Sebi releases norms for mutual fund investment in minors’ name

Sebi has recently brought a framework for making investment in mutual funds in the name of minor through guardian and to ease the process for transmission of such schemes. The move is aimed at bringing uniformity in such investment process across asset management companies (AMCs).

The regulator said payment for investment by means of cheque, demand draft or any other mode will be accepted from the bank account of the minor or from a joint account of the minor with the guardian only. For existing folios or
investor accounts, AMCs need to insist upon a change of pay-out bank mandate before redemption is processed.

Upon the minor attaining the status of major, the minor in whose name the investment was made, shall be required to provide all the KYC details, updated bank account details including cancelled original cheque leaf of the new account. Further, no further transactions shall be allowed till the status of the minor is changed to major, the regulator noted. Sebi has asked AMCs to build a system control at the account set-up stage of Systematic Investment Plan (SIP) and Systematic Transfer Plan (STP) on the basis of which, the standing instruction is suspended when the minor attains majority, till the status is changed to major.