Nov 14, 2010

Mutual Fund Updates: Regarding Restriction on acceptance of third party payment instruments in Mutual Fund Schemes

We draw your attention to important changes with regards to purchase and redemption of mutual fund units. All Mutual Fund Companies will now be verifying bank accounts and rejecting third party payments for mutual fund transactions

1. Change of bank account:
When a change of bank account request is received along with the redemption request, the Mutual Fund does not get adequate time to validate the changed bank account details. There is a risk of redemption proceeds being transferred to a wrong account because of an error in capturing bank account details.
In view of the above, a new practice will be followed effective 15th November 2010 as outlined below for all change of bank account requests:
Mutual Fund Company will validate and register the bank account within seven calendar days from the date of submission of request at AMC branches/collection centers. Any redemption placed along or during this period shall ordinarily be issued to the earlier bank account registered in the records. However, on specific requests, this will be issued to the new bank account after the verification and validation process is done at AMC end.

2. Non-acceptance of Third Party Payments for mutual fund subscriptions effective November 15, 2010

When payment is made from a bank account other than that of the beneficiary investor, the same is referred to as a "Third Party Payment". Third party cheques carry inherent identity risks. Thus, we will henceforth be rejecting any subscription payments received from a third party.

In case of payments from a bank account which is jointly held, the first holder of the mutual fund subscription has to be one of the joint holders of the bank account from which the payment is made.

Investors are required to mention the details of the bank account from where the payment for subscription is being made in the subscription form. The details required are - bank account number, bank name and the cheque / demand draft number.

--- Safe Invest India (Information Services)

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