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 financial 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.
Source: Team Cafe Mutual