SEBI proposes new platform to help investors trace inactive mutual fund folios

The market regulator observed that investors in mutual funds occasionally lose track of their holdings over time.

The Securities and Exchange Board of India (SEBI) on Tuesday proposed developing a service platform for investors to trace inactive and unclaimed mutual fund (MF) folios, PTI reported.

Sebi mulls service platform for monitoring folios of unclaimed, dormant mutual funds (Getty Images)

The Registrar and Transfer Agents (RTAs) would create the suggested service platform, Mutual Fund Investment Tracing and Retrieval Assistant (MITR), according to a consultation document released by Sebi.

The suggested site will update KYC according to current standards, encourage investors to look for forgotten mutual fund assets, and provide measures to lower the danger of fraudulent redemptions.

It would also result in fewer mutual fund folios going unclaimed and help create a transparent financial environment.

Given that investments may have been made in physical form with minimal KYC information, the regulator observed that investors in mutual funds occasionally lose track of their holdings over time.

Until the investor, his nominee, or legal heir approaches the relevant asset management company (AMC) for redemption or transfer, the investments in open-ended growth option mutual fund schemes may stay invested indefinitely. It is also conceivable that these MF folios won't show up in the unitholder's Consolidated Account Statement because the PAN, email address, or legitimate, address are not available.

Thus, inactivity in mutual fund folios could be due to the 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 may be accessed via a link on the websites of MF Central, AMCs, AMFI, the two QRTAs, and Sebi. It can be hosted collaboratively by the two Qualified RTAs, ComputerAge Management Services Ltd (CAMS) and KFin Technologies Ltd, acting as agents of AMCs.

Compliance with all relevant legislation, including system and cyber security audits, shall be the joint and multiple responsibility of the QRTAs. They should also make sure that the platform conforms with the Disaster Recovery (DR) and Business Continuity Plan (BCP) criteria, the PTI report added.

Inactive folios are ones in which the investor may have stayed involved in an open-ended programme but either decided not to redeem or may have simply lost sight of the investment, according to the regulator.

However, folios that show up on the platform when the unitholder is aware of the investment and has decided to stay involved, have no repercussions.

The proposal is out for public comment until January 7, according to SEBI.