Mutual fund investment in children’s name: New SEBI rule comes into effect today


Parents or legal guardians will be able to invest from their own bank accounts in mutual fund schemes for their children, starting today i.e. June 15. The Securities and Exchange Board of India (SEBI) has revised its 2019 circular which prescribed the uniform process to be followed across Asset Management Companies (AMCs) in respect of investments made in the name of a minor through a guardian.


Earlier, Sebi only allowed payment for investment from the bank account of the minor or from a joint account of the minor with the guardian. The new rule will streamline this investment process for mutual fund investors who invest on behalf of minors.


Decoding the rule


Under the new rule, payment for investment in mutual funds by any mode will be accepted from the bank account of the minor, parent or legal guardian of the minor, or a joint account of the minor with parent or legal guardian.


They will no longer need to open joint accounts or open the account of minor children for this purpose.

What happens to existing folios?


For existing mutual fund folios, the AMCs will have to insist upon a change of pay-out bank mandate before redemption is processed.


Irrespective of the source of payment for the subscription, all redemption proceeds will be credited only to the verified bank account of the minor, which he or she can hold with the parent/ legal guardian, Sebi said.


Source- cnbctv18
Share on social media