Know How to do KYC for Mutual Funds

The recent years have seen a phenomenal rise in mutual fund (MF) investments in India, with the Assets Under Management (AUM) crossing Rs. 23 trillion by February 2019, with more than three-fourths of it coming in the last 10 years. This is a signal that more and more people are taking financial planning seriously and are setting clear financial goals.

When it comes to safe investment with above average returns, MF is the clear winner. The ease of investment, a buoyant market and an array of fund types to invest in make MFs a suitable investment avenue for both the novice and the expert.

What is KYC?

First, let us know what KYC is. It is an acronym for ‘Know Your Customer’ and is a general term for the process used for identification of a customer whenever he/she opens an account with a financial entity. KYC establishes an investor’s identity & address through relevant supporting documents such as prescribed photo id (e.g., PAN card) and address proof. KYC compliance is mandatory under the Prevention of Money Laundering Act, 2002 and Rules framed thereunder, read with the SEBI Master Circular on Anti Money Laundering (AML) Standards/ Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries.

How to do KYC for mutual funds?

Usually two types of KYC are collected while the KYC process is being done. The first one is the basic and uniform KYC. The second one is additional KYC, distinct form the first type.
Basic KYC includes identity proof and address proof. PAN card with photo is accepted as identity proof for individuals. In case the PAN card does not have a photograph of the investor, driving licence/copy of passport/voter ID/copy of bank passbook with photo can be accepted as well. For proof of address, the following documents are admissible:

• Latest Telephone Bill: Landline/Mobile (not more than 3 months prior to the date of application)
• Latest Electricity Bill (not more than 3 months prior to the date of application)
• Passport copy
• Latest Bank Passbook/Bank Account Statement (not more than 3 months prior to the date of application)
• Latest Demat Account statement (not more than 3 months prior to the date of application)
• Voter ID
• Driving License
• Ration Card
• Rent Agreement

Note: In case of correspondence and permanent address being different, proof for both these addresses needs to be submitted.

In case of Individuals, the additional KYC details to be provided are:

• Gross Annual Income details
• Occupation Details
• Politically exposed Person status
• Addresses in other jurisdictions other than India, where the customer has tax residency.

Corporate Bodies

• Certificate of Incorporation
• Memorandum & Articles of Association
• Authorized signatories list with specimen signatures
• Board resolution for investment in Mutual Fund

Partnership Firm

• Certificate of Registration (for registered partnership firms only)
• Partnership Deed
• Authorized signatories list with specimen signatures

Hindu Undivided Family (HUF)

Self-attested copy of PAN card in HUF name is mandatory. Deed of declaration of HUF or PAN in name of Karta AND Bank pass book / bank statement / Demat statement in the name of HUF.

Trusts

• Certificate of registration (for registered trusts)
• Trust deed
• Authorized signatories list with specimen signatures

Unincorporated association or a body of individuals: –

• Proof of Existence/Constitution document {Resolution of the managing body & Power of Attorney granted to transact business on its behalf are mentioned currently)

• Authorized signatories list with specimen signatures

You can opt for ekyc, where you need to verify your identity on the website of the mutual fund house. You require details of your Aadhar for this. You need to enter the Aadhar number and your registered mobile number on the webpage. An OTP will be sent to the registered mobile number. Upon entering this OTP on the screen, Aadhar verification will be completed.

You can also complete KYC verification physically by visiting your certified financial advisor. Here you need to complete the application form and submit it along with the necessary documents (identity and address proofs). All the supporting documents submitter as part of the KYC process should be either self-attested or attested by an authority, as per the requirement.

KYC for investing in mutual funds must be completed by the investor, regardless of the investment amount. In case of failure, the transaction/purchase by the investor is liable to be rejected.

Let us consider some cases where the investor is not an individual and how KYC needs to be completed in such cases:
Joint applicants – KYC needs to be completed by all the applicants.

Power of Attorney – KYC needs to be completed by both the investor and the power of attorney holder.
NRIs/PIOs – They are also required to complete KYC formalities.

Minors – In case of investments in respect of a minor, the Parent/Legal Guardian who opens the account on for the minor needs to complete the KYC process. When the minor person attains majority, he/she needs to complete KYC at that point of time.

If the KYC documents are not found do be in order, or if there is any deficiency in the documents, the KYC compliance status of the investor may be cancelled, and an intimation of the same will be sent to the investor.