New KYC is essential for making fresh investments

With the November 30 deadline, retail investors should complete their KYC (know your customer) guidelines with their respective asset management companies

November 29, 2012 4:38 IST | India Infoline News Service
From December 1, 2012, certain additional information needs to be submitted as well as an ‘in person verification’ (IPV) needs to be completed for further investments in any mutual fund (other than the one in which the investors have already invested).

With the November 30 deadline, retail investors should complete their KYC (know your customer) guidelines with their respective asset management companies (AMCs). The documents required include your PAN card, father’s name, nationality, marital status, IPV and even net worth.

Complying with the new KYC is essential because it will allow investors to invest their money in all SEBI (Securities and Exchange Board of India)-regulated financial instruments such as stocks, mutual funds, depository participants, portfolio managers, collective income schemes and venture capital funds.

However, if the investors are unable to comply with the guideline, the market regulator has allowed investments in existing schemes to continue i.e. systematic investment plans (SIPs) in existing schemes will not suffer.

If you have already invested in a particular fund house and have completed your KYC before January 1, 2012, then you are already a KYC compliant investor and can make further investments in the existing fund house without any further KYC requirements.

If you have already invested in any particular fund house and now wish to invest in another fund house where you have not invested before January 1, 2012, then you will have to complete the KYC formalities again by filling up the new KYC form implemented after January 1, 2012 with supporting documents duly attested and complete the in person verification (IPV).

IPV is also an additional requirement by SEBI from January 1, 2012 wherein the registered intermediaries will verify the investor physically. Mere submission of identity and address proof is not sufficient under the new regulations.

All intermediaries in the security market are authorized to conduct IPV. In case of mutual funds, AMCs and distributors who comply with the certification process of National Institute of Securities Market (NISM) or Association of Mutual Funds (AMFI) and have undergone the process of know your distributor (KYD) can perform IPV.

Further, in case any applications are received directly from the investors (i.e. without being routed through the distributors), the Mutual Fund may rely upon the IPV (on the KYC Application Form) performed by scheduled commercial banks / authorised employees of AMC.

The revised KYC form before January 1, 2012 for individuals has additional provision for details such as father's / spouse name, marital status, nationality, gross annual income / net worth details and in-person verification. The revised KYC form can be used for changing contact details like address, email id and phone no.

Hence, existing individual investors who are know your client (KYC) registered prior to January 01, 2012 through CDSL Ventures Ltd (CVL) and who wish to invest in any new mutual fund / through capital market should complete the additional KYC requirements/provisions (as mentioned above) using the KYC Details Change Form on or before November 30, 2012.

Please note updating of additional KYC requirements along with IPV is currently a one-time requirement and needs to be completed with any one of the mutual funds i.e. need not be done with all the mutual funds where the investor has existing investments.

The requirement is mandatory and the investor who wants to open a new account/folio with a new mutual fund from December 1, 2012, is required to complete the above formalities on or before that date in order to enable them to invest in a new mutual.

This will not affect subsequent transactions (or ongoing SIPs) of investors in their existing mutual fund folios/accounts which is KYC compliant under the erstwhile centralized KYC with CVL (CVLMF). The KYC updation and IPV (one time) as detailed above will be mandatory for registering any change in the KYC information like address, contact information, etc.

The next step needs to be taken by the government. By including the Reserve Bank of India, Insurance Regulatory and Development Authority and Pension Fund Regulatory and Development Authority to introduce a common KYC for all financial transactions, life will become easy for everyone, including tax authorities.
Click here to download KYC details change form (for individuals).

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