forms for KYC and MF together and it will be responsibility of the AMC, who received the forms, to get the KYC done before allotting units of the fund applied for.

With reference to KYC requirements, AMFI has issued the following clarification on behalf of SEBI:

1. It is the responsibility of the Intermediary (i.e., the AMC) to ensure that the KYC is completed as specified in various SEBI circulars / guidelines.

2. Once the investor has submitted KYC application form complete in all respects along with the necessary KYC documents (i.e. Identity proof and Address proof) and PAN to the Intermediary (AMC), and the same are found to be in order, the investor is deemed to have fulfilled his/her obligation w.r.t. KYC compliance, and the AMC may process the transaction after validating the PAN (i.e., PAN validation should be completed before processing the transaction).

3. It is thereafter the responsibility of the Intermediary (AMC) 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’.

4. AMCs may continue to accept subscriptions from new investors along with KYC form and KYC documents + PAN etc. as being done hitherto.

5. For cases where the KYC status is ‘Under Process’, AMC may accept the subscription/switch transactions and process the same, but keep the units ‘on hold’ from any further transactions till KYC status is ‘Verified”.

6. In such cases where the KYC status is ‘Under Process’, if the AMC relies on the KYC status which is under process and accepts subscriptions, the AMC will still be held accountable under PMLA, if the KYC fails subsequently.

7. In respect of redemption cases where the KYC status is “Under Process” in the KRA system, AMC may collect the fresh KYC documents before processing the redemption request as a matter of precaution.

8. Redemption payment of maturity proceeds in respect of close ended schemes should be paid only after obtaining the KYC documents.

9. KYC compliance is mandatory even for existing SIP mandates. If the KYC is pending in respect of existing SIP accounts, reminders must be sent to the concerned investors with a request to fulfill the KYC compliance before a specified date, cautioning the investor that in case of non-completion of KYC by the specified date the SIP shall be discontinued.

10. AMC initiated corporate actions such as dividend pay-out / dividend re-investment may be continued to be processed in the normal course.

11. Likewise, Non-financial requests such as nomination, change of email address/telephone number, change of bank etc. may be continued to be accepted and processed. However, AMCs should use the opportunity to obtain KYC documents from such investors and fulfill the KYC compliance.

So, an AMC may receive both KYC and investment forms together, but before processing purchase or redemption requests, the KYC process must be completed.

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