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INDIA

SEBI Eases on KYC Compliance Rules for Mutual Fund Investors 

Know Your Customer is the process that banks, fund houses, and stock brokers use to verify an investor's identity.

Mutual fund investors are relieved by this action of the national regulator of capital markets, the Securities and Exchange Board of India (SEBI); mutual fund investors no longer need to link their permanent account number (PAN) to their Aadhaar in order to obtain the “KYC-registered” status for MF transactions.

Know Your Customer is the process that banks, fund houses, and stock brokers use to verify an investor’s identity before enabling them to begin investing with them (KYC).

The capital markets regulator, in an amended circular released on 14 May, removed the requirement to confirm the PAN and Aadhaar connection.

Amol Joshi, Founder of PlanRupee Investment Services, said, “Earlier if PAN and Aadhaar were not linked, your KYC would be on hold. Now, if Aadhaar and PAN are not linked and if you do Aadhaar-based KYC, then you will get ‘KYC-Registered’ status. However, for getting ‘KYC-Validated’ status, PAN and Aadhaar still needs to be linked.”

SEBI sent out a request in October to all mutual fund investors to re-complete their KYC by 31 March if they had not done so previously using an “officially valid document (OVD),” such as a voter ID card, passport, or Aadhaar.

Previously, investors in mutual funds may complete their KYC by presenting an account statement or bank passbook as proof of residency.

Name, address, and PAN (including PAN-Aadhaar linkage) are the three customer record attributes that SEBI requires KYC registration agencies or KRA websites to check within two days of receiving information as part of the risk management framework.

However, the circular from 14 May has removed the need to confirm the PAN and Aadhaar linkage.

The status “KYC-validated” denotes that the email address and mobile number, which are derived from Aadhaar, have been validated by the KRA.

If an investor’s email address and mobile number have been validated by KRA and their KYC is based on an identity verification technique other than Aadhaar, it is deemed to be KYC-registered.

Investors can move forward with all transactions across all fund houses after their KYC has been approved. Investors can only deal with fund firms they already have investments with if they have registered for KYC.

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