What is the KYC process?

A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.

Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.

The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment firm in the UK.

What is the KYC process?

KYC stands for “Know Your Customer” and is a term used for the customer identification process as part of the account opening process with any financial entity. KYC establishes an investor’s identity and address through relevant supporting documents such as the required photo ID (e.g., PAN card, Aadhar card) and proof of address and in-person verification (IPV). KYC compliance is mandatory under the Prevention of Money Laundering Act, 2002 and the rules set out therein, read with the main SEBI Circular on Anti-Money Laundering (AML)/Combating Terrorist Financing (CFT)/Securities Market Broker Bonds.

A Know Your Customer (KYC) is generally divided into 2 parts:

Part I contains the basic and uniform KYC details of the investor as prescribed by the KYC (Uniform KYC) register to be used by all registered financial intermediaries and

Part II additional KYC information that may be requested separately by the financial intermediary such as a mutual fund, stock broker, custodian participant opening the investor’s account (additional KYC).

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