10.6 Filling the Application Form for Mutual Funds

What Must Accompany the Form

The Key Information Memorandum, together with any addenda issued since its last update, must accompany every application form. This is a hard requirement rather than good practice.

Sections of the Form

Distributor information

The EUIN rule is examined repeatedly. Where an individual has advised the investor, the EUIN must be recorded. Where no advice was given, the box is left blank and the investor signs the declaration that the transaction is execution only. Entering an arbitrary EUIN to complete the form falsifies the record and exposes the named individual to responsibility for advice they did not give.

Leaving the ARN blank makes the transaction a direct plan transaction.

Existing folio or new application

An existing investor quotes the folio number, and the personal details already on record apply. A new applicant completes the full details section.

Applicant details

• Name exactly as in PAN records — mismatches are the single largest cause of rejection
• PAN, mandatory for every holder
• KYC acknowledgement
• Date of birth, and for a minor, proof of date of birth and guardian details
• Status: resident individual, NRI, HUF, company, trust and so on
• Occupation and gross annual income, required under anti-money-laundering rules
• Contact details, including mobile number and email
• FATCA and CRS declaration of tax residency
• Ultimate Beneficial Owner declaration for non-individual applicants

Bank details

Mandatory, and the source of most operational trouble later:

• Account number, bank and branch, and IFSC
• Account type
• A cancelled cheque or bank verification document
• Multiple bank accounts may be registered, with one designated as default

Redemption proceeds are credited only to a registered account of the unitholder. Payment to a third party is not permitted.

Scheme, plan and option

• Scheme name, exactly as stated
• Plan: regular or direct — determined by whether an ARN is quoted
• Option: growth or IDCW, and for IDCW the sub-option of payout, reinvestment or transfer

A blank option field results in the default option stated in the scheme documents being applied, which is frequently not what the investor intended.

Payment details

• Mode: cheque, demand draft, NEFT, RTGS, UPI or NACH mandate
• Cheque number, bank and account, which must correspond to a registered account
• Cash is accepted only up to the small prescribed limit and subject to conditions; in practice almost all investment is non-cash

Third-party payments are not permitted, with narrow exceptions such as payment by a parent or grandparent for a minor within a prescribed limit, an employer on behalf of an employee under a payroll deduction arrangement, and a custodian on behalf of an FPI. Each exception requires a third-party payment declaration and the relevant KYC.

Nomination

Up to ten nominees may be registered, with the percentage share to each. An investor who does not wish to nominate must sign a declaration opting out. Nomination cannot be made by a power of attorney holder on the investor's behalf.

Signatures

Every holder must sign as recorded in the folio, and the guardian signs on a minor's folio.

Common Causes of Rejection

The Distributor's Discipline

Three rules that prevent nearly all of the above:

1. Never submit a form signed in blank. It is an express breach of the AMFI Code of Conduct and removes the investor's informed consent.
2. Check the name against the PAN card, not against how the investor writes it.
3. Verify the bank details against the cancelled cheque, because a wrong IFSC surfaces only at redemption, when the investor most wants the money.

A form checked properly at submission costs a few minutes. A form rejected a week later costs the investor the intervening NAV movement and costs the distributor the relationship.

Mode of Holding

A folio with more than one holder must state how it is held, and the choice governs who has to sign for everything afterwards.

Anyone or Survivor is the mode most households actually want and the one least often selected, because the default tick is passed over. A joint folio held in Joint mode requires every holder's signature on a redemption, which becomes an obstacle precisely when a family needs money quickly. Correcting the mode later requires a written request signed by all holders, so it is far easier to get right at the outset.

Regardless of mode, all holders' PAN and KYC are required, and payouts go to a bank account registered in the folio.

Minor Folios

A folio for a minor is operated by a guardian — a natural guardian or a court-appointed one — and carries rules that surface years later:

• The minor is the sole holder; there can be no joint holder on a minor's folio.
• Proof of date of birth and evidence of the guardian relationship are required at the outset.
• Nomination is not permitted in a minor's folio.
• Payment must come from the minor's own account, or from an account of the guardian or of a parent or grandparent within the third-party payment exception.
• On attaining majority the folio is frozen for further transactions until the former minor submits fresh documentation in their own name — signature attestation, PAN, KYC and bank details.

The last point is where families are caught out. The AMC issues advance intimation before the eighteenth birthday, and a distributor who acts on it keeps an education-goal folio transactable at the moment it is needed.