SEBI has asked fund houses not to allow transactions i.e. accepting fresh money or honouring redemption after minor turns major and does not submit KYC details.
Currently, the industry does not have a uniform policy to deal with minor to major accounts. Hence, a few AMCs allow transactions or accept fresh money even after the minor turns major.
SEBI has further asked AMCs to put a mechanism to discontinue SIPs, STPs and SWPs on such accounts.
Parents or guardians can invest in mutual funds on behalf of their children through a minor account. Since children do not have income and mandatory documents like PAN, Aadhaar and bank account, AMFI rules mandate parents to invest in mutual fund through their KYC details.
Now, when a minor becomes a major on attaining 18 years of age, she has to complete the KYC process in her own capacity and notify each of the concerned mutual funds by filling up a prescribed ‘minor attaining majority form’ in order to be able to transact further in her folios.
Typically, in such a scenario, most ‘minor turns major’ investors take a little while to complete their KYC. A Mumbai RIA requesting anonymity said, “The industry assumes that as and when a minor turns major, she will obtain her PAN, open a bank account, get Aadhaar or driving license and complete mutual fund KYC on the very first day. This is impossible. Even if we tell such clients in advance, they take a little while to complete these formalities.”
