Investments may be made in Mutual Funds on behalf of minors and in fact several Funds have plans exclusively targeted at investments for minors. We explain the guidelines in this regard.
What are the guidelines regarding investments in the name of Minor?
The following guidelines are applicable from April 1, 2011 for purchase applications made on behalf of a minor:
– The minor should be the first and the sole holder in an account.
– The date of birth of the minor would have to be provided in the application form along with a photocopy of supporting documents like Birth Certificate / Passport / School leaving certificate.
– The Guardian in the folio on behalf of the minor should either be a natural guardian (i.e. father or mother) or a court appointed legal guardian.
– Investors have to provide information on the relationship/status of the guardian as father, mother or legal guardian in the application form and supporting documentary evidence will have to be provided evidencing the relationship (copy of Birth certificate /passport) in the case of a natural guardian and appropriate evidence for court-appointed guardians. Details of documents which can be provided will be available along with the application form / Key Information Memorandum.
What is the procedure to change the status when the Minor becomes Major?
When the units are held on behalf of the minor, the ownership of the units rests with the minor. A guardian operates the account until the minor attains the age of majority. When a minor turns major, Mutual Funds will seek relevant documents and follow the guidelines as enumerated below.
Prior to minor attaining majority, Mutual Funds will send advance notice to the registered correspondence address advising the guardian and minor to submit an application form along with the prescribed documents to change the status of the account to “major”.
The notice shall clearly state that all existing standing instructions and transactions including SIP,STP,SWP which have been registered earlier for a period beyond the minor’s date of attaining majority shall be suspended.
The account shall be frozen for operation by the guardian on the day the minor attains the age of majority and no transactions shall be permitted till the documents for changing the status as required are received.
List of standard documents to change the account status from minor to major:
A Service Request form / letter duly filled and containing details like Fund, name of the major (investor), folio number
New Bank mandate Registration form if there is a change in the bank account of the investor
Signature attestation of the investor (major) by the Bank Manager
KYC acknowledgement of the investor – i.e. the minor who has turned major
What would happen to SIPs registered for a Minor’s folio?
AMCs will register fresh standing instructions like SIP,SWP,STP in a minor’s folio only till the date of the minor attaining majority, though the instructions may be for a period beyond that date.
All existing standing instructions and transactions including SIP, STP, SWP which have already been registered for a period beyond the date of the minor attaining majority, shall be suspended. In such a case, once the SIP is ceased, the investor would have to register a fresh SIP on attaining the age of majority after completing the formalities to effect a change in status.
Note: Contributed by Investor Education Team of CAMS. The views expressed herein are general practices in the Mutual Fund industry and may vary on a case to case basis.