SEBI Lays Framework For Mutual Fund Investment In Minors’ Name
A motorcyclist passes passengers sitting next to an advertisement for the Mutual Funds Sahi Hai campaign by the Association of Mutual Funds in India. (Photographer: Dhiraj Singh/Bloomberg)

SEBI Lays Framework For Mutual Fund Investment In Minors’ Name


The Securities and Exchange Board of India on Tuesday came out with a framework for making investment in mutual funds in the name of minor through guardian and to ease the process for transmission of such schemes.

The move is aimed at bringing uniformity in such investment process across asset management companies.

The regulator said payment for investment by means of cheque, demand draft or any other mode will be accepted from the bank account of the minor or from a joint account of the minor with the guardian only.

For existing folios or investor accounts, AMCs need to insist upon a change of pay-out bank mandate before redemption is processed.

Upon the minor attaining the status of major, the minor in whose name the investment was made, shall be required to provide all the Know-Your-Customer details, updated bank account details including cancelled original cheque leaf of the new account. Further, no further transactions shall be allowed till the status of the minor is changed to major, the regulator noted.

Also read: SEBI Asks InvITs To File Draft Papers 30 Days Before Opening Of Issue

SEBI has asked AMCs to build a system control at the account set-up stage of Systematic Investment Plan and Systematic Transfer Plan on the basis of which, the standing instruction is suspended when the minor attains majority, till the status is changed to major.

In order to improve the processing turnaround time for transmission requests, SEBI said AMCs will have to implement image based processing wherever the claimant is a nominee or a joint holder in the investor folio.

Further, fund houses need to have a dedicated, central help desk and a webpage carrying relevant information and instructions in order to provide assistance on the transmission process.

AMCs need to implement a common set of document requirements for transmission of units to claimant who are nominees or joint holders in the investor account. Also, they have to implement a uniform process for treatment of unclaimed funds to be transferred to the claimant including the unclaimed dividends.

Besides, the regulator has asked AMCs and industry body Association of Mutual Funds in India to promote the importance of nomination as a part of its investor education and awareness programmes.

Also read: SEBI Proposes To Discontinue Usage Of Pool Accounts For Mutual Fund Transactions

To ensure uniformity across the industry, SEBI has asked AMFI to prescribe the form for a common set of document needed for transmission of units as well as uniform process for treatment of unclaimed funds within 30 days and all fund houses need to mandatorily follow the same.

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