Here are four rules investors need to comply with in April
1 min read 26 Mar 2023, 07:26 PM ISTBy 31 March, MF investors either need to declare a nominee or opt out if they do not wish to declare a nominee. Investors who don’t do either will see a freeze on their investments and will not be allowed to opt for any redemptions.
PremiumStarting April, mutual fund (MF) investors need to adhere to several new compliance requirements. Here are some of them.
MF nomination
By 31 March, MF investors either need to declare a nominee or opt out if they do not wish to declare a nominee. Investors who don’t do either will see a freeze on their investments and will not be allowed to opt for any redemptions.
Investors can give these declarations online on the sites of registrar and transfer agents (RTAs)—KFintech and CAMS —or MFCentral.
The process can be more challenging for joint holders. “Joint holders who haven’t updated their contact details will need to submit filled-up physical forms. It’s even more challenging in the case of a joint holder who is a non-resident Indian," says Mahesh Mirpuri, a Chennai-based MF distributor.
Do note that if you have invested through a demat account, you will have to update your nominee details with your brokerage.
PAN and Aadhar linking
If you don’t link your PAN (Permanent Account Number) with Aadhar by 31 March, your PAN will become inoperative and impact all the processes where PAN is a requirement.
Once PAN is considered ‘inoperative’, it will result in invalid KYC (know your customer) profile of the investor.
For all MF folios (investment accounts) where PAN is not linked with Aadhar, all fresh investments (including existing systematic investment plans, switches) may get restricted from 1 April.
One-time password
Earlier, Sebi had mandated a one-time password (OTP) sent to the investors’ registered e-mail id and phone number at the time of redeeming their investments.
From 1 April, this has been extended to investments as well. For investors doing systematic investment plans (SIPs), this requirement would be applicable only at the time of registration of mandate of systematic transactions.
However, for every fresh lump sum investment, an OTP would be sent, which the investor needs to verify.
Revalidating KYC
In the case of investors who have used Aadhar as an officially valid document (OVD) for KYC before 1 November, the KYC registration agencies (KRAs) need to revalidate these KYCs before 30 April.
According to Sebi’s last circular, KYC records of all existing clients (who have used Aadhaar as an OVD) shall be validated within a period of 180 days from 1 November, extending the cut-off date from 1 July 2022.
In case, the KRAs are yet to reach out to investors for re-validation, MF distributors can ask investors to re-validate the KYC using Aadhar-based XML or e-Aadhaar or virtual ID (VID).
