Sebi eases KYC compliance norms for MF investors

financialexpress.com:

The Securities and Exchange Board of India (Sebi) has removed the requirement of linking permanent account number (PAN) with Aadhaar, providing some relief for mutual fund investors to obtain a “KYC-registered” status for mutual fund transactions.
However, investors require a “KYC-validated” status, which is only possible after linking PAN with Aadhaar, for unconstrained transactions across all fund houses. A KYC-registered status allows investors to only transact with the fund houses they already have investments with.

After mutual fund KYC (know your customer) rules came into effect from April 1, around 13 million accounts were put on hold due to incomplete KYC, with around 3% of mutual fund accounts having the ‘KYC hold’ status.

“This is a relief for mutual fund investors but the KYC-registered status has limitations, and nowadays, more and more investors are linking their PAN with Aadhaar to avail unconstrained transactions across fund houses,” Neeraj Gaurh, senior vice president and fund manager at Axis Securities PMS, said. However, this is a positive development for investors who want to keep it simple and continue with their existing fund houses, he added.

Know Your Client (KYC) is a mandatory process for banks, fund houses, and stock brokers to verify an investor’s identity before they can start investing. This mandate ensures that the investment entities know their clients well and can prevent fraudulent activities.

In October 2023, Sebi had made it mandatory for all mutual fund investors link their PAN with Aadhaar to complete the KYC process by March 31, 2024. If PAN and Aadhaar were not linked, the KYC process would be put on hold, preventing any investment activity including systematic investment plans