Mutual Fund KYC issue is in the news these days. With a new KYC rule effective from 1st of April 2024, many mutual fund investors are in a state of surprise. They are facing an unexpected challenge as fund houses have declined their investments. Many of them have also taken to social media to voice their concerns.
It has been reported that 70% of the Mutual Fund investors on MF Utilities platform don’t have a ‘validated’ KYC status. They used a non-Aadhar document for KYC and now they cannot invest in a new AMC without getting a fresh KYC each time.
Addressing the concerns of such investors, the Association of Mutual Funds in India (AMFI) has released a detailed infographic explaining the issue and what investors can do to avoid their KYC troubles.
AMFI released the infographic on Tuesday (April 23, 2024), which explains the steps investors can take to monitor their KYC status and take necessary action. The following are key details from the infographic that you should know.
Since 1st April 2024, significant changes have been implemented regarding Know Your Customer (KYC) status. The Securities and Exchange Board of India (SEBI) issued a circular on 11th August 2023, advising KYC Registration Agencies (KRAs) to verify specific attributes of KYC.
Attributes of KYC to be verified include PAN (including PAN-Aadhar linkage), Name, Address, Client’s Mobile Number, and Email ID. SEBI also asked KRAs to verify these attributes with official databases such as the Income Tax database on PAN, Aadhaar XML/DigiLocker/M-Aadhaar.
AMFI’s infographic says, “The records of those clients in respect of which all the above attributes are verified by KRAs with official database (such as Income Tax database on PAN, Aadhaar XML/DigiLocker/M-Aadhaar) shall be considered as validated records”.
Attributes Affecting Your KYC Status
According to AMFI, the KRAs have changed the KYC status of all existing KYC complied investors after validating above 4 attributes such as PAN, Name and Address with the official database.
It says KRAs have changed the KYC status of all existing KYC complied investors based on the validation of four attributes such as PAN, name and Address with the official database. The KYC status now falls into the following categories:
- KYC VALIDATED: Investors whose PAN, Name, Address, Client’s Mobile Number, and Email ID have been successfully verified with official databases.
- KYC REGISTERED: Investors who have completed the KYC registration process but have not yet undergone the validation process for all attributes.
- KYC ON HOLD: Investors whose KYC process is currently on hold, possibly due to discrepancies or incomplete information.
Implications on KYC Status
KYC Validated: No new implications.
KYC Registered: Previously, investors could only conduct financial transactions within the Asset Management Company (AMC) where they already held investments. But now, Investors need to submit a set of KYC documents every time they invest with a new AMC.
KYC On hold: Previously, investors could only transact after resolving the reason for their KYC status being On Hold. But now, investors will have the opportunity to transact once they address the reason for their KYC status being On Hold.
These modifications aim to simplify the KYC process. It improves transparency and security in the financial system, which benefits both investors and regulatory organizations.
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Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before making any investment decision.
