A Mutual Fund (MF) folio may be opened on behalf of a minor by a guardian, who should either be a natural guardian (i.e. father or mother) or a legal guardian appointed by the court.
A Mutual Fund (MF) account/folio may be opened on behalf of a minor by a guardian, who should either be a natural guardian (i.e. father or mother) or a legal guardian appointed by the court. However, there shall not be any joint account with the minor, either as the first holder or as the joint holder, and the minor shall be the sole holder in the MF account.
Acting on a Securities and Exchange Board of India (SEBI) circular dated December 24, 2019, the Association of Mutual Funds in India (AMFI) has now reviewed the existing AMFI guidelines for investment on behalf of minors after consulting with the AMFI Operations & Compliance Committee.
The new guidelines also include provisions for change of guardian of a minor unitholder as also guidelines for change in status from minor to major.
AMFI has also issued updated guidelines and the forms and has also listed the supporting documents required to be submitted in this regard.
As the ownership of MF units vest with the minor even when the units are held by a guardian on behalf of the minor, the guardian may operate the minor’s account only until the minor attains the age of majority.
As per the SEBI directive, the minor’s account shall be frozen for operation by the guardian on the day the minor attains the age of majority and no further customer-initiated transactions shall be permitted till the status is changed from minor to major.
To keep the MF account active, upon the minor attaining the status of a major, the minor in whose name the investment was made is required to provide all the KYC details, updated bank account details including submission of a cancelled original cheque leaf of the new account.
Accordingly, when a minor turns a major, he/she needs to submit an application for change in status from Minor to Major in a prescribed form (called MAM form), along with the prescribed documents.
Unless the requisite formalities are completed on time, not only the guardian be allowed to undertake any financial or non-financial transactions from the date of the minor attaining majority but all existing standing instructions like SIP, SWP & STP, if registered for a period beyond the date on which the minor attains majority will cease to be executed from the date of the minor attaining majority.
So, well before initiating the process of change in status from Minor to Major, the unitholder should – obtain a PAN card and complete the KYC process to change his/her status in his/her existing bank account from Minor to Major or open a new bank account immediately upon becoming a major and procure a new cheque book with his/her name pre-printed thereon.
Apart from the copy of PAN and cancelled original cheque leaf, the MAM form to be submitted along with Nomination Form, KYC Acknowledgment or a duly completed KYC form and a fresh SIP, STP, SWP mandate in the prescribed form.
If the signature of the unitholder is not verified by the parent/guardian whose signature is registered in the records of the mutual fund against the folio of the minor unitholder or by a Notary or a Judicial Magistrate First Class(JMFC), the applicant unitholder has to submit Annexure 1 containing signature attestation by the bankers.