New SEBI rule from June 15 for mutual fund investment in the name of children; check details
Mutual Fund investment news: Parents or legal guardians will be soon able to invest from their own bank accounts in mutual fund schemes for their children. They will no longer need to open joint accounts or open the account of minor children for this purpose, according to a new SEBI circular dated May 12, 2023.
The Securities and Exchange Board of India (SEBI) has revised its 2019 circular (SEBI/HO/IMD/DF3/CIR/P/2019/166 dated December 24, 2019) which prescribed the uniform process to be followed across Asset Management Companies (AMCs) in respect of investments made in the name of a minor through a guardian.
The regulator said that Para 1 (a) of the 2019 circular shall now read as:
“Payment for investment by any mode shall be accepted from the bank account of the minor, parent or legal guardian of the minor, or from a joint account of the minor with parent or legal guardian,” the circular said.
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SEBI also said that for existing folios, the AMCs should insist upon a change of pay-out bank mandate before redemption is processed.
However, all redemptions from mutual fund investments made in the name of a minor shall be credited only to the verified bank account of the minor, as per the latest SEBI circular.
“Irrespective of the source of payment for subscription, all redemption proceeds shall be credited only in the verified bank account of the minor, i.e. the account the minor may hold with the parent/legal guardian after completing all KYC formalities,” SEBI said.
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As per the regulator, all other provisions mentioned in the 2019 circular would remain unchanged.
The new rule will be effective from June 15, 2023. “All AMCs are advised to make the necessary changes to facilitate the above changes in mutual fund transactions w.e.f. June 15, 2023,” SEBI said.