SEBI has announced a major change for mutual fund investors, which will prove significant for both investors and asset management companies (AMCs). Now, it will be mandatory to complete the KYC process before opening a new folio and depositing the first investment. This aims to protect investors from fraudulent transactions and processing delays, ensuring every investment is safe and secure.
The first investment amount can now be deposited only after final verification by the KYC Registration Agency (KRA). Previously, AMCs would immediately approve investments based on their internal KYC checks, resulting in delays in redemption, dividend, or notifications for investors in case of KYC discrepancies. Under the new rule, the asset management company will first complete all documentation and internal verification, after which the folio will be sent to the KRA, and only after verification can the first investment amount be deposited by the investor.
What will happen if KYC is not completed?
If the KYC process is not completed, investors will be temporarily unable to invest further and may not receive redemptions or dividends on time. Asset management companies also find it difficult to contact and make payments to investors. This change will benefit both investors and asset management companies. Errors will be less likely, compliance will be easier, and transactions will be more accurate. However, initial investment payments may be slightly delayed as KRA verification can take 2-3 days.
SEBI sought opinion
SEBI has also sought suggestions from the general public and investors on this new rule. Investors and stakeholders can share their opinions on SEBI’s web portal until November 14, 2025. Additionally, AMCs, KRAs, and other market intermediaries will be required to adapt their systems and procedures to comply with the new rule, ensuring timely and accurate implementation of all investments.
