Decoding the latest KYC status

Now that KRAs have done with the validation process of all mutual fund accounts under SEBI’s customer due diligence (CDD) norms, many of your clients must be witnessing disruption in MF transactions arising out of the latest KYC status.

According to the SEBI norms, KRAs have validated all KYC details of capital market investors. As part of this activity, KRAs have identified investors based on officially valid document (OVD) like Aadhaar, passport, driving license, voter ID and so on. KRAs also validated email id and mobile number before putting a validation tag on KYC status.

As a result, KRAs have assigned three statuses to KYC - Validated, Registered and On Hold.

MF PANs with KYC ‘Validated’ status will not have any issue related to mutual fund transactions. These are the folios where investors have used Aadhaar for their KYC.

If the KYC status of your client is showing ‘Registered’ then they need to do KYC again to invest in any other fund house. However, there will be no disruption in any existing mutual fund investments. They can continue to invest in the invested fund houses.

‘Registered’ tag indicates that the client has not used Aadhaar as OVD or used the proof of address, which is no longer valid like bank account statement or utility bill.

Even if there is no change in KYC records, investors are required to do their KYC again to do transactions in other fund houses.

Finally, clients with KYC ‘on hold’ status are not allowed to do any financial and non-financial transaction. Clients with this status will witness disruption as their SIPs/STPs will not go through.

These clients will have to do their KYC again to invest or redeem money.

Let us look at this table to understand this issue:

We recommend your clients to use Aadhaar for doing the KYC to avoid any disruption in future. While your clients can do online KYC through Aadhaar, if they are using Aadhaar for physical KYC, they need to ensure that the QR code in Aadhaar document is machine readable.

Your clients can submit Aadhaar XML or e Aadhaar or virtual ID (VID), which requires investors to follow a due process to download.

In any case, your clients can give other permissible documents as Proof Of Identity/Proof Of Address like passport, driving license, voter id, job card issued by NREGA, letter issued by national population register containing name and address and any other document issued by the central government for KYC purpose.

Meanwhile, mutual funds folios in demat holding will not be affected by this change.