SEBI has permitted parents or legal guardians to invest from their own bank accounts in mutual fund schemes for their children.
New Delhi: The Securities and Exchanges Commission of India (SEBI) has permitted parents or legal guardians to invest from their own bank accounts in mutual fund schemes for their children. No longer will they have to open joint accounts or open the account of minor children for this purpose, according to a new SEBI circular dated May 12, 2023.
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The market watchdog 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.
According to SEBI, the 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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Existing Folios
With regard to existing folios, the market regulator said that the AMCs should insist upon a change of pay-out bank mandate before redemption is processed.
However, the circular also says that, 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.
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“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.
As per the regulator, all other provisions mentioned in the 2019 circular would remain unchanged.
The new rule will be effective from 15 June 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.
