Mutual fund KYC new rule: Investors can continue SIP even if Aadhaar PAN not linked

The Securities and Exchange Board of India (Sebi) has said that even if an investor’s Aadhaar and PAN are not linked, then also, he will be able to continue SIP or redeem units of any mutual fund scheme. Earlier, the market watchdog had put mutual fund accounts of such investors on hold whose PAN and Aadhaar were not linked. But owing to problems faced by such investors, the Sebi has decided to relax this rule. Earlier, the Association of Mutual Funds in India (Amfi) had urged Sebi to relax this rule as SIP in mutual fund accounts of lot of investors in India had got stuck. Now, thanks to the relaxation, such investors will be able to continue with their SIPs and apply for redemption as well.

But the capital market regulator has outrightly said that  if somebody wants to open a new mutual fund account then his Aadhaar and PAN must be linked. The relaxation is only for those investors who have  active mutual fund schemes opened against their name.

Recently, Sebi had made many changes in KYC norms for mutual fund investors. Let’s see which of such rules are still in force:

Apart from the Aadhaar and PAN linkage rule, which now stands nullified, the market watchdog had recently made one more change related to KYC norms of mutual fund investors.  Investors were required to provide either of only four valid documents for validation of their address. These four documents are Aadhaar, passport, driving license and voter ID card. Apart from these documents, no bank or AMC can accept any other documents as a valid address proof for address validation of the mutual fund investor as a part of KYC rules and regulations.

This rule mentioned above was brought in force for both active and new SIP investors. And it is very much applicable even now. Sebi has not relaxed this rule. Meaning, if somebody has an active folio and at the time of starting his investment he had not provided any of these docs as address proof, then, his investment in  mutual fund scheme would be put on hold, and he would not be able to continue his SIP or redeem his units. Only after that investor produces any of these four valid documents with the institution with which he had opened his mutual fund account, he would restart his SIP.

Sebi had made these changes in rules and regulations to protect investor interest and gather complete set of information about investors.