SEBI proposes a platform to trace inactive mutual fund folios

A searchable database is to be developed by RTAs, according to the paper.

The market regulator has proposed a platform for investors to trace their inactive mutual fund folios.

In a consultation paper floated on December 17, the Securities and Exchange Board of India (SEBI) proposed the setting up of Mutual Fund Investment Tracing and Retrival Assistant (MITRA). According to the paper, inactive folios will  be those in which "no investor initiated transaction/s (financial and non-financial) have taken place in the last 10 years but unit balance is available”.

On the reasoning behind such a proposal, the paper said, "Over a number of years, Mutual Fund investors may lose track of their investments considering investments might have been made in physical form with bare minimum KYC details."

"The investments in open-ended growth option mutual fund schemes may remain invested perpetually until and unless investor/his nominee/legal heir approaches the concerned AMC (asset management company) for redemption/transfer/transmission. Due to unavailability of PAN, email ID or valid address it is also possible that these folios do not appear in the unitholder's Consolidated Account Statement. Thus, inactivity in Mutual Fund folios could be on account of investor losing track of his/her investment, demise etc. Such inactive folios may become susceptible to fraudulent redemptions."

Therefore, the regulator has proposed a platform that would be developed by registrar and transfer agents and would help investors to search for unclaimed folios at an industry level.

Public suggestions and comments have to be sent in by January 7, 2025.

It is expected to empower investors in the following ways:

1..Enable investors to identify the overlooked investments or any investments made by any other person for which he/she may be rightful legal claimant;

2..Encourage investors to do KYC as per the current norms thus reducing the number of non-KYC compliant folios;

3.The platform database will lead to reduction in the unclaimed Mutual Fund folios;

4.Contribute towards building a transparent financial ecosystem and will be reliable medium for investors to find their inactive Mutual Fund investments.

5..Build/Incorporate mitigants against fraud risk