SEBI offered MITRA to stem deceitful redemptions.
The Securities and Exchange Board of India (SEBI) has floated a consultation paper proposing the creation of a platform to help investors trace and retrieve inactive mutual fund folios. This initiative aims to address the challenges of forgotten or unclaimed investments and enhance investor protection.
Key Details of the Proposal
- Inactive Folios Definition: Folios where no investor-initiated transactions (financial or non-financial) have occurred for 10 years but have a positive unit balance.
- Proposed Platform: Named Mutual Fund Investment Tracing and Retrieval Assistant (MITRA), to be developed by Registrar and Transfer Agents (RTAs).
- Purpose:
- Assist investors in locating forgotten investments.
- Provide a centralized system for tracing unclaimed mutual fund folios across the industry.
Reasons for the Proposal
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- Lost Track of Investments:
- Investments made in physical form or with minimal KYC information might be forgotten.
- Lack of updated PAN, email ID, or valid address can prevent such folios from appearing in Consolidated Account Statements (CAS).
- Fraud Prevention:
- Inactive folios are vulnerable to fraudulent activities like unauthorized redemptions.
- Perpetual Investments:
- Open-ended schemes can remain invested indefinitely without redemption unless approached by the investor, nominee, or legal heir.
Proposed Benefits
- Identification of Overlooked Investments: Helps rightful claimants, including nominees and legal heirs, locate investments.
- Encouraging KYC Compliance: Promotes updated KYC records to reduce the number of non-compliant folios.
- Reduction in Unclaimed Folios: Centralized tracing could lower the volume of unclaimed investments.
- Fraud Mitigation: Incorporates safeguards to prevent unauthorized redemptions.
- Transparent Financial Ecosystem: Enhances trust and reliability in the financial sector.
Public Consultation
- SEBI has invited public suggestions and comments on the proposal until January 7, 2025.
This initiative aligns with SEBI’s broader goals to safeguard investors, minimize risks, and promote a transparent and efficient financial system. For more details or to participate in the consultation, refer to SEBI’s official website.