Investing in Quantum Asset Management Co. Ltd’s mutual fund (MF) schemes just got easier if you have an Internet banking account. In a move that reduces paperwork, the fund house no longer needs your physical signature. But does this endanger your money?
Reaching investors directly, without the help of distributors, is the biggest challenge that fund houses face in India. When Quantum AMC launched its operations in 2006, it became India’s first and only fund house to bypass agents and offer its schemes directly to investors. They refused—and still do—to pay commission to agents. So while most distributors avoided them, the fund house looked for newer ways to reach investors.
How to buy
Visit Quantum AMC’s website, select a scheme, enter your name, telephone number, email ID and permanent account number (PAN). Through the PAN, Quantum AMC will run a quick check on your compliance with know-your-client, or KYC, norms (this happens instantaneously since its registrar and transfer agent, Karvy Computershare Ltd, gets the data from CDSL Ventures India Ltd; the agency mandated to do KYCs). As per the Securities and Exchange Board of India’s (Sebi) MF guidelines, you need to be KYC compliant to be able to invest in MFs.
Once Quantum establishes that you are KYC-compliant, it allows you to open an online account. By virtue of procuring your KYC-compliance, Quantum also procures your physical signature you would have given at the time of applying for KYC.
Moving on, you need to fill out other details such as your bank account details, and opt for your own username and password (just like you’d open an email account). Log into your Internet banking account, transfer the amount and you’re done.
If you buy units before 3pm in its equity funds, you get the same day’s net asset value (NAV), else you get the next day’s NAV.
Allowing investments through Internet transaction platforms is nothing new as almost all fund houses offer this facility. But then you need to take a printout of your application form, attach details such as your KYC proof and a copy of cancelled cheque and courier the documents to them. Few fund houses, including ICICI Prudential Asset Management Co. Ltd and Reliance Capital Asset Management Ltd, allow first-time investors to buy directly through their website, but block units until the printout of the application form and documents are sent to them.
Quantum claims there is a logic behind doing away with the need to obtain your physical signatures. Says Jimmy Patel, CEO, Quantum AMC: “We have studied the Information Technology Act, 2000, thoroughly and it says that the act of the user (the investor) accepting the ‘terms and conditions’ displayed on the screen after filling in the required forms and then hitting the ‘submit’ key construes as his signature. Hence, obtaining a physical signature after that means an extra step, which is not really needed.”
Quantum seems to have taken this step because it has shut out the largest distribution avenue available to Indian fund houses: the agent route. But are there chances of a fraud? “Not really, because an investor’s Internet banking password is known only to him. Also, we have ensured that the redemption goes back in the same bank account from where the money has come,” says Patel. So “a fraud is not likely to happen”, he adds.
But some fund houses are not really convinced. “Though Quantum does a KYC check, there isn’t really anything that can replace a physical signature,” says the head of operations at one of the top five fund houses, who refused to be named because he is not permitted to speak to the media. Adds the head of customer services of a foreign fund house, who also refused to be named for the same reason: “This is a financial product; it’s important to have a physical document that contains your physical signature. It’s not like buying an airline ticket. By that logic, can I open a bank account or a depository participant account online? No.” However, the latter admitted that his fund house is evaluating this facility and if convinced, they too may start offering it.
Sankar Makkapati, program manager (information technology), Karvy Computershare Ltd, feels that every fund house has its own compliance team that validates such processes. “If the MF industry can provide technology to the investors, why shouldn’t it?” As a corollary, Makkapati reminds that as earlier courier companies insisted you visit their offices with your letters, but today they come to your office and pick them up.
Quantum’s latest facility has just taken off and only time will tell how safe it turns out to be. But for a low-cost fund house that doesn’t have a single branch across India (its forms are available through 214 Karvy centres) and avoids the agent route, it just got a little bit closer to you.