As per AMFI best practice guidelines, investments made through third party cheques will not be processed with effect from 15th November, 2010. A cheque issued by and signed by any other person other than the First holder of the investment is a third party cheque.
Below is a list of frequently asked questions to guide you further.
Q I would like to invest in Mutual Funds? Can I pay through my friends’ / relatives’
accounts while applying for MF schemes?
A. No. As an investor, you must provide the funds from your Bank account. If you don’t have a bank account, then you must open one and provide the funds from the account, through a cheque drawn on your own Bank Account.
Q. I wish to invest in my minor child’s name. He doesn’t have a Bank account. Can I issue my cheque for such an investment? Is this exempted from the regulation?
A. Yes, there are exceptions to the regulation for certain special cases. These are listed below:
• Payment may be made by Parents/Grand-Parents/related persons on behalf of a minor in consideration of natural love and affection or as gift for a value not exceeding Rs.50,000/- (each regular purchase or per SIP installment).
• Payment may be made by Employers on behalf of employees under Systematic Investment Plans through Payroll deductions will be exempted.
• Payments can be made by Custodians on behalf of FIIs or clients.
However, such applications will be considered only if accompanied by:
1. A declaration mentioning the relationship with the First Holder. (These declarations are expected to be part of the Application Form issued by Mutual Funds. Please refer the Mutual fund websites for the necessary guidance / forms.)
2. PAN copy and KYC Acknowledgement, of the person or entity who is making payment on behalf of the investor. These documents should be attached with the application form.
Q. Can I provide a cheque leaf through another bank account which also belongs to me, but different from the one mentioned in the Bank Mandate column of the application?
A. Investors may provide a cheque from a different bank which belongs to them. However, the cheque leaf should have the investor name printed therein. If the cheque leaf does not have the name printed, investors should submit a copy of the Bank Statement, attested by the Bank Manager as evidence for holding the account. For the benefit of Investors, RTAs have the provision to register multiple bank mandates in each folio. We encourage Investors to register multiple bank mandates, if you have more than one bank account. This will ensure that your subscription will not get rejected under the ground of third party cheque.
Q. What if I gave a cheque leaf from my relative’s bank account and it was accepted by the CAMS Service Centre staff or by the AMC staff?
A. All such instances will be reported to the AMC for initiating the refund process / return of documents.
Q. Can I make the payment through a Demand Draft / Pay-order / Banker’s Cheque?
A. Such applications will be accepted if the DD/PO/BC instrument is accompanied with a Certificate from the Issuing banker stating the Account Holder’s name and the Account Number which has been debited for issue of the instrument. The Account Holder’s name mentioned in the Certificate should be that of the First Holder. If the said certificate from the Issuing Banker is not attached, the referred application will be treated as ‘Not In Good Order’ [NIGO] and will not be processed.