Sebi mulls service platform for tracking inactive, unclaimed mutual fund folios

New Delhi, Dec 17 (PTI) Markets regulator Sebi on Tuesday proposed developing a service platform for investors to trace inactive and unclaimed mutual fund (MF) folios.

The proposed service platform called Mutual Fund Investment Tracing and Retrieval Assistant (MITR )would be developed by the Registrar and Transfer Agents (RTAs), Sebi said in its consultation paper.

The proposed platform would encourage investors to search for forgotten MF investments, update KYC as per the current norms and incorporate safeguards to reduce the risk of fraudulent redemptions.

Additionally, it would lead to reduction in the unclaimed mutual fund folios and contribute towards building a transparent financial ecosystem.

The regulator noted that over a number of years, mutual fund investors sometimes lose track of their investments considering investments might have been made in physical form with bare minimum KYC details.

The investments in open-ended growth option mutual fund schemes may remain invested perpetually until and unless the investor/his nominee/legal heir approaches the concerned asset management company (AMC) for redemption/transfer. Due to the non-availability of PAN, email ID or valid address, it is also possible that these MF folios may not appear in the unitholder’s Consolidated Account Statement.

Thus, inactivity in mutual fund folios could be on account of investors losing track of their investment, demise and such inactive folios may become susceptible to fraudulent redemptions.

To address the concern, Sebi said,” The service platform is proposed to be developed by the RTAs to provide investors with a searchable database of inactive and/or unclaimed mutual fund folios at an industry level”.

The platform can be hosted jointly by the two Qualified RTAs —  ComputerAge Management Services Ltd (CAMS) and KFin Technologies Ltd as agents of AMCs — and can be available through a link on the website of MF Central, AMCs, AMFI, the two QRTAs and Sebi.

The QRTAs should be jointly and severally responsible for compliance with all the applicable regulations, including system audit and cyber security audit.

Further, they should ensure that the platform complies with the guidelines for Business Continuity Plan (BCP) and Disaster Recovery (DR).

The regulator has defined inactive folios as those folios where the investor might have remained invested in an open-ended scheme and has either chosen not to redeem or simply might have lost track of the investment.

Although, there is no consequence for those folios appearing in the platform where the unitholder is aware of the investment and has chosen to remain invested.

The Securities and Exchange Board of India (Sebi) has sought public comments on the proposal till January 7.