KYC ( Know your Customer)
KYC is an acronym for "Know your Customer", a term commonly used for Customer Identification Process. The provisions of The Prevention of Money Laundering Act, 2002 (PMLA) and KRA Regulations (2011), has made it mandatory for all Market Participants to comply with the 'Know Your Client' (KYC) norms. SEBI has prescribed certain requirements relating to KYC norms for Financial Institutions and Financial Intermediaries including Mutual Funds to 'know' their customers. This could be in the form of verification of identity and address, financial status, occupation and such other personal information.
In-order to implement uniform KYC norms and eliminate duplication of KYC across SEBI registered intermediaries in the securities market, KYC registration has been centralised through KYC Registration Agencies (KRA) registered with SEBI w.e.f. 01/01/2012. Thus, each investor has to undergo KYC process only once in the securities market and the details would be shared with other intermediaries/ KRAs
The following SEBI registered intermediaries are required to carry out a uniform KYC process at the time of account opening:
- Stock Brokers
- Depository Participants (DPs)
- Mutual Funds (MFs) or Registrar and Transfer agents (RTA) on their behalf.
- Portfolio Managers (PMs)
- Venture Capital Funds (VCFs)
- Collective Investment Schemes (CIS)
A : Applicability :
All investors (Individuals or Non Individuals) who wish to make an investment in a Mutual Fund scheme through purchase or switch via a Lumpsum amount or via a Systematic Plan (SIP ( including MICRO SIP ) /STP) are required to complete the KYC process. This one-time verification is valid for transactions across all Mutual Funds. Submission of KYC acknowledgement is mandatory for the following :
Category of Investors:
- All unit holders ( including joint holders ) i.e. Resident & Non resident Individuals
- Guardian of Minor
- Power of Attorney holder
- HUF and its Karta
- All Non Individual unit holders ( Corporate, Partnership Firm, Trust, HUF, Un-incorporated Association or body of individuals, Banks/Institutional Investors, FII, Army/ Government Bodies, Registered society etc..)
- Financial Institutions to whom the units of Mutual Fund are pledged
1. Existing KYC compliant Mutual Fund investors ( pl refer pt. D-5 ) may continue investing in Mutual Fund but need to complete the KYC process through KRA in case they desire to invest through other intermediary registered with SEBI.
2. Existing non-KYC compliant Mutual Fund investors has to complete the new KYC process for any fresh/ additional purchase or switch transactions in Mutual Fund.
3. New investors as at above pt 2
4. PAN Exempted Investors ( provided sufficient documentary evidence in support of such claims is submitted ) are also required to undergo the new KYC process but are exempted to submit PAN if other documents as stated in the KYC Form are submitted :
• In case of transactions undertaken on behalf of Central Government and/or State Government and by officials appointed by Courts e.g. Official liquidator, Court receiver etc .
• Investors residing in the state of Sikkim
• UN entities/multilateral agencies exempt from paying taxes/filing tax returns in India
• MICRO SIP
B: KYC Registration Agencies (KRA):
CDSL Ventures Ltd. (CVL) and NSDL Database Management Limited (NDML) are SEBI registration as KRAs
C : KYC - In-Person Verification (IPV):
It is mandatory for intermediaries including Mutual Funds to carry out In-Person Verification (IPV) of investors for KYC process from the Effective Date. The IPV carried out by any SEBI registered intermediary can be relied upon by the Mutual Fund. AMC/ the RTA appointed by the AMC or NISM/AMFI certified distributors who have complied with all mandatory requirements ( ARN validity , self declaration etc.) and are KYD compliant are authorized to undertake the IPV for Mutual Fund investors. However, in case of IPV conducted by the distributor , the ARN code of the distributor on the IPV stamp should match with the ARN code affixed on Financial Transaction Application Form. 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 scheduled commercial banks.
D : KYC Process :1. New investor and Existing non-KYC compliant investors :
As per clause 1.iv of the SEBI circular dated December 23, 2011 the intermediary shall carry out KYC process when the client chooses to trade / invest / deal through the intermediary. Therefore, it is essential for an intermediary to have the client account opening form duly signed by the investor along with the KYC documents in order to proceed with carrying out the KYC, uploading the KYC information on the system of the KRA, and forwarding KYC documents to the KRA
a) New investors are requested to use the new Common KYC Application Form with specified documents as mentioned in the form and carry out the KYC process including In-Person Verification (IPV) with any SEBI registered intermediaries including Mutual Funds. The Common KYC Application Forms are also available on AMC website , AMFI website ( www.amfiindia.com ) and SEBI registered KRA; CVL (CDSL Ventures Ltd.) (i.e. www.cvlindia.com).
