Parents like to invest in their name to show love and affection towards their minor children. Generally people prefer to invest in mutual funds in the name of their minor child. You can invest in any mutual fund scheme of any mutual fund house like Axis Asset Management Company Limited, Baroda Asset Management India Limited, Canara Robeco Asset Management Company Limited, BOI AXA Investment Managers Private Limited etc.
If you invest in a mutual fund in the name of a minor child, then he is the first and only holder of a mutual fund folio. Meaning if you want to invest in a mutual fund in the name of a minor, then he / she will be the holder of that folico, because the joint holder is not allowed to invest in the mutual fund in the name of the minor. Parents can be guardians or court-appointed guardians. Along with this, if you want to invest in a mutual fund in the name of minor, then you should know about many other rules, so through this article we are going to give you the information related to this.
Documents to invest in the name of minor
- To invest in a mutual fund in the name of a minor child, one has to provide the date and age of the child.
- A copy of the age proof, such as a birth certificate, a passport copy, has to be provided. Also, any documents that indicate or prove the parent’s relationship with the child. Do this when opening a mutual fund folio or before investing for the first time.
- You can enter SIP or STP instructions while opening a mutual fund folio in the name of a minor child. It is valid only till the minor becomes mature or attentive, that is, the same age does not become 18 years.
- SIP (Systematic Investment Plan – SIP) is a facility with which you can invest a fixed amount regularly in the mutual fund scheme of your choice. You can start investing with just 500 rupees a month with the help of SIP.
- Systematic transfer plan (STP) is a method of transferring money from one mutual fund to another.
SEBI rules for investing in mutual funds in the name of a minor
SEBI has framed several rules for investing in mutual funds in the name of minors, some of which are the following –
- SEBI states that investments in mutual funds in the name of minors can be made only through checks and DDs. Investment in mutual funds through any other mode will be accepted only from the minor’s bank account or parent and minor’s joint bank account. If a mutual fund folio or investor account already exists, the AMC insists on changing the pay-out bank mandate. It is necessary to do this before the redemption process is processed. If one invests in a mutual fund through SIP, the SIP is closed when the minor is 18 years of age. Then the holders have to follow the normal KYC procedure.
- When your minor child turns 18, he / she will have to provide KYC details. It contains updated bank account details, which includes the original canceled original check of the new bank account. After this further transactions can be done only when the status of minor is changed to child.
- SEBI has ordered AMC to build a system to improve the process during the account set-up phase of SIP and STP.
- In order to approve the transmission request processing turnaround time, AMC has to implement image-based transmission essentially. This happens when the claimant is a designated or joint holder in the mutual fund portfolio. The mutual fund house should have a dedicated central help desk and a webpage which provides all relevant information and also gives instructions to assist the transmission process.
- AMC should implement a common set of documents required to transmit units to all claimants. This is very important for claimants who are nominees or joint holders.
- As per SEBI rules, a similar process should be implemented to transfer claim-free funds to the rightful claimants. In addition, it should also include a claim-free dividend.
- SEBI has asked mutual fund houses and AMFI (The Association of Mutual Funds in India) to also promote the importance of enrollment as a part of educating investors and bringing awareness among them, etc.