Why was KYC introduced to the financial markets?

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.

Why was KYC introduced to the financial markets?

One of the main reasons why KYC was introduced in financial markets was to limit/prevent cases of fraud, tax evasion and money laundering. To do this, you need to find the source and destination in case of any financial transaction. This is where KYC has been strengthened, and in the case of investments and bank accounts, these processes have been made mandatory and rigorous.

SEBI, the securities market regulator, has made it easier for investors in securities markets through the introduction of cKYC – common KYC for entire securities markets. Once this is completed, you can buy or sell any product of the securities market.

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