Market regulator SEBI has proposed a major change in the mutual fund account opening process. Under this, a new mutual fund account will only be opened after the investor’s KYC process has been fully verified. Currently, in many cases, accounts are opened with incomplete documents.
According to SEBI’s new proposal, an investor’s account will be considered fully operational only after their identity has been finally approved by the KYC agency. Only after this will the first investment be possible. Investors will receive information about each step of the process via mobile or email to avoid any errors or delays. Mutual fund companies and central KYC agencies have been instructed to adapt their systems and operations to the new proposed rules. SEBI has invited public comments on this proposal until November 14th.
What is the situation now
Currently, the KYC (Know Your Customer) process is mandatory for opening new mutual fund accounts, but in some cases, accounts are opened before KYC is complete. This creates problems for investors and the asset management companies (AMCs) that manage mutual fund schemes.
Investors face problems
Incomplete or incorrect KYC details prevent investors from transacting in new accounts, redeeming accounts, or receiving dividends. Furthermore, AMCs also face difficulties in sharing scheme information and accepting deposits.
This will be the new process
Investors will have to submit their documents to mutual fund companies to open a new account.
– The company will send those documents to KYC Registration Agencies (KRAs) for final verification
– The agency will mark the new account as KYC verified after checking the documents.
– Only after this the investor will be authorized to make the first investment in the account.
– The investor will be notified through registered email and mobile number at every stage of the KYC process.
Relief has already been given here.
1. Investors must provide complete information
Fund companies will now be required to provide investors with more clear and complete information. This means that when you invest in a mutual fund, you will be clearly informed of all the important information about the scheme—such as risks, fees, performance, and investment strategy.
2. NFO investment is necessary
Mutual fund companies are now required to invest the money raised through new fund offerings (NFOs) within 30 days. If they fail to do so, investors can withdraw their funds without paying an exit load.
3. Risk information will be available beforehand
Previously, investors received information about their fund’s risk level at the end of each month. Now, this information will be made available by the 15th of each month.
