Know Your Customer (KYC) norms for Mutual Funds
Prevention of Money Laundering Act, 2002 (PMLA) came into effect from July 1, 2005 and consequently SEBI mandated that all intermediaries (which includes Mutual Funds) should formulate and implement a proper policy framework as per the guidelines on anti money laundering measures and also adopt a Know your Customer (KYC) Policy. Your attention is drawn to the addenda dated August 31, 2006, December 29, 2006, September 17, 2010, December 10, 2010 and December 29,, 2011 issued by HDFC Mutual Fund (Mutual Fund) / HDFC Asset Management Company Limited (AMC) on PMLA.
Effective January 01, 2011 KYC compliance was made mandatory for all categories of investors irrespective of the amount invested for the following transactions:
- New / Additional Purchases
- Switch Transactions,
- New SIP/ STP/ Flex STP/ FlexIndex/ DTP registrations.
- Any SIP/STP/Trigger related products launched subsequently
Who all need to be KYC Compliant?
- Any individual(s) or non-individual(s)
- Guardian investing on behalf of minor.
- Constituted as Power of Attorney (PoA) holder(s), in case of investments through PoA.
- If an individual becomes an Investor due to an operation of law, e.g., transmission of units upon death of an investor, the claimant / person(s) entering the Register of unit holders of the Fund will be required to be KYC compliant before such transfer can take place.
NEW KYC Norms
SEBI vide Circular No. MIRSD/SE/Cir-21/2011 dated October 5, 2011, SEBI (KYC Registration Agency) Regulations, 2011 and Circular No. MIRSD/ Cir-26/ 2011 dated December 23, 2011 has introduced the concept of KYC Registration Agency (KRA) for the purposes of a unified KYC in the securities market. This is effective January 1, 2012. HDFC Asset Management Company, being a SEBI registered intermediary is a point of service for processing KYC applications. KRA shall send a letter to the investor within 10 working days of the receipt of the initial/updated KYC documents from the Mutual Fund, confirming the details thereof. The KYC done with us will be valid for all the SEBI registered intermediaries viz. Mutual Funds, Portfolio Managers, Depository Participants, Stock Brokers, Venture Capital Funds, Collective Investment Schemes, etc.
Apart from KYC, it is mandatory for intermediaries including mutual funds to carry out In-Person Verification (IPV) of all its new investors. The IPV carried out by any SEBI registered intermediary can be relied upon by the Mutual Fund. HDFC Asset Management Company Limited and NISM/AMFI certified distributors who are KYD compliant are authorized to undertake the IPV for Mutual Fund investors. Further, in case of any applications received directly (i.e. without being routed through the distributors) from the investors, the Mutual Fund may rely upon the IPV (on the KYC Application Form) performed by the scheduled commercial banks.
Please click here to read the addendum dated December 29, 2011.
Procedure for KYC compliance
Investors (both individuals and non-individuals) intending to invest must meet certain mandatory requirements in terms of establishing their proper identity and address. Applicants (including new/ existing Unit-holders) will have to submit the following documents:
- KYC Application Form duly completed by each applicant including joint Unit-holders
- Documents evidencing Proof of Identity and Proof of Address*
* List of requisite KYC documents for individuals and non-individuals is mentioned in the revised KYC Application Form.
These documents can be submitted at our Investor Service Centres (ISCs) and other intermediaries of KRA's as mandated by SEBI. Upon receipt and verification of the above documents, a KYC acknowledgement will be issued to each applicant. Investor(s) must note that KYC compliance is mandatory at the time of submission of each subscription request with the designated Official Points of Acceptance.
Key changes in the KYC procedure for Mutual Funds:
- In-Person Verification (IPV): It is mandatory for intermediaries including mutual funds to carry out In-Person Verification (IPV) of its new investors. The IPV carried out by any SEBI registered intermediary can be relied upon by the Mutual Fund. Employees of Asset Management Company and NISM/AMFI certified distributors who are KYD compliant are authorised to undertake the IPV for Mutual Fund investors. Further, in case of any applications received directly (i.e. without being routed through a distributor) from the investors, the Mutual Fund may rely upon the IPV performed by scheduled commercial banks.
- New KYC application form: Some changes have been made in the existing KYC application form in light of the revised KYC norms. The new forms can be downloaded from our website www.hdfcfund.com or AMFI website www.amfiindia.com.
Impact on mutual fund investors:
- Individual Investors who have completed the earlier KYC process with CVL prior to January 1, 2012 - Certain additional KYC details along with IPV is required. Kindly use the 'KYC Details Change' forms.
- Non-Individual Investors who have completed the earlier KYC process with CVL prior to January 1, 2012 - Need to submit the entire KYC details again in the 'KYC Application Form Non-Individual' form along with the documents / requirements mentioned on the reverse of the form.
- Investors who have completed the KYC process through any of the intermediaries on or after 1st January, 2012 - such as Depository Participant, Portfolio Management Services, etc., and hold a valid acknowledgement issued by a KRA, can invest with any of the Mutual Funds using the same acknowledgement.
Important points to note:
- Updation of appropriate KYC information along with IPV is currently a one-time requirement and needs to be completed with any one of the Mutual Funds.
- Ongoing systematic transactions (SIPs/STPs etc) of investors in their existing folio, which is KYC compliant under the erstwhile KYC conducted with CVL (CVLMF-KYC) will not be impacted.
- All non-individual investors (corporates / societies / trusts etc) who
have completed the KYC process have to submit their balance sheets
annually as required.