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In a major relief, SEBI clarified that existing investors where KYC status was ‘On hold’ due to non-linking of Aadhaar and PAN or non-validation of email Id and phone number will be allowed to do transactions in mutual funds and other capital market securities.
This means, investors having ‘On hold’ KYC status will move to ‘Registered’ KYC status. With this, such investors can continue to transact in existing fund houses. However, these clients cannot invest in a new fund house.
Answering a query which reads - Is PAN-Aadhaar seeding mandatory for transactions in the securities market? SEBI said, “No. The Indian government has made it mandatory for everyone to link their PAN to their Aadhaar, with certain exceptions for NRIs, non-citizens, those over 80, and residents of the states of Assam, Jammu and Kashmir and Meghalaya.”
Such a client will have to link their Aadhaar and PAN and update this information on the KRA portal to get the KYC ‘Validated’ status.
In another development, SEBI said that investors with KYC status of ‘On hold’ due to non-validation of email id and mobile number will also move to KYC ‘Registered’ status.
So far, investors whose KYC status was ‘On hold’ due to non-validation of email id and mobile number were not allowed to execute any financial and non-financial transaction in the capital markets including mutual funds.
KRAs have assigned three statuses to KYC - Validated, Registered and On Hold.
MF investors with KYC ‘Validated’ status do not have to face 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. Also, to invest in new funds, they will have to get ‘Validated’ status.
Finally, clients with KYC ‘On hold’ status are not allowed to do any financial and non-financial transactions. Clients with this status are witnessing disruption as their SIPs/STPs is not going through.
AMFI data shows that the KYC of 3% mutual fund investors have been put ‘on hold’ by KYC registration agencies (KRAs). A rough estimate shows that 13.50 lakh investors could be facing disruption in transactions due to the KYC issue.
