SEBI offers new platform to help investors trace inactive mutual fund portfolios

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

Registrar and transfer agents (RTAs) would create the suggested service platform, Mutual Fund Investment Tracing and Retrieval Assistant (MITR), according to a consultation paper released by Sebi.

The suggested site will update KYC as per current norms, encourage investors to search for forgotten mutual fund assets and provide measures to reduce the risk of fraudulent redemptions.

This would also lead to a decrease in the number of unclaimed mutual fund portfolios and help create a transparent financial environment.

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

Until the investor, his agent or his legal heir contacts the active management company (AMC) with a view to redemption or transfer, investments in UCITS with variable capital growth options may remain invested indefinitely. It is also conceivable that these MF folios may not appear in the consolidated account statement of the unit holder because the PAN, email address or legitimate address is not available.

Thus, inactivity of mutual fund portfolios could be due to investors losing track of their investment, disappearing and these inactive portfolios may become prone to fraudulent redemptions.

To address this concern, SEBI said, “It is proposed that the services platform be developed by RTAs to provide investors with a searchable database of inactive and/or unclaimed mutual fund portfolios at the level of the sector”.

THE platform is accessible through a link on the websites of MF Central, AMCs, AMFI, both 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 the AMCs.

Compliance with all relevant legislation, including systems and cybersecurity audits, is the joint and multiple responsibility of the QRTAs. They must also ensure that the platform complies with Disaster Recovery (DR) and Business Continuity Plan (BCP) criteria, the PTI report added.

According to the regulator, inactive folios are those where the investor may have remained involved in an open-ended scheme, but decided not to redeem or simply lost track of the investment.

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

The proposal is open for public comments until January 7, according to SEBI.