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All you need to know about new KYC rules 2012

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IT professional Ramesh Nair's mutual fund adviser delivered him bad news last night. Twenty-seven year old Nair, who was traveling abroad for work, has to go through a fresh round of know-your-customer (KYC) rules effective from January 1.

Do you share a plight of Nair? Financial Chronicle tells you what new KYC rules are, how they are different from the old ones and what you can do to make things easier.

In order to help investors dealing with Securities and Exchange Board of India (Sebi) intermediaries, the markets watchdog has issued three circulars. As per these norms, registered intermediaries were asked to follow a uniform KYC compliance procedure for all the investors. These may impact various investments such as mutual funds and stocks.
KYC for new investors only: Will the new KYC requirement, effective January 2012, be applicable to both new and existing investors?


No. The rules will be applicable to new investors only.


However, if the existing KYC compliant investor would like to deal with any Sebi registered intermediary other than mutual funds, they will have to follow the new KYC compliance procedure.


Difference in old and new rules: Simply put, as a senior HDFC Mutual Fund official said: The new KYC norms require certain additional information to be collected as compared with the KYC being done till December 31, 2011. Additionally, it is mandatory for mutual funds to IPV for all their investors.

For individuals, you now have to compulsorily mention marital status. There has been slight changes in the modification in slabs for gross annual income details.


Otherwise, individuals have the choice to mention their net-worth as on a recent date in lieu of gross annual income details. Thankfully, data like unique identification number (UID)/Aadhar is non-mandatory.


IPV is brand new thing: The new common KYC regulation mandates all intermediaries should complete IPV for all investors. Mere submission of identity and address proofs is not sufficient under the new regulations, according to officials.

You also need to know who is authorised to perform IPV. Short answer: All intermediaries in the securities market are authorised to conduct IPV. In case of mutual funds, asset management companies (AMCs) and the compliant distributors can perform IPV. In case of any applications received directly from the investors (that is, without being routed through the distributors), the mutual fund has to rely upon the IPV (on the KYC application form) performed by the scheduled commercial banks.


Last things: So, can you, as an investor, do a stand-alone KYC without purchase? The answer is no. The KYC application now needs to be accompanied with an investment application. Another important things would be related to investors in micro-SIPs (systematic investment plans).

As per the new rules, even the micro SIP investors have to do KYC through this new system and instead of PAN, separate unique number will be generated through KYC/KRA system.
 

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