Fund Basics. Mutual fund investing for minors

Many funds have plans exclusively targeted at investments for minors. Here are guidelines for investing in mutual funds on behalf of a minor.

The minor should be the first and the sole holder in an account. That is, there cannot be a joint holder along with a minor.

The date of birth of the minor needs to be provided in the application form along with a photocopy of supporting documents like birth certificate/ passport/ school leaving certificate.

The guardian in the respective folio where the investment is held on behalf of the minor shall either be a natural guardian (i.e. father or mother) or a court-appointed legal guardian, and this must be mentioned in the application form.

Investors have to provide information on the relationship/status of the guardian as father, mother or legal guardian in the application form and supporting documentary evidence will have to be submitted evidencing the relationship (copy of birth certificate/ passport) in the case of a natural guardian and appropriate evidence for court-appointed guardian(s). Details of documents, which are acceptable, are normally provided in all the mutual fund application forms/Key Information Memorandum.

Prior to a minor attaining majority, mutual funds send advance intimation to the registered address, advising the guardian and minor to submit an application form along with the prescribed documents to change the status of the investor to “major”.

The account will not be operable by the guardian on and after the day the minor attains the age of majority and the guardian will not be able to undertake any financial and non-financial transactions in the folio after the date of the minor attaining majority.

Once the status is changed on receipt of the prescribed documents, the investor who is a major may transact in the folio.

Documents required include a service request form/letter duly filled and containing details; new bank mandate registration form in case of a change in the bank account— proof in the form of a cancelled cheque with the investor name appearing therein should be attached; signature attestation of the investor (minor turned major) by the bank manager where the account is held; and KYC acknowledgement/KYC verification details of the investor.

SIPs can be registered on behalf of a minor. However, AMCs will register a standing instruction for SIP, SWP, and STP in a minor’s folio only till the date of the minor attaining majority, even if the SIP form contains an end period which is beyond such date. Fresh registrations would be allowed based on the instructions of the investor.

Contributed by CAMS. The views expressed are general practices in the MF industry.

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