Mutual Fund investment means a financial tool for investors to pool their money into various schemes according to their financial Goal or Objective which gives them expected returns. Power of Attorney means is a legal document that gives a person the power to act for another person on his behalf. This is generally used when the principal investor is ill or disabled, or when the principal investor can’t be present to sign necessary legal documents for financial transactions. The person appointed as power of attorney can be any trusted family member or a friend or any other acquaintance.  Under some special cases only, investors prefer to invest in mutual funds through power of attorney like 1) when you are a frequent traveler. 2) when you are ill or not well. 3) when you want your investments to be handled by your spouse or family member. 4) when you are a Nonresident of India.

Giving Power of Attorney

It is generally advisable to investors to give the power of attorney only to the right person, not to their mutual fund agents as in many situations mutual fund agents have used this power of attorney to their benefits. So an investor needs to be extra cautious while selecting the right person for this power of attorney.

An investor also has the option to restrict POA which means he can specify to the holder that he can only transact in the mutual fund, not in any other assets. In the old format of a POA, it contained only the signatures of the power of attorney giver and not of the person who accepts it which is acceptable by the mutual fund companies. So the investor should make sure that it has both the signatures of the giver and the acceptor.

Also, it is not mandatory to register the power of attorney, companies even accept unregistered power of attorney.

KYC for both the parties

Both the investor and the power of attorney’s KYC should be completed to transact in mutual funds. An investor can register the POA when opening a fresh mutual fund folio.  POA holder can open a fresh mutual fund folio on behalf of the Power of Attorney giver.

When opening a Mutual Fund folio

The investor then registers the power of attorney when he is opening a fresh mutual fund folio. The name of the POA holder has to be specifically mentioned under the specified column on the application form. The PAN number is also to be mentioned of the power of attorney holder and the KYC is also to be attached along with the  Notarized copy of the POA with the application form. This folio is opened by the investor, even when the Power of attorney is registered, subsequent transactions can be done by the POA  holder as well as the investor. The holder of POA can also open a fresh mutual fund folio on the behalf of the investor. All the above-mentioned documents are required and the application is filled in the same way. POA holder can sign in the column specified for the Applicant signature. It should be clearly indicated below the signature that the signature is on behalf of the applicant by the Constituted Attorney.

Registering Power of Attorney under existing mutual fund folio

By giving a separate letter, the investor can register the power of attorney in his existing mutual fund. In the letter, he has to mention the details of the POA holder and request to register the POA in the folio. The documents required are  Pan card copy, KYC copy of the Power of Attorney holder along with the notarized POA needs to be submitted. Once the POA registration is done, the holder can start with the transactions on the behalf of the investor.

Canceling Power of Attