’KYC is a problem crying to be fixed’, laments Edelweiss MF’s Radhika Gupta

Edelweiss Mutual Fund CEO expresses concern over new KYC rules disadvantaging new players, calling it a 'strange rule' from KRAs.

Edited By Alka Jain
First Published5 Apr 2024
Radhika Gupta, CEO, Edelweiss Asset Management Company Ltd. (Mint)
Radhika Gupta, CEO, Edelweiss Asset Management Company Ltd. (Mint)

Edelweiss Mutual Fund CEO Radhika Gupta on Thursday said the latest mutual fund KYC rules have put new MF players at a “major disadvantage”. The Securities and Exchange Board of India has made KYC formalities mandatory for investors before investing in MF schemes. The rule has come into effect from April 1.

In a post on X (formerly Twitter), Radhika Gupta wrote, “KYC is a problem crying to be fixed as of yesterday. In a world where we have Aadhar and some of the best digital public infra in the world, it also seems very doable.”

Calling it a “strange rule” from KRAs, the Edelweiss MF CEO stated customers who are KYC registered can invest in funds they have folios, however, without getting a Validated tag, they cannot invest in new mutual funds. “This is putting newer MF players at a major disadvantage.”

This will increase the cost of doing business for Mutual Fund Directors who have to validate and comply with these rules again and again, said Gupta adding that it will also divert the focus of MFDs from market expansion.

“For MFDs who have to validate and comply with these rules again and again, cost of doing business just goes up at a time when we should focus on market expansion. I do hope this is addressed definitively very soon if we aim to bring MF to every home," she added.

What are new KYC norms for mutual fund investors? 

It is required of all investors in mutual funds, new or old, to comply with KYC regulations. However, from April 1, there is a reduction in the official list of documents recognized as identification or residency proof. 

Investors need to fill out a KYC form and submit a valid identity proof along with proof of address documents to start investments in mutual funds. The fund house or a SEBI-registered entity then registers these documents with one of the KYC Registration Agencies (KRAs).

The need for a new KYC is following the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, as well as a SEBI master circular on KYC standards for the securities market.

Investors must comply with KYC, even if they have old mutual fund investments. They cannot make new investments or request redemptions without a valid KYC. Every folio holder needs to be KYC-compliant. If an unitholder passes away, the nominee or beneficiary needs to be KYC-compliant for the units to be transferred.

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