Sebi Plans to Aid Investors in Locating Dormant Mutual Fund Investments

MUMBAI: Markets regulator Sebi is working on setting up a portal designed to help investors trace mutual fund investments that may have been forgotten over the years. These investments can become dormant and unclaimed due to reasons such as unavailable PAN at the time of investment, address changes, or other forms of inactivity.

Sebi is mandating the two leading registrar & transfer agents (RTAs), CAMS and KFintech, to establish MITRA (Mutual Fund Investment Tracing and Retrieval Assistant), a platform aimed at assisting investors in finding such investments. The regulator released a draft circular on this initiative on Tuesday and is inviting public comments and suggestions by January 7.

MITRA will not only help investors locate forgotten mutual fund investments but also ensure current KYC compliance and implement protective measures against fraudulent withdrawals. This initiative is expected to reduce the number of unclaimed mutual fund accounts and enhance transparency in the financial system, according to Sebi.

Mutual fund investors sometimes lose track of their investments, especially those made physically with minimal KYC information over the years. In open-ended schemes with growth options, investments can remain indefinitely until the investor, nominee, or legal heir contacts the fund house for withdrawal or transfer. These accounts might not appear in the unitholder's consolidated account statement due to missing PAN, email ID, or a valid address, Sebi noted.

Inactivity in such accounts might result from investors forgetting their investments or due to their demise, making these accounts vulnerable to fraudulent claims. Sebi aims to mitigate these risks and make it easier for people or legal heirs to claim such investments smoothly.

Sebi proposed that MITRA would provide investors with a searchable database of inactive and/or unclaimed mutual fund folios at an industry level. While CAMS and KFintech would jointly manage the platform, it would be accessible via websites of the two RTAs, MF Central, AMCs, AMFI, and Sebi. The RTAs would share responsibility for regulatory compliance, including system and cybersecurity audits, Sebi said.