Conversion of status to major from a minor mutual fund folio is a must, as otherwise such folios are frozen after the child turns 18
Some investors invest in mutual funds via a minor’s name. Usually, the minor would be their child. They assume that the amount invested in the child’s name remains untouched even during tough financial times. But once your child turns 18, it’s important that you change the status of that investment. Here’s how you should do it.
Why is conversion to major folio a must?
When you invest in a child’s name, a bank account is also required in the name of the kid. In both these cases, the first holder has to be the child. The sum that gets invested in this mutual fund scheme must come from from the bank account held in the minor’s name, as per a Securities and Exchange Board of India (SEBI) mandate.
The parent’s name is added as guardian in both the bank account as well as mutual fund folio. Guardian can purchase, redeem or make systematic transactions. However, as the child turns 18, the control of the folio shifts from the hands of the guardian to the child. The parent cannot transact in these folios after the 18th birthday of the child. Also, all standing instructions such as systematic transfer plan (STP), systematic investment plan (SIP) and systematic withdrawal plan (SWP) stand suspended. “To transact in such a folio after the 18th birthday of the child, the kid need to complete the KYC process and then convert the folio to major status from minor by following the due process,” says Rupesh Bhansali, head-mutual funds, GEPL Capital.
Should changes be made in the bank account as well?
Yes. First, get your documents ready. When the investments are made in the child’s name, there is no need for a permanent account number (PAN). But as the child reaches the age of 18, there is a need to get PAN. If the child already has a PAN, the PAN needs to be changed to Major status, as minor PAN does not have the photograph and signature of the child.
The updation can be done by using the ‘change of PAN details’ form. Mutual funds require PAN with photograph and signature of the investor for completing the know-your-client (KYC) process.
Second, the bank account with minor status needs to be updated with major status. Both the child and the guardian need to visit the bank personally, even in these COVID-19 times. If the investments held in the minor folio were done from some other bank account, before the above-mentioned rule insisting on minor bank account came into effect in December 2019, then a new bank account needs to be opened, with the child (now a major) as the first holder.
Once you are done with these steps, you have to complete the KYC process. KYC can be done online or in paper form physically. This can be done with any one of the fund houses in whose schemes you are invested in or through the registrar and transfer agents (RTAs). Both the bank account and the mutual fund folio need to be KYC compliant.
How do I change the status from minor to major?
After you have the KYC in place and the bank account with a ‘major’ status, you can approach each fund house in which you have a minor folio. Every fund house has a ‘status change from minor to major form’ on its website as well as at branch offices. You should fill up the form and get it stamped from your banker. Signature attestation by your banker is a must.
The form, along with KYC acknowledgement, and a copy of the PAN card can be submitted to the mutual fund or to the RTA’s office. For each folio, you have to submit separate forms. But if you have multiple folios in the same fund house, you can submit one letter clearly specifying all the folios, with the signature of the major child as well as all guardians, after checking if your fund house allows it.
Some fund houses also allow submission of the documents online. “Investors can email the scanned copies of the signed form, along with KYC acknowledgement, and other supporting documents from their registered email with the fund house to change the status of the minor folio to major,” says Sandeep Bhosale, AVP-Customer Interaction, Quantum AMC. “The investor gets a verification call from us and the investor then has to send the physical documents later,” he adds.After the status of the folio is changed to major, the control of the folio goes to the hands of the child that changed major. She becomes the first holder of the folio and can thereafter transact in the units of the mutual fund. She can also add anyone else (including her parents) as joint holders in that folio. This entire process of arranging the documents to change the folio status may take 20 to 30 days.