Small fund houses allege that they are losing business to big players as non-individual investors find it cumbersome to undergo fresh KYC.
Some small-sized and new fund houses have approached AMFI to review the new KYC rule which came into effect from November 2012.
Their contention is that non-individual investors, especially companies, who have not complied with new KYC rule are unable to open new folios with new fund houses unless they undergo fresh KYC again.
The new KYC rules require details like balance sheets for the last 2 ?nancial years, photograph, POI, POA, PAN and DIN numbers of whole time directors, etc. to be furnished to fund houses to comply with new KYC norms.
Fund officials say that companies sometimes find it cumbersome to undergo fresh KYC again and thus continue to invest with their existing fund houses. As a result of this, fund officials allege that they are losing business to big players with whom majority of companies have been investing for a long time now.
“We have approached AMFI to review the KYC norms. Companies find it cumbersome to do a fresh KYC again if they want to invest in a new fund house. As a result of this, we are losing business,” said the sales head of a foreign fund house.
SEBI introduced common KYC norms from January 2012 which required investors to undergo KYC again. This data is maintained by KYC Registration Agencies (KRA) like CVL, NDML, DotEx, CAMS & KARVY.
The new KYC rules required AMCs to gather additional information like father/spouse name, marital status, nationality, annual income/net worth. Additionally, in person verification (IPV) was also made mandatory.
Since November 2012, investors who had not provided the above mentioned additional information are not allowed to open a new folio with a new fund house though they are allowed to invest in the existing fund house. It is only after complying with the new KYC norms that the investors are eligible to open a new account/folio with any other new mutual fund.
Small fund houses are of the view that the new KYC rules favour big players. They have requested AMFI to find a solution to this problem.
“We have faced this problem with some of the companies. They don’t want to undergo fresh KYC again because of the documentation and thus continue to invest with the same fund house. The problem is not so much with individual investors because the documentation requirements are less,” said the operations head of a public sector fund house.
