Of late, many mutual fund holders have discovered that their accounts have been frozen because it was not in compliance with Know Your Customer (KYC) norms.
SEBI in a recent diktat instructed KYC registration agencies (KRAs) to verify Mutual Fund unitholders KYC information based on name, mobile number, address and Permanent Account Numbers (PAN). SEBI's intention through this exercise was to align mutual fund investor records with other official databases such as Income Tax and Aadhaar card database.
Records of most of the Aadhaar-based databases are largely updated and as a result, new customers are not facing many such issues. However, this problem is more pronounced with the older generation, who have not used PAN or Aadhaar for their KYC.
"KYC of many old mutual investors has been rejected and their folios are frozen as a result of this alignment exercise. The main reason for such rejection is mismatch of information in other databases," says Gaurav Goel, a SEBI registered investment advisor.
While KRAs and AMCs are trying their best, yet customer complaints are yet to be resolved completely. In some cases, even after the submission of documents, there have been reports of delays in updating of records from KRA's end. "Many non-resident investors have also raised concern as they are not mandated to have an Aadhaar card, or even if they have one they do not receive OTPs on their mobile phones for KYC completion" says Goel.
How to resolve the issue?
An investor in mutual funds must verify their records by visiting the KYC inquiry menu on the www.cvlkra.com website. The KYC status can be any of the three, validated, registered or on hold.
"First, the customer needs to be aware of their KYC status. Multiple KYC statuses depend on the documents they have submitted while doing their KYC," says Abdulla Chaudhari, Head, Investor Services, Edelweiss Mutual Fund.
If the status is KYC Validated, then the status is compliant and nothing needs to be done. Investors can continue to invest in different mutual fund companies without having to go through the KYC process again.
In case the status is KYC 'Registered' then documents provided by the investor are not fully compliant. "Here, the good news is that you do not need to do any modification if you want to invest in an asset management company (AMC) where you have already invested. The modification is required if you want to invest in any AMC you have never invested in," says Chaudhari.
The best way to address this issue is to do your KYC is online either through the website of any fund house or through a KYC registration agency (KRA) by using m-Aadhaar or e-Adhaar.
Finally, if the status is KYC 'On Hold' then this means that PAN Aadhaar seeding is incomplete and mobile number and email validation has failed. In such a situation, the customer will have to complete PAN-Aadhaar seeding in their income tax records.
