Unclaimed Mutual Funds: SEBI Considers Developing MITR Platform To Track Inactive Folios

What if you invested in mutual fund schemes long ago and, in the course of your busy life, lost track of them? This is not uncommon as many investors forget their investments, and in cases of deceased account holders, such funds often go unclaimed. In this regard, the Securities and Exchange Board Of India (Sebi) has proposed developing the 'MITR' (Mutual Fund Investment Tracing and Retrieval Assistant) platform to help investors trace their inactive folios with unclaimed funds. The proposal is open for public comments or suggestions until January 7, 2025.

What Is An Inactive Folio In Mutual Funds?

Sebi defines inactive folio as: “Mutual Fund Folio(s) where no investor initiated transaction/s (financial and non-financial) have taken place in the last 10 years but unit balance is available”.

It includes investments where an investor had invested in an open-ended MF scheme and did not redeem the amount willingly or forgot and lost track of the investment. So, this platform will show all investments making it easy for investors to keep track of their MF folios and keep it updated with their latest KYC. This will protect such folios from being redeemed fraudulently.

Why Do Mutual Fund Folios Become Inactive?

According to Sebi’s draft circular, “Mutual Fund investors may lose track of their investments considering investments might have been made in physical form with bare minimum KYC details. The investments in open-ended growth option mutual fund schemes may remain invested perpetually until and unless the investor/his nominee/legal heir approaches the concerned AMC  for redemption/transfer/transmission. Due to the unavailability of PAN, email ID, or valid address, it is also possible that these folios do not appear in the unitholder's Consolidated Account Statement. Thus, inactivity in Mutual Fund folios could be on account of an investor losing track of his/her investment, demise, etc. Such inactive folios may become susceptible to fraudulent redemptions”.

How Will MITR Work?

Two Qualified Registrar and Transfer Agents (QRTAs) will host the platform:

1. Computer Age Management Services Ltd (CAMS)

2. KFin Technologies Ltd

This means that investors can access the MITR platform through these websites as well.

Investors will be able to access the MITR platform through other websites as well. A link to the platform is proposed to be made available on the websites of:

• AMCs (Asset Management Companies)

• AMFI (Association of Mutual Funds in India)

• MF Central

• SEBI

• The two QRTAs (CAMS and KFin Technologies)

The QRTAs will have the responsibility ‘jointly and severally’ to comply with all regulations such as cyber security, system audit, etc. They will also need to comply with the Business Continuity Plan (BCP) and Disaster Recovery (DR) as per Sebi’s guidelines.

AMCs will be responsible for establishing a Unit Holder Protection Committee (UHPC) to ‘review of inactive folios, unclaimed amounts of dividend and redemptions and measures taken by AMC to reduce the quantum of such unclaimed amounts.’

Benefits For Investors:

The platform is expected to bring transparency, ease folios tracing by investors, update their KYC details, and redeem amounts in case of a family member’s demise. It will also help safeguard inactive folios from fraudulent redemptions.

Note that even if the money remains unredeemed after 10 years, it continues to belong to the investor. This platform aims to enhance transparency, offer convenience, and protect investor assets from misuse.