- Individual ( including NRI / PIO ) & Non Individual investors will have to produce self attested copies of Proof of identity, Proof of Address and other mandatory documents alongwith originals & IPV copy ) as set out in the KYC Application Form. In case, the original of any document is not produced for verification, then the copies should be properly attested by entities authorized for attesting the documents, as per the list mentioned in the form.
- NRIs/PIOs, in addition to the certified true copy of the passport will also be required to furnish certified true copies of the overseas address and permanent address. If any of the documents (including attestations/ certifications) towards proof of identity or address is in a foreign language, they have to be translated to English for submission. The documents can be attested, by the Consulate office or overseas branches of scheduled commercial banks registered in India. A PIO, in addition, will also be required to submit a certified true copy of the PIO Card.
b) KYC application and necessary documents as set out in the form should be submitted along-with an investment application (purchase / additional purchase / switch / SIP mandate forms) and not on a standalone basis. The KYC form after completion of IPV process can also be submitted to the Investor Service Centre of Registrar & Transfer Agent ( RTA ) along-with above mentioned Financial Transactions as RTA is authorised to complete the KYC process on behalf of Mutual Funds. However, an investor who has investments in Mutual Fund and is not KYC compliant may submit new uniform KYC form alongwith the specified documents to the Mutual Fund by quoting the folio number.
c) The documents submitted as per the above process by the investor to the Point of Service of the Intermediaries would be forwarded to the KRA. The KRA on receipt of documents from Intermediaries would send a confirmation to investors after it finds the documents in order.
d) Once the investor completes the KYC process as per the revised guidelines with a SEBI registered intermediary from any KRA, the investor need not undergo the same process again with another intermediary including Mutual Funds. However, the Mutual Fund reserves the right to carry out fresh KYC of the investor. The investor needs to produce a copy of the confirmation letter received from KRA while investing with a Mutual Fund for fresh investments or additional purchases/switch transaction in an existing folio as per the aforesaid requirements or till his KYC status is updated successfully as per the new revised KYC norms.
2: Existing KYC compliant investors :
Existing KYC compliant investors of the Mutual Fund, who have completed the KYC process prior to January 01, 2012, can continue to invest in Mutual Fund schemes as per the current practice i.e. by submitting along with their Financial Transaction the KYC acknowledgement issued prior to January 01, 2012 by CVL on behalf of all Mutual Funds. However, it will not be applicable for investments in other securities markets. These investors will have to follow the new KYC procedure in case they wish to deal with any SEBI registered intermediary other than mutual funds. The Mutual Fund reserves the right to carry out fresh KYC of the investor / seek additional documents.
3. An existing investor can inform the RTA / Mutual Fund to update the KYC Certification against all the folios/accounts held by him with the respective Mutual Fund. However, each of the holders in these folios/accounts should be KYC Compliant. Applications Forms / Transaction Slips not accompanied by KYC Acknowledgement / Confirmation letter are liable to be rejected by the Mutual Fund and no transactions, other than redemption, will be permitted. Investors are advised to complete KYC process through KRA at the earliest.
4. Further, in order to ensure that the unitholder receives all communications, including redemption requests, at the new address, investors are also advised to forward any request for change of address only to same POS/ intermediaries/KRA sufficiently in advance of any transaction with the Fund House. Investors holding erstwhile MIN/ KYC Compliance Acknowledgement and who have since changed their address with Karvy are requested to approach POS /KRA and complete the process stated above. Kindly note that the Mutual Fund, the AMC or the Trustees shall not be liable in case the investor does not follow the above procedure for change of address or the earlier address continues to be in the Registrar’s database. AMC or its Registrar will update change of address requests of KYC compliant investors based on the data provided by KRA and will not be responsible for non-updation if not received sufficiently in advance of any transaction.
5. Investors are advised to approach the same POS/ intermediaries/ KRA from where the KYC acknowledgement was issued in case they wish to rectify any data entry mistake by POS/KRA.
6. RTA are authorised to undertake the KYC process on behalf of Mutual Fund ( subject to the completion of IPV process by the investor ) as per new guidelines through any KRA.
For details on documents to be submitted pls refer to the revised KYC forms available this site/ the website of AMFI (i.e. www.amfiindia.com ) or CVL (CDSL Ventures Ltd.).( i.e. www.cvlindia.com) KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc), you need not undergo the same process again when you approach another intermediary.Downloads:KYC Individual