SEBI seeks public comments on proposal to streamline MF folio commencement
Investors will be able to transact only after KYC verification is completed and marked as compliant in the agency records
The Securities and Exchange Board of India (SEBI) has released a consultation paper to standardise the procedure to open mutual fund (MF) folios and execute the first investment.
It has sought public comments on the proposal ‘Process for Opening of Mutual Fund Folios and Execution of First Investment’ by 14 November 2025. The comments can be submitted through SEBI’s web-based form under the public comments section.
The plan is to ensure that every new folio is (KYC) Know Your Client compliant at the Asset Management Company (AMC) level and in the KYC Registration Agency (KRA) system, before any transaction or investment happens.
Investors will be able to transact only after KYC verification is completed and marked compliant in the KRA records.
The markets watchdog stated, “The objective of this consultation paper is to solicit comments on the proposed standardization of the process for opening of Mutual Fund folios and execution of first investment.”
It stressed that new folios would be operational only after KYC completion, as earlier non-compliant folios instances arose due to the sequential verification process.
The AMCs conduct internal KYC checks and process investments, and send documents to KRAs for final verification. In case the KRA finds discrepancies, the folio is marked KYC non-compliant until the issue is resolved.
SEBI highlighted that the process created issues for both investors and AMCs. Investors were unable to execute transactions or receive redemption proceeds and dividends when their bank details were incorrect, whereas AMCs struggled to communicate with investors and credit redemption proceeds, resulting in an increase in unclaimed funds.
Hence, now AMCs will be required to keep investors informed at every stage of the KYC process through their registered email and mobile numbers.