Mutual fund distributors are set to approach the capital market regulator, the Securities and Exchange Board of India (Sebi), seeking a central bureau of registry for all ‘know your client’ (KYC) documentation. The distributors will also lobby for an electronic or digital KYC till a comprehensive system is put in place. They maintain that this would bring down the volume of paper in the system that would otherwise be generated if the distributors were to send a copy of all supporting documents to AMCs with retrospective effect.
“Today, KYC is an important documentation for an individual practically in every facet of his life. How many times will one individual fill up a KYC form? It is time to create a KYC bureau on the lines of a CIBIL, India’s first credit information bureau. This is being cost-effective without sacrificing risk,” said a person familiar with the issue.
KYC is the due diligence and regulation that financial institutions and other regulated entities must perform to identify their clients and ascertain relevant information for doing business with them. Sebi had, in December 2009, clarified that all AMCs must maintain a copy of all investor documentation, including KYC, PoA and the like, thereby reiterating its stance that maintaining all the documentation pertaining to the unit-holders/investors is the responsibility of the AMC. Currently, the documentation is maintained by the respective distributors.
The regulator has also called upon the trustees that in the event this is not adhered to with no further payment of any commissions, fees should be made to such distributors. Needless to say, mutual fund distributors are still grappling with this fiat.
“Currently, we have four crore folios. Not only do we have to send photocopies of all client details to the AMC, we also have to send on a one-time basis, statement of holdings and all transactions since inception of that folio in duplicate to the investor and seek confirmation from the unit-holders on the duplicate copy. This is a lot of paper,” said the head of a large distribution house.