Mutual fund purchases thus far could be made with cheques from one's own bank, third party cheques, DDs or Banker's Pay Order. AMFI recently issued new guidelines for mutual fund investments made through third-party cheques. With effect from November 15, mutual fund investments made through third-party cheques will not be processed. We discuss the new rule and answer investor queries.
What is a third-party cheque?
A cheque issued by and signed by any other person other than the first holder of the investment is a third-party cheque. When a payment is made from a bank account that is not held by the beneficiary investor, that is, the first Holder or the sole Holder, it is referred to as a “Third Party Payment”.
I wish to invest in my minor child's name. He doesn't have a Bank account. Can I issue my cheque for such an investment? Are there any exceptions to this rule?
There are exceptions to the rule, as mentioned below:
Parents: Payment may be made by parents/grandparents/related persons on behalf of a minor for a value not exceeding Rs 50,000 (each regular purchase or per SIP instalment)
Employers: Payment may be made by employers on behalf of employees under Systematic Investment Plans through payroll deductions.
Custodians: Payments made by custodians on behalf of FIIs or clients.
Such applications should be accompanied by PAN and KYC Acknowledgement of the person or entity making the payment on behalf of the investor and a declaration mentioning the relationship with the first holder.
These declarations are expected to be part of the application forms issued by mutual funds. Investors may contact the mutual funds for necessary guidance.
Can I provide a cheque leaf through another bank account which belongs to me, but different from the one mentioned in the Bank Mandate column of the application?
Yes. Investors may provide a cheque from a bank account different from the one mentioned in the bank mandate column which belongs to them. However, the investor's name should be printed on the cheque leaf. If the cheque leaf does not have the name printed, investors should submit a copy of the bank statement, attested by the bank manager as evidence of holding the account.
What if the Bank Account from which payment is made is jointly held?
In this case, the Beneficiary Investor, that is the first / sole holder must be one of the joint account. holders
Can I make the payment through a demand draft / pay order / banker's cheque?
Such applications will be accepted if the instrument is accompanied with a certificate from the issuing banker stating the account holder's name and the account number which has been debited for issue of the instrument. The account holder's name mentioned in the certificate should be that of the first holder. If the said certificate from the issuing banker is not attached, the application will not be processed.
Source: http://www.thehindubusinessline.com/iw/2010/12/19/stories/2010121951660800.htm
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1 comment:
Why not stop Life Insurance Companies third party Cheque.?
This move is part of efforts to check fraudulent activities by mutual fund agents and distributors, some of whom have been found to be collecting cheques from investors and depositing them for investments in their own names.this is so many fraudulent activities possibilities in Life Insurance Companies also, so why not same rule immediate effect for Insurance Companies.?
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