Top News

Market regulator SEBI has called for a uniform process for opening mutual fund folios and making the first investment. In this regard, SEBI released a consultation paper on Thursday. SEBI aims to ensure that all new folios comply with KYC regulations at both the Asset Management Company (AMC) and KYC Registration Agency (KRA) levels before any investment is approved.

Under this proposal, investors will be able to make their first investment only after the KYC verification by the KRA is complete and the folio is marked as compliant. SEBI has also suggested that investors be informed of their KYC status at every stage through their registered email address and mobile number.

Is there a problem with the current process?
The consultation paper states that despite the existing rule requiring KYC verification before opening a new folio, there have been instances of non-compliance due to different processes. Typically, AMCs first conduct their own verification and then send the documents to KRA for final verification.

However, if KRA finds any discrepancies, the folio is marked as non-compliant. Until these issues are rectified, the folio remains so. This leads to various problems, including delayed transactions, a lack of accurate information reaching investors, and an increase in unclaimed dividends or redemptions.

What is the solution?
To address these issues, SEBI has issued a draft circular titled "Procedure for Opening a Mutual Fund Folio and Making the First Investment." It outlines a standardized procedure for AMCs, KRAs, and other intermediaries. The regulator has directed them to update their systems once the new regulations come into effect.

Disclaimer: This content has been sourced and edited from Navbharat Times. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.