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Business News/ Specials / Mf Mint Money/  Paperwork before buying a fund
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Paperwork before buying a fund

At present, the process has been simplified but does take time and patience.

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Over the last year or so, the Securities and Exchange Board of India (Sebi) has brought in a number of changes to re-orient the mutual fund industry to focus on investor protection along with creating a more organized and systematic record of investments.

This has led to a more serious effort by asset managers to show investors the benefits of mutual fund investing. Regulations have focussed on aspects such as advertising, defining expense ratios and outlining the portfolio parameters for certain kind of debt funds in an attempt to limit risk.

Apart from this, there are also changes made to the know-your-client (KYC) requirements which has made verification tighter. This might increase your initial paperwork, however it is a valid step in checking fraud.

KYC

Effective January 2012, Sebi further simplified the KYC process with the introduction of centralized KYC registration agencies (KRAs). Central Depository Services (India) Ltd (CDSL) facilitates and carries out KYC procedure on behalf of all mutual fund houses. As an investor, you have to undergo the KYC process only once and the details will get shared with other intermediaries. This will cover market intermediaries such as mutual funds, portfolio managers, stock brokers, depository participants and collective investment schemes among others.

What you need to do is get the KYC form either from a mutual fund website or branch or from any other service centre detailed on the Association of Mutual Funds in India website (www.amfiindia.com) or the CDSL website (www.cvlindia.com), fill it in and submit once again at one of the above locations. Along with the KYC form, you will have to take some original documents for verification and their copies for submission; these include, proof of identity, proof of address, passport copy and passport-size photograph.

If you are an existing investor, this KYC will hold good. However, for new investors there is an additional requirement of in-person verification at the time of submitting forms.

EMPLOYEE UNIQUE IDENTIFICATION NUMBER (EUIN)

In September 2012, a circular issued by Sebi to re-energize the mutual fund industry directed the Association of Mutual Funds in India (Amfi) to create a unique identity number in addition to the Amfi registration number (ARN) of a distributor. At present Amfi registers distributors and assigns them a unique ARN once they have passed the certification test as an Amfi registered adviser. Now in addition to the ARN for a distributor or a distribution firm, Amfi has allotted EUIN to all the employees who are registered with Amfi.

While an ARN is more for the purpose of simply identifying and attributing commission to the distributor or distribution firm, EUIN serves the purpose of identifying the person who has sold a fund to you. A photo identity card with the EUIN will be issued to each person interacting with investors for selling or marketing mutual funds.

Adding this number on the application form is your responsibility. The use of this additional identification is effective from 1 June 2013. You will have to add this number for all new transactions for buying, switching and registering systematic investment plans or systematic transfer plans.

It is not mandatory if you have invested on your own without anybody’s advice. EUIN is applicable for transactions which are advisory in nature rather than pure execution. The objective of the EUIN is to tackle the problem of mis-selling. Even if an employee (who has been issued EUIN) leaves an organization, her EUIN remains the same and gets mapped to the new employer or cancelled if they no longer sell mutual funds.

Asset management companies have issued new application forms with the provision for adding the EUIN and the above-mentioned declaration, which is what you need to fill henceforth.

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Published: 27 Jun 2013, 03:02 PM IST
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