Sebi to keep tab on bureaucrats, politicians' MF investments

Come January 1, 2010, all the new as also existing MF investors would need to disclose if they are or have been a head of state (both at central and state governments). This would even apply to MP (Member of Parliament), MLA (Member of Legislative Assembly) or MLC (Members of Legislative Council).

Such disclosures would also need to be made by civil servants, bureaucrats and all politicians in the new Know Your Customer (KYC) compliance regime being implemented by the fund houses as per Sebi's direction with effect from next month.

Earlier, KYC norms required investors to only disclose their broader occupation details like whether they are in public or private sector service, business and agriculture, or if they are professionals, retired persons or housewives.

The new KYC norms, being implemented to meet the Prevention of Money Laundering regulations, are to be followed by both new and existing investors in mutual funds. According to industry experts, the new KYC norms would help Sebi compile a dossier on investments made by bureaucrats and politicians.

This could be helpful in its various probes and with regard to preventive measures for money laundering activities. Recently, central bank RBI also asked the banks to be extra careful while dealing with customers who could be 'politically exposed persons'.

RBI said that banks would need to maintain a high level of monitoring for PEPs, although it has termed as 'low-risk' those customers who are salaried employees and work in government departments, government owned companies, regulators and statutory bodies.

The new KYC norms being implemented by fund houses would also make it mandatoty for all investors to furnish their PAN (Permanent Account Number) details from next year irrespective of the size of their investment.

Currently, individual investors need to quote PAN only for investments of Rs 50,000 or more, although non-individual investors are required to quote their PAN for all amounts. All the fund houses have been asked by industry body Amfi to comply with new KYC norms.

The norms would include collecting details like PAN, address proof and photograph of all their new and existing investors, with effect from January 1, 2011.

The Amfi (Association of Mutual Funds in India) decision follows a direction from market regulator Sebi earlier this year to tighten the KYC norms to check fraudulent practices and money laundering activities.

Earlier in 2007, Sebi had made it mandatory to furnish PAN -- which is allotted by the Income Tax Department -- for all stock market transactions as part of efforts to check fraudulent practices.

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