This means redemption transactions received without PAN in respect of non-PAN-exempt folios are liable to be rejected
Permanent Account Number or PAN will be required for redemption or repurchase transactions in respect of non-PAN-exempt folios, the Association of Mutual Funds in India (AMFI) has said. This direction came after the recent SEBI inspection of fund houses showed that Asset Management Companies (AMCs) and Registrar or Transfer Agents (RTAs) have been processing redemption transactions in respect of non-PAN exempt folios without obtaining the PAN, which is not in line with various SEBI circulars. The AMFI direction means that redemption transactions received without PAN in respect of non-PAN-exempt folios are liable to be rejected.
A PAN is required mandatorily for all transactions in the securities market (including mutual fund investments) as per various circulars issued by SEBI from time to time. Investments in mutual fund units up to Rs 50,000 per mutual fund per year is permitted without PAN, provided the investor provides appropriate alternate proof of identification in lieu of PAN.
“During the recent SEBI inspection of mutual funds, SEBI has observed that AMCs/RTAs have been processing redemption transactions in respect of non-PAN exempt folios without obtaining the PAN, which is not in line with various SEBI Circulars. It is therefore clear that PAN is required for redemption/repurchase transactions as well in respect of non-PAN-exempt folios, and AMCs/RTAs will be required to collect the PAN of the unitholder(s) at the time of redemption in such cases, if the same has not been provided previously,” an AMFI advisory says.
It is estimated that there are about 1 crore PAN exempted folios. In total, the MF industry has about 8 crore folios.
AMFI has asked distributors and mutual funds to make sure that all their mutual fund clients have provided their PAN. They will also have to ensure that MF clients have completed the KYC process as required under extant regulations / AML laws.
“If any of your mutual fund clients have not provided the PAN or have not completed the KYC process, please encourage them to fulfill the same urgently using the KYC form / ‘KYC Change Request Form’. This will enable the RTAs to receive the PAN / KYC data from the KRAs and facilitate in the KYC / PAN updation by the RTAs across all mutual funds, without the client having to notify individual AMCs,” the AMFI advisory adds.
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