Mutual fund distributors plan to approach SEBI for clarifying KYC rule which requires in-person verification (IPV).
Mutual fund distributors plan to seek clarification from SEBI pertaining to the recent KYC requirement which requires them to personally verify their clients, a process known as in-person verification (IPV) which came into effect from January 01, 2012.
Distributors, especially those who wish to enroll outstation or NRI clients, are facing hurdles in IPV. SEBI has allowed depository participants to verify their clients through a web camera. However, it is not known whether mutual fund distributors can also use this facility.
“We are getting requests from investors based out of Sikkim. The requirement to do an IPV has many practical difficulties,” says Ramesh Bhat, President of IFA Galaxy.
Moreover, the requirement may prove to be a hurdle for the small investor. “It is not feasible for a distributor to conduct IPV for a small-ticket investment,” says Amar Pandit of My Financial Advisor.
According to sources, the AMFI committee on operations & compliance had discussed whether distributors can be allowed to use web cameras for verifying NRI clients. However, the committee did not arrive at a decision.
Distributors have told Cafemutual that they are either cautious or going slow in accepting new clients. A few distributors are now only enrolling clients who are known to their existing clientele, or those who approach them through referrals. “We are taking in referral clients from existing clients who have been investing through us for some time now. We are asking AMCs to verify clients whom we don’t know,” says a top distributor from Mumbai.
Financial planners are not facing this hurdle since their process starts only after meeting the client. As a result, they have a more stringent due diligence process.
