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In a best practices circular issued today, AMFI has asked AMCs and RTAs to verify authenticity of phone number, email id, bank account and address linked to MF folios.
This would help the industry implement two-factor-authentication at the time of redemption. The two-factor-authentication is simply authenticating the redemption request by keying in one time password (OTP) received on registered phone number or email id. The first factor authentication is logging into the MF investment account itself.
AMFI said that the working group formed by AMFI has suggested the uniform guidelines to implement validation of email id, mobile number, bank mandate and two factor authentication for redemption.
Here are some key highlights of the new regulations. Please note that these changes would not be applicable to MF folios in demat form:
- MF folios cannot have mobile number of other persons who is not family. Family means self, spouse, dependent children, dependent siblings/parents and a guardian in case of minor
- RTA will run a verification process to see if MF folio captures phone number/ email id of MFDs, RTA, RIA, AMC and their employees. If RTA detect such a discrepancy, they will have to intimate investor
- RTA will also see if multiple phone numbers or email ids has been used for different MF folios based on PAN
- RTAs will have to verify mobile number and email id linked with MF accounts and tag accounts as verified or unverified
- RTAs will send confirmation message to email id and mobile number of investors. Investors can authenticate it by clicking on the link
- Mobile numbers starting between 1 and 5 will be termed as invalid. Similarly, phone numbers like ‘000000000’ or ‘9999999999’ will be invalid
- However, RTAs will have to devise a different process to validate overseas mobile numbers
- Email ids with missing @, having initials like abc, xyz, invalid domains will be invalid
- Ideally, both mobile number and email id have to be verified. If one of them is not authenticated (say email id) then the folio will have unverified flag against email id
- If investor did not authenticate due to invalid mobile number or email id, RTAs will intimate such an investor through electronic means or physical letter
- There will be no two-factor authentication for physical redemption requests
- Digital redemption requests have to be authenticated by OTP received either on mobile number or email id. So, if one of them is verified, investors can do redemption
- Also, investors can update their contact details post authentication
- If both mobile no. or email id are not validated, the OTP will be sent to registered (old) contact details. If investor do not have access to old mobile no. or email id, she can input any of her registered bank account number and upload a self-attested copy of cheque
- If nothing works, investors can give a written request to update mobile no and email id
- MFDs can get access to report on change in contact details of their clients
- OTP authentication will also be applicable on switch transactions, SWPs and STPs
- Redemption triggered by AMC on maturity, merger, winding up will not require two factor authentications
- All verifications have to be carried out by September 30, 2022
