Sebi wants MFs to update investor data by November

Documentation includes account opening documents, PAN, KYC and PoA.

Irked by the poor response from the mutual fund industry on updates in the matter of investor-related documents, the Securities and Exchange Board of India (Sebi) has asked Asset Management Companies (AMCs) to comply with the requirements by November.

Last December, the market regulator had told AMCs to confirm if all such documents were maintained and available. These documents included those on anti money laundering, combating financing of terrorism, know-your-customer (KYC) documents and the ones on power of attorney (PoA).
 

COUNTDOWN BEGINS

• Immediate steps to obtain all investor-related documents
• No further payment of commissions to distributors till full compliance
• All supporting documents of past transactions
• Set up a separate customer services mechanism to address queries and grievances of unitholders
• Send statement of holdings and all transactions since inception of folios in duplicate on a one-time basis 
  to investors and seek confirmation from the unitholders
• All existing folios should be updated by 15 November
• No new folios should be opened without referring the investors’ documents
• These documents should be available with AMCs/ RTAs and not just with the distributor

Despite eight months having passed, the market regulator said it had not got “any confirmation from the trustees of the mutual funds on the completion of the process”. Its circular says: “Thus, it appears that all the investor-related documentation is not available with the AMCs. It has been observed that due to such incomplete documentation, investors’ rights to approach the AMCs directly are restricted and investors are forced to depend on the distributors for executing any financial or non-financial transactions.”

For existing MF folios, the regulator said by November 15, fund houses should update the investor-related documents, including account opening documents, PAN, KYC and PoA.

And, that new folios be opened only after ensuring all required documents were available with AMCs and Registrar and Transfer Agents (RTAs) and not just with the distributor.

Earlier, Sebi had said in case documentation was incomplete, the trustees should not make further payment to such distributors till full compliance, sending a status report to Sebi once the process is completed. Sebi has asked trustees for confirmation after receiving certification from an independent auditor on completion of the process by November 22.

Fund houses said it was not easy. “Clients are reluctant to give documents to the distributors. It’s a long process to obtain such documentation and takes longer time,” said the chief executive officer of a large fund house.

According to a chief marketing officer in the industry, “The task given was a massive one. The process is still on. The major portion is almost finished and we are hopeful that we will be able to complete the task during the timeframe given by the regulator.”