Investing in mutual funds on behalf of a minor & change of guardian


Investment on behalf of a minor

Investments in mutual funds can be made on behalf of a minor by parents (natural guardians) or court-appointed guardians. The minor has to be the first and sole holder in an account (folio). There shall not be any joint accounts with minor as the first or joint holder. When the units are held on behalf of the minor, the ownership of the units rests with the minor. A guardian operates the account until the minor attains the age of majority (i.e. 18 years of age).

Documents needed for a minor

Investors have to provide information on the relationship of the guardian as father, mother or legal guardian in the application form. Also, supporting documents will have to be provided to establish the relationship (photocopy of birth certificate/passport) in the case of a natural guardian and appropriate evidence for court-appointed guardians.

Also, supporting documents for minor are mandatory to be submitted for opening of folio. The documents include: photocopy of birth certificate, school leaving certificate, passport and any other suitable proof evidencing the date of birth of the minor. Details of documents which can be provided will be available with the application form.

When the units are held on behalf of the minor, the ownership of the units rests with the minor. A guardian operates the account until the minor attains the age of majority”

Minor Attaining Majority

In case of a minor investor becoming a major, asset management companies (AMCs) shall send a notice advising the guardian and minor to submit an application with prescribed documents for changing status to ‘major’.  The account shall be frozen for operation by the guardian on the day the minor attains the age of majority and no transactions shall be permitted till the documents for changing the status are received.

Documents need to change account status

List of documents to change account status from minor to major include services request form, duly filled and containing details like name of major, folio numbers, etc. Bank mandate which shows account is changed from minor to major, signature attestation of the major by a manager of a scheduled bank/bank certificate/letter and KYC (know your customer) acknowledgement of the major.

SIPs registered for a minor’s folio

The guardian cannot undertake any financial and non-financial transactions including fresh registration of SIP (systematic investment plan), STP (systematic transfer plan) and SWP (systematic withdrawal plan) after the date of minor attaining majority till the application form with documents are received by the AMC/RTA (registrar & transfer agents). 

In case of existing standing instructions—like SIP and SWP—which are registered for a period beyond the minor’s date of majority, the AMC/RTA shall send an advance notice advising the guardian and minor that existing standing instructions will continue to be processed beyond the date of minor attaining majority, until an instruction to terminate the existing instructions is received from the major by the AMC/RTA.

Change in Guardian

Due to certain situations, there may be change in guardianship. For instance: the existing guardian passes away or is unable to perform his/her duties. In such cases a new guardian has to register his/her changed status in the records of AMCs to become eligible to operate the folio on behalf of the minor. The new guardian must be a natural guardian (i.e. father or mother) or a court-appointed legal guardian.

Documents need for new guardian

The AMC has to be informed about the change in guardian and documents should be submitted prior to registering the new guardian. The documents include: notarised or attested copy of the death certificate of the deceased guardian, request letter from the new guardian, no objection letter or consent letter from old guardian (if alive) or court order for new guardian and signature of the new guardian attested by the bank where the minor holds an account. AMCs shall mandatorily obtain information on the relationship of the guardian as father, mother or legal guardian in the application form. The new guardian also needs to submit his/her KYC.

Once the AMC or the R&T agent receives the documents, the name of the new guardian is registered in their records. S/he can then operate the investment of the minor.



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