KYC compulsory for all Mutual fund investors | Third party payment not accepted for mutual funds

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Complete your KYC formalities before Jan 1

STARTING January 1,2011,Know-Your-Customer,or KYC,norms will be mandatory for all mutual fund investors irrespective of the amount you invest.Till now,retail investors who invested less than 50,000 were not required to follow KYC guidelines.They could invest by merely submitting a copy of their self-attested PAN card.

KYC-Compliance :CDSL Ventures (CVL),a wholly-owned subsidiary of Central Depository Services-India (CDSL),has been appointed by the mutual fund industry to do KYC verification of investors.So,an investor needs to submit the following mandatory documents at CVL Points of Service or POS locations: Completed KYC application form (which can be downloaded here)

Address Proof: This could be a utility bill,passport,letter from your employer or housing society,ration card,voter ID card,or drivers licence.

All these are acceptable forms of address proof.PAN Card: If you are submitting your KYC application in person,you will need to have the original documents with you as well as the copies to be processed.The originals will be returned to you after they are verified as accurate.If you send the document through a courier,documents need to be attested by a notary,gazetted officer,or manager of a scheduled commercial bank.As of now,there are no charges or fees levied for KYC verification.

Post January 1,2011,while making an investment for the first time in a mutual fund,a copy of the KYC acknowledgement needs to be attached along with the investment application forms and transaction slips.Any application form not accompanied by a KYC acknowledgement can be rejected.
However,investors need not worry about their existing mutual fund investments.Even if you want to redeem any investment made before January 1,2011,it would be redeemed without any KYC requirement, says Waqar Naqvi,MD & CEO,Taurus Mutual Fund.
Non-acceptance of Third Party Payments for mutual fund subscriptions effective November 15, 2010

As per guidelines issued by the Association of Mutual Funds in India (AMFI), mutual funds are required to put in place strong processes by November 15, 2010 to ensure that Third-Party payment instruments are not used for mutual fund subscriptions.

When payment is made from a bank account other than that of the beneficiary investor, the same is referred to as a “Third Party Payment”. In case of mutual fund subscription with joint holders, the first holder is considered as the beneficiary investor. In case of payments from a bank account which is jointly held, the first holder of the mutual fund subscription has to be one of the joint holders of the bank account from which the payment is made.

Investors are required to mention the details of the bank account from where the payment for subscription is being made in the subscription form. The details required are – bank account number, bank name and the cheque / demand draft number.

Mutual Funds will be providing a facility for investors to do a one-time registration of all their bank accounts where they are one of the holders and from where they expect to make a payment for mutual fund subscription. The registration can be done at the respective mutual fund investor service centres, along with any one of the following supporting documents viz. Original cheque or Self attested copy of Cheque/Bank statement/Bank passbook or a letter from a bank stating the account number and the account holders‟ name and address.

In case the bank account from where the payment is made is not pre-registered with the mutual fund as explained above, investors should ensure to submit/provide additional documents along with the subscription form as given below:

a. Cheque Payments

(1) If the name of the first holder is not printed on the cheque, the signature on the cheque should match with the signature in the subscription form.

(2) If any of the above information is not available on the cheque, investors should submit any one of the following documents to establish that the payment is made from the bank account of the first holder viz. Self attested Copy of Bank Pass book/Bank Statement or a letter from the bank stating the name of the account holder and the account number.

b. RTGS / NEFT / Fund Transfers

(1) Investors should submit a copy of the instruction to the bank containing the account number debited for the remittance.

c. Payments via Demand Drafts

(1) Investors should submit a certificate from the Issuing banker, stating the account holder‟s name and the account number which has been debited for issue of the instrument.

Based on the scrutiny of the document(s) submitted and information provided by the investor, if it is construed that the payment for subscription is not from a bank account belonging to first unit holder, the subscription is liable to be rejected. In case funds are transferred to the mutual fund account prior to rejection of the subscription, additional documents / details with respect to the investor and the payment will be sought prior to making a refund.

Source: Economic times

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