“We are mulling to make it non-mandatory for retail customers who have a ticket size below the threshold of Rs 2 lakh to undergo in-person verification of information provided in the KYC forms,” said a person in the know.
However, the distributor or agent would have the discretion to conduct the in-person verification if the transaction raises any suspicion, sources said.
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One reason why distributors of financial products insist on verifying the information entered by customers in-person is because the Prevention of Money Laundering Act lays the responsibility with the intermediary. To avoid inadvertently being on the wrong side of the law, intermediaries and asset management companies have been playing cautious and are insisting on an IPV from January 2016.
“We're having discussions with fund houses highlighting that this is not required in each and every case, especially for transactions below a certain size,” said another regulatory source.
While Sebi’s move is aimed at making it simpler for retail investors, not all are looking at it that way. Industry players are of the view that Sebi should have uniform set of requirements across for all investors.
“With this move, we are regressing back to different KYC requirements for different sets of investors when the need of the hour is a homogenous process. The talks were to have a uniform KYC across financial products, but a layer is likely to be added with this change in mutual fund space itself. The regulator needs to push for similar processes for all ticket sizes. Because the biggest problem that deters investors is not the IPV, but the complicated processes,” said Manoj Nagpal, CEO of Outlook Asia Capital.
- Sebi is planning to remove the requirement of in-person verification for small ticket investments
- The move will enable first-time customers to transact online and buy mutual fund offerings through e-commerce platforms
- The regulator is likely to announce the changes at its board meeting on November 30