AMCs Not to Accept Third-party Payments

The Association of Mutual Funds in India (AMFI) has asked fund houses not to accept third party payments barring a few exceptions.

In a best practice guidelines circular issued to AMCs on Monday, AMFI said that third-party payments would only be accepted in case of payment by “parents/gand-parents/related persons on behalf of a minor for a value not exceeding Rs 50,000 (each regular purchase or per SIP installment); payment by employer on behalf of employee under systematic investment plans (SIP) through payroll deductions and custodian on behalf of an FII or a client.” However, the mutual fund body recommends that in the above mentioned exceptional cases, AMCs should have appropriate controls in place to carry out verification as required under the Prevention of Money Laundering Act (PMLA).

The AMCs should, therefore, determine the identity of the investor and the person making payment, that is, mandatory KYC for investor and the person making the payment; obtain necessary declaration from the investor and the person making the payment. Declaration by the person making the payment should give details of the bank account from which the payment is made and the relationship with the beneficiary.

It has also asked AMCs to verify the source of funds to ensure that funds have come from the drawer’s account only. AMFI further elaborates the process for identifying third-party payments. The procedures recommended include asking the investor for details of his pay-in bank account (account from which a subscription payment is made) and his pay-out bank account (account into which redemption /dividend proceeds are to be paid); seeking a certificate from the issuing banker for subscriptions through pre-funded instruments such as pay order, demand draft, banker’s cheque, etc.

If the payment is made by RTGS, NEFT, ECS, bank transfer, etc., a copy of the instruction to the bank stating the account number debited must accompany the purchase application.

If payments are received via channel distributors, AMCs should ensure that the settlement model has satisfactory checks and balances against third-party payments.

The guidelines further say that for payments through net banking, AMCs should endeavour to obtain the details of the bank account debited from the payment gateway service provider and match the same with the registered pay-in accounts.

AMCs should implement the process for identifying third-party cheques within 90 days of the issuance of the circular or by November 15, 2010.

Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=14990

KYC Must for Any Investment Amount

The Association of Mutual Funds in India (AMFI) has asked all asset management companies (AMCs) to make KYC (know-your-customer) norms mandatory for all non-individual and NRI investors irrespective of the amount of investment.

Under the present norm, KYC is mandatory only for investments above Rs 50,000.

In a letter sent to AMCs, AMFI has said that the mutual fund industry should go ahead with making KYC mandatory, irrespective of the amount of investment for all non-individual investors/NRIs/channel investors (high risk category) with effect from October 01, 2010. These categories will include corporate, partnership firms, trusts, HUF (Hindu undivided family), NRI and investors coming through channel distributors.

However for individual investors, a decision would be taken only after feedback from the Securities and Exchange Board of India (SEBI).

The AMFI committee on KYC had made the proposal to lower the current threshold amount from Rs 50,000 to zero in a phased manner for different categories of investors and the proposal is still under consideration of SEBI. However, the AMFI committee has recommended that even as the proposal is pending clearance from SEBI, the mutual fund industry should remove the limit of Rs 50,000 for all non-individual investors and NRIs investors.

KYC norms were implemented from February 1, 2008, for all investors investing in mutual funds schemes amount of Rs 50,000 and above. It was done in order to comply with the Prevention of Money Laundering Act 2002.

For the convenience of investors, all mutual funds have made special arrangements with CDSL Ventures Ltd. (CVL), a wholly owned subsidiary of Central Depository Services (India) Ltd (CDSL).

Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=14989