HDFC Mutual Fund would not accept third party payment instruments from Nov.15th

Mutual fund

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In order to enhance compliance with Know Your Customer (KYC) norms under the Prevention of Money Laundering Act, 2002 (PMLA) and to mitigate the risks associated with acceptance of third party payment instruments (cheques, demand drafts, pay orders etc.), Association of Mutual Funds in India (AMFI) issued best practice guidelines on ‘Risk mitigation process against third party cheques in mutual fund subscriptions’. In line with these recommendations, HDFC Mutual Fund shall not accept applications for subscriptions with third party payment instruments with effect from November 15, 2010. This will not be applicable in the following exceptional cases:

· Payment by Parents/Grand-Parents/related persons on behalf of a minor in consideration of natural love and affection or as gift for a value not exceeding Rs. 50,000/- (each regular purchase or per SIP installment);

· Payment by employer on behalf of employee under Systematic Investment Plan (SIP) facility through payroll deductions;

· Custodian on behalf of an FII or a Client.

Please note that these provisions will apply to all SIPs registered on or after November 15, 2010. Installments of SIPs registered before November 15, 2010 will not be affected.

Third-Party instrument by definition

· When payment is made through instruments issued from an account other than that of the beneficiary investor, the same is referred to as Third-Party payment.

· However if a payment is received from a joint bank account then the first holder of the mutual fund folio has to mandatorily be one of the joint holders in the bank account from which payment is made. If this criterion is fulfilled, then this is not construed to be a third party payment.

Further in order to prevent frauds and misuse of payment instruments, investors must make the payment instrument favouring either of the following:

· “XYZ Scheme A/c Permanent Account Number of First Investor”. For example “HDFC Top 200 Fund A/c ABCDE1234F”

· “XYZ Scheme A/c First Investor Name”. For example “HDFC Top 200 Fund A/c Bhavesh Shah”

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