Third-party cheques in mutual funds
Subscriptions into mutual fund schemes are not accepted if they are accompanied by payment instruments not drawn on the investor's bank account. Such instruments are called third party instruments. The Association of Mutual Funds in India has barred their use while investing in mutual funds, with the intent of preventing fraud and misuse.
There are however, exceptions to this rule for the following specific instances: investment by a parent or grandparent in favour of the minor child for amounts not exceeding `50,000; an employer making investments on behalf of the employee through an SIP; and a custodian making payments on behalf of foreign institutional investors. Mutual funds have put systems in place to enable such investments allowed with third party cheques.
Compliance: The investors as well as the person making the payment must comply with PAN and KYC requirements. In case of a minor, the guardian will have to comply with the PAN and KYC norms.
Format: Each mutual fund has a format in which the declaration must be given. It can be downloaded from the MFs' websites.
Information: Details of the beneficiary investor, such as folio number, and application form number have to be provided. The relationship with the beneficiary investor must be clearly identified.
Source: Economic Times
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