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Know Your Client

Guidelines issued by Securities and Exchange Board of India under The Prevention of Money Laundering Act, 2002 (“PMLA”) requires Mutual Funds to follow enhanced know your client (KYC) norms. This FAQ is only meant to clarify certain questions relating to enhanced KYC procedures.

What is KYC?

KYC is an acronym for “Know your Client”, a term commonly used for Client Identification Process. SEBI has prescribed certain requirements relating to KYC norms for Financial Institutions and Financial Intermediaries including Mutual Funds to ‘know’ their clients. This would be in the form of verification of identity and address, financial status, occupation and such other personal information. Applicant must be KYC compliant while investing with any SEBI registered Mutual Fund.

KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc), Investors need not undergo the same process again when they approach another intermediary.

KYC is applicable for which type of transactions?

Effective January 01, 2011 KYC compliance was made mandatory for all categories of investors irrespective of the amount invested for the following transactions:

  • New / Additional Purchases.
  • Switch Transactions.
  • New SIP/MICRO SIP Registrations received from effective date.
  • New STP Registrations received from effective date.
  • New DTP Registrations received from effective date.

KYC norms are applicable on a prospective basis. For existing SIP / STP / DTP registrations (and similar facilities), KYC norms as applicable on the date of acceptance of the request are applicable, unless specifically mentioned.

What are the KYC requirements for a Mutual Fund Investor?

In order to simplify the KYC process, and to make it uniform across various SEBI regulated intermediaries in the securities market viz. Stock Brokers, Depository Participants, Mutual Funds, Portfolio Managers, Venture Capital Funds, etc. These changes aim to eliminate duplication of KYC process across these intermediaries and will make investing more investor friendly.

For this purpose, KYC registration is being centralized through KYC Registration Agencies (KRA) registered with SEBI. Thus each investor has to undergo KYC process only once in the securities market and the details would be shared with other intermediaries.

Individual investors will have to produce his Proof of identity (Photo PAN card copy or PAN card copy and copy of the passport, driving license etc) and Proof of Address (any valid documents listed in section B of the KYC Application Form for Individuals).

Non –Individual Investors will have to produce certain documents pertaining to its constitution/registration to fulfill the KYC process. A list of Mandatory Certified Documents to be submitted can be found in section C of the KYC application form for Non-Individual Investors.

Where and how does one get to be KYC Compliant?

In order to bring uniformity in the Know Your Customer (KYC) process in the securities market and develop a mechanism for centralization of the KYC records and also to avoid duplication of KYC Process across the intermediaries in the securities market; SEBI vide Circular No. MIRSD/SE/Cir-21/2011 dated October 5, 2011, SEBI (KYC Registration Agency) Regulations, 2011 and Circular No. MIRSD/ Cir-26/ 2011 dated December 23, 2011 introduced the concept of KYC Registration Agency (KRA) effective January 01, 2012.

Apart from KYC, it is mandatory for intermediaries including mutual funds to carry out In-Person Verification (IPV) of all its new investors. The IPV carried out by any SEBI registered intermediary can be relied upon by the Mutual Fund. NISM/AMFI certified distributors who are KYD compliant are authorized to undertake the IPV for Mutual Fund investors. Further, in case of any applications received directly (i.e. without being routed through the distributors) from the investors, the Mutual Fund may rely upon the IPV (on the KYC Application Form) performed by the scheduled commercial banks.

Investors can submit the common KYC Application Form along with all necessary documents as prescribed in the KYC Application Form with any SEBI registered intermediaries including mutual funds. KRA shall send a letter to the investor within 10 working days of the receipt of the initial/updated KYC documents from the Mutual Fund, confirming the details thereof.

In other words, investors will have to:

  • Download the KYC form: Individual InvestorNon Individual Investors
  • Attach the documents evidencing Proof of Identity and Proof of Address
  • Complete IPV from any of the following:
    • NISM/AMFI certified distributors who are KYD compliant
    • Scheduled Commercial Banks (in case of any applications received directly)

Upon receipt and verification of the above documents, a KYC acknowledgement will be issued to each applicant Existing KYC compliant investors of the Tata Mutual Fund can continue to invest as per the current practice. However, existing investors are also urged to comply with the new KYC requirements including IPV as mandated by SEBI.

To whom is a KYC applicable? Is there any exemption?

KYC is required for All Client Categories and Any Amount of investment. Joint Holders: Joint holders (including first, second and third if any, are required) to be individually KYC compliant before they can invest with any Mutual Fund. . e.g. in case of three joint holders, all holders need to be KYC compliant and copies of each holder’s KYC Acknowledgement must be attached to the investment application form with any Mutual Fund.

Minors: In case of investments in respect of a Minor, the Guardian should be KYC compliant and attach their KYC Acknowledgement while investing in the name of the minor. The Minor, upon attaining majority, should immediately apply for KYC compliance in his/her own capacity and intimate the concerned Mutual Fund(s), in order to be able to transact furtherin his/her own capacity.

Power of Attorney (PoA) Holder: Investors desirous of investing through a PoA must note that the KYC compliance requirements are mandatory for both the PoA issuer (i.e. Investor) and the Attorney (i.e. the holder of PoA), both of whom should be KYC compliant in their independent capacity and attach their respective KYC Acknowledgements while investing.

For transmission (IN case of death of the unite holder): If the deceased is the sole applicant, the claimant should submit his/her KYC Acknowledgement in the request along with the other relevant documents to effect the transmission in his/her favour.

How does the investor transact in Mutual Fund after completing the KYC process?

Investors must attach their KYC Acknowledgement along with the Investment Application Form(s) / Transaction Slip(s) while investing for the first time in a mutual fund. Applications Forms / Transaction Slips investors not accompanied by KYC Acknowledgement are liable to be rejected by the Mutual Fund.

In case of existing investors when and how will the KYC norms be introduced?

KYC norms are applicable to all investors. It is in the interest of all Investors to obtain KYC Acknowledgement and submit it to the Mutual Fund to avoid any inconvenience in future.

What are the consequences of KYC cancellation/rejection?

In the event of any KYC Application Form being found deficient for lack of information / insufficiency of mandatory documentation, further investments will not be permitted.

Does the KYC Acknowledgement have an expiry date?

No. Once the KYC Acknowledgement is obtained and informed to a Mutual Fund, it will be registered against the folio and quoted in all future account statements. The same will exist in perpetuity, unless cancelled by KRA.

What happens if I have multiple folios/ accounts with a Mutual Fund?

You can inform the Mutual Fund to update the KYC Acknowledgement against all the folios/accounts you have with it. However, each of the holders in these folios/accounts should be KYC Compliant.

Is there a charge I need to pay to get myself KYC Compliant?

Currently, KYC is done free of cost.

Are there any special requirements for an NRI?

Yes. Such applicants must furnish a certified copy of proof of their identity (their PAN). PAN is the sole identification number for KYC compliance. Also a copy of their overseas / local address proof (as applicable) certified by a local authority / Indian embassy / consulate is required. If documents are not in the English language, they must be translated into English.

Is there any special requirement for a PIO (Person of Indian Origin)?

The requirements applicable to an NRI will also apply to a PIO. However, additionally, he will need to submit a certified true copy of the PIO Card.

What about Minor becoming Major?

Upon a Minor attaining the age of majority (i.e. on completing 18 years of age), he/she must be KYC Compliant and have KYC Acknowledgement of their own. The same should be informed to the Mutual Fund where he/she holds an investment, along with other details such as the Bank Details, Signature, etc as per the present requirements of such Mutual Fund.

Whom do I inform about change of Name/Address/Status/Signature etc?

You should intimate your change of Name/Address/Status/Signature etc to any convenient KRA. You need to quote your PAN and submit proof (in case of new address). You should provide for at least 10 days for the change of address to take effect with all the Mutual Funds with whom you are invested. Please note that you should not write to the Mutual Fund or its Registrar for the change of address (unless as a designated KRA). The specified form can be obtained from the AMFI or the KRA from where the KYC is originally done. All details of the holders in the Mutual Fund records will be replaced by the address details available in the KRA record.

If I am already providing my PAN/PAN Proof for my investment in Mutual Fund. Is that not sufficient for meeting the requirement of KYC?

The requirement of providing your PAN along with proof is sufficient for proof of identity. However, the current requirement for KYC requires the mutual fund to verify identity, address as well as obtain further information about the investor.

Why do I need to give my Income details? How can I be sure that it will not be misused?

As per PMLA, it is mandatory for Mutual Funds to obtain financial status details from its investors. It is for this reason that the Income details are sought. Please note that no proof / income documents are required. The information given you in the KYC Application form will be treated in a confidential manner and used for regulatory purposes if called for.

Do I need to inform about my change of Income status?

Yes. If you find an increased/decrease in your income, which would effectively, changed the income bracket that you have declared in the KYC Application form, you should apply to any convenient PoS in the specified form. No proof is needed.

Can an investor give a COA (Change of Address) along with redemption request?

Redemption request is given to the investor service centre while the change of address (if KYC process has been previously completed) has to be given to a PoS. The change of address will be effected by CVL and informed to the Mutual Funds. As it will take 10 days for this process to be completed, the redemption transaction accompanied by a change of address request is likely to be processed without effecting the change of address request.

Is the KYC Acknowledgement a separate form or is it a part of the Mutual Fund application. Which of the forms require being time-stamped?

KYC Acknowledgement is a separate form. Time stamping is not required on the KYC Acknowledgement.

What do I do once I have received my KYC Acknowledgement?

Once the investor is KYC compliant, it will be required to intimate his KYC details to all the Mutual Funds with whom it has investments by quoting the folio numbers. The same will be updated in the records of the Mutual Fund.

What if I have already obtained a MIN?

Scenario 1 :

If the MIN was obtained by submitting the PAN, the MIN Acknowledgement can be enclosed along with the Investment Application Form(s) / Transaction Slip(s) while investing for the first time in a Mutual Fund, as the PAN number will be stated on the said acknowledgement.

Scenario 2 :

If the MIN was obtained without submitting the PAN but with other proof identity documents, the investor needs to carry the PAN card in original and a copy for submission at the PoS. For such cases, CVL will send out a communication to the respective investors requesting them to submit the PAN for KYC compliance.

Is the Aadhaar card accepted as proof of address?

In reference to SEBI circular CIR/MIRSD/ 09 /2012 dated 13 August 2012 the Aadhaar card can be submitted as proof of address

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