1 min read.Updated: 25 Dec 2019, 10:57 AM ISTNeil Borate
SEBI clarified that such investments can only be made from the minor’s bank account or a joint account of the minor and the guardian
According to the SEBI circular, the minor must update his KYC and bank account details on attaining the age of majority (18 years)
On 24th December, the Securities and Exchange Board of India issued a circular for investment by minors (individuals below the age of 18). In it, the regulator clarified that such investments can only be made from the minor’s bank account or a joint account of the minor and the guardian. Here guardian includes a parent or a legal guardian. “Earlier investment from the guardian’s account was also accepted," said Nishith Baldevdas,a Chennai based independent financial advisor. “However this led to problems during redemptions, especially where the account was with a nationalised bank," he added. For existing such folios where investment has been made from the guardian’s account, the regulator has laid down that AMCs must insist on a change in pay-out bank mandate before processing redemptions.
According to the SEBI circular, the minor must update his KYC and bank account details (including providing an original cancelled cheque) on attaining the age of majority (18 years). Until this is done, no further transactions will be allowed in the account and all standing instructions such as Systematic Investment Plans (SIPs), Systematic Withdrawal Plans (SWPs) and Systematic Transfer Plans (STPs) will be suspended.
In addition, the Circular asked AMCs to have a common transmission request form, No Objection Certificate (NOC) and set of documents for transmission of units. All the necessary forms and formats should be made available on the websites of AMCs, RTAs (Registrar and Transfer Agents) such as CAMS and KFin Tech and the Association of Mutual Funds of India (AMFI). Transmission is a technical term for inheritance of mutual fund units on the death of an individual by his or her legal heirs.
The circular laid down that redemption requests shall not be accepted until transmission is complete. AMCs shall also adopt a uniform process for transmission of unclaimed funds and unclaimed dividends to a claimant during transmission. The Stamp Duty payable by a claimant on indemnity bonds and affidavits during transmission shall be as prescribed by law. The regulator asked AMFI to come out with a common form, documents and process for unclaimed money within 30 days of the circular (by January 24th, 2020).