SEBI has provided significant relief to mutual fund investors by eliminating the mandatory requirement of a demat account for unit transfers. Now, investors holding units in 'Statement of Account' (SoA) mode will be able to transfer or gift units without a demat account. This will simplify tasks related to family transfers, nominees, and legal heirs.
Mutual Fund: The Securities and Exchange Board of India (SEBI) has introduced a major change in transfer rules for mutual fund investors. Now, those holding units in 'Statement of Account' (SoA) mode will not require a demat account for transfers or gifting. This move will provide relief to millions of investors who invest in non-demat mode. Under the new system, investors will be able to transfer units from home via online portals, simplifying family and legal transfer processes.
Demat Account Requirement Eliminated
Previously, mutual fund unit transfers were only possible through a demat account. This caused difficulties for many investors, especially those who held their units in SoA mode. Now, under SEBI's new rules, such investors will not require any additional process or a demat account. They will be able to make these transfers directly through the online portal of their fund house or registrar agency.
This change will be particularly helpful for investors who wish to gift units to their children or spouse. Furthermore, the transfer of units to a nominee or legal heir after the demise of a unit holder will now be much easier than before.
Why SEBI Made This Change
Mutual fund investment is not just a means of earning returns but also a crucial part of a family's financial security. Often, investors wish to transfer their units to other family members or are required to do so for legal reasons. Previously, this process was complex and lengthy. SEBI has simplified the rules keeping these investor difficulties in mind.
For instance, if an investor's folio has two joint holders and one of them passes away, the surviving holder can now easily add another family member as a new joint holder. Similarly, if units are transmitted in the name of a nominee, that nominee can further transfer those units to other legal heirs.
Digital Process from Home
SEBI has made the entire transfer process digital and secure. Investors can transfer units from the comfort of their homes. For this, they will need to complete the process by visiting the websites of Registrar and Transfer Agents (RTAs) like CAMS, KFintech, or MF Central.
The transferor will need to log in with their PAN number and select the scheme whose units are to be transferred. Subsequently, the details of the recipient (transferee) must be entered. For the security of the process, the consent of all holders is mandatory. This consent will be obtained via a One Time Password (OTP), which will be sent to their registered mobile number and email.
This entire process will be on a "First In, First Out" (FIFO) basis, meaning units purchased earlier will be transferred first, just like in redemption or switch transactions.
Adherence to These Conditions is Necessary
SEBI has also set some rules for this facility. The most important is that the units being transferred should not be under any kind of lien, freeze, or lock-in. For example, if your units are in a tax-saving scheme (ELSS) and the three-year lock-in period has not been completed, such units cannot be transferred.
Additionally, both the transferor and the transferee must have a folio with the same mutual fund house. If the recipient's folio does not exist, they must first open a 'zero balance folio'. It is also mandatory for both parties' KYC (Know Your Customer) to be fully valid and verified.
Another important condition is that units cannot be sold immediately after transfer. SEBI has stipulated a 10-day 'cooling period' for this. This means that the units cannot be redeemed for 10 days after the transfer. This will reduce the chances of haste or fraud.
