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In a yet another attempt to streamline the KYC process across different financial intermediaries operating in India, SEBI has made a change to the existing KYC  procedures (primarily used for mutual fund investments earlier) which is effective from 1 January 2012.

 

What is KYC ?

KYC stands for Know your Customer or alternatively Know Your Client and is a mandatory regulatory requirement to tackle Money Laundering & Crime Prevention. In simplified sense, KYC requires a financial institution or intermediary to know whom they are dealing with and requires them to check the identity, address and occupation of the clients. Over the years KYC procedures have been evolved and are now mandatorily to be carried out before entering into any financial transaction with a client.

SEBI has via its circulars MIRSD/SE/Cir-21/2011 dated 5 October 2011, MIRSD/Cir-23/2011 dated 2 December 2011 and MIRSD/Cir-26/2011 dated 23 December 2011 made changes to the existing KYC norms for mutual fund investor. The primary reason behind these changes is to have a unified KYC procedure across all financial intermediaries in the security market and hence eliminating the duplication of KYC. Examples of these financial intermediaries are Stock Brokers, Depository Participants, Portfolio Managers, Mutual Funds, Venture Capital Funds, etc. From now on, each investor would be required to get KYC only once in the security market and the details of KYC will be shared across all financial intermediaries.

In order to perform the unified KYC norms, a new term has been annouced by SEBI – ‘KYC Registration Agencies‘ or KRA. CDSL Ventures Limited or commonly called as CVL has recently obtained SEBI registration as KRA and is the authorised body to perform KYC checks.

 

Key Changes in KYC Norms

  1. From now onwards, KYC would require IPV or In-Person Verification. The information provided in the KYC form has to be verified in person by the AMC or the registered distributors of the AMCs who are KYD (Know Your Distributor) compliant.
  2. There have been slight changes to the existing KYC form to incorporate the new and uniform KYC norms. The form can be download from CVL’s website http://www.cvlindia.com/downloads01.html.  Broadly the following new requirements have come up in the new forms:

For Individual Investors

  • Marital status;
  • Income slabs have been modified and an option has been provided to the investor to provide their networth instead of gross annual income;
  • The list of acceptable address proofs have been modified. These details are mentioned in the KYC form itself.

For Non-Individual Investors

  • Place of Incorporation and date of commencement of business has been added;
  • Income slabs have been modified and an option has been provided to the investor to provide their networth instead of gross annual income;
  • Details required from of the Karta / Promoter/ Director / Partner / Trustee have been modified. These modifications include PAN with Proof, DIN for Directors, UID for others, Address proof and photographs;
  • Requirement to attach Balance Sheet for last 2 years and there after requirement to submit balance sheet on an annual basis;
  • Copy of latest shareholding pattern.

 

Immediate Impact

If you are an existing Mutual Fund investor and are KYC compliant with the earlier norms – no action is required from your end and you can continue to use your earlier issued KYC acknowledgement to invest into mutual funds. However, if you would want to invest via other financial intermediaries such as stock brokers, etc., you would need to comply with the new KYC norms.

For New Mutual Fund investors – the new KYC norms mentioned above will be need to be complied with.

 

How to get the KYC done as per the new procedures

  1. Investor has to fill up the new KYC form which can be obtained from any financial intermediary. It can alternatively be downloaded from http://www.cvlindia.com/downloads01.html.
  2. The filled application from along with the required documents would need to be submitted at any of the KRA’s office or any of the designated intermediaries.
  3. Unlike earlier norms of KYC, the new procedures would require an investment application form to be accompanied along with the KYC form. Hence, if an investor does not want to do investment at the time of KYC application, his KYC application will not be accepted by the KRA.
  4. KRA shall perform IPV and verify the documents of the investor.
  5. A temporary acknowledgement shall be issued to the investor for the submission of the documents and completion of IPV.
  6. Once all documents are verified in detail, the KRA shall send a letter within 10 working days to the investor mentioning the compliance with the KYC procedures. Any deficiencies would be notified as well (if any).

To avoid confusions the following points can be noted:

  1. KYCs formality are to be done in person and can not be done via email / scanned documents.
  2. Any changes required to be made by the investor to their earlier KYC details can be made as a normal KYC change request.
  3. KYC norms shall be applicable for Micro SIP investors as well.
  4. Old KYC forms before 1 Jan 2012 will no longer be valid.
  5. KYC can not be done on a stand alone basis. It must be performed along with an investment request.

 

Who can do IPV?

  1. IPV can be done by a stock broker, any of their sub brokers or authorised persons.
  2. In case of Mutual Funds, the AMCs can perform the IPV at their respective offices.
  3. In case of applications received by mutual funds directly from the client, the respective fund house can accept IPV performed by any of the scheduled commercial banks.
  4. Mutual Fund distributors who are AMFI / NISM certified and have complied with the KYD (Know Your Distributor) norms.

 

How to Know KYC Status

It is very easy to determine the status of your KYC by visiting http://www.cvlindia.com/ and clicking Inquire on KYC. You would need to enter your PAN (Permanent Account Number) details in the form and your KYC status shall be shown to you. If you need, you can print a copy of your KYC status which is a valid KYC proof for all your mutual fund investments. Any issues with regards to your KYC can be emailed to cvlhelpdesk@cdslindia.com. Our experience has been very positive while dealing with CVL helpdesk – they are very prompt in responding back to your emails and will let you a simple resolution for your query.

 

Banyan Financial Advisors is a registered Financial Intermediary and is authorised to perform inperson verification (IPV) to comply with the new KYC norms. Please contact us via our website www.banyanfa.com if you need any details or clarification on how to get your KYC done.

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4 Responses to Changes to KYC (Know Your Customer) Norms w.e.f 1 January 2012 and How to Do KYC !

  1. Zacharia Mathews says:

    New KYC Norms

    I am KYC complied and has investments in mutual funds as well as a DP account for stock trading. Being am an NRI, I have PIS account as well.

    Do I have to do take any action further on my KYC status?

  2. Banyan Financial Advisors says:

    Hi Zacharia
    If you have done your Kyc then you are fine. You do not need to comply with the new KYC norms. Please check the status of your KYC on the link on the blog and confirm if it is having “Verified” status. You would need your PAN to check the status.

  3. Bond_Bhai says:

    I am trying to open an account with FundsIndia. I have sent them all the docs including the KYC form and related documents to that. Now, FundsIndia is saying i have a record in NSE KRA with status as “Old Records Submitted” which means, the KYC is not complete. Since the record already exists they cannot initiate another KYC request, even if they do, it gets rejected
    They have asked me get it updated by the previous Intermediatary (In this case ICICIDirect where i had an account before). But the problem is, i have closed this account and ICICIDirect refused to the KYC since i don’t have an account.
    FundsIndia has asked me to get the NSE KRA rejected so that they can initiate the new KYC. I dont know how to get this done!
    Any suggestions on how to proceed?

  4. If you can email me your PAN at info@banyanfa.com, I can check if I can get this resolved for you.

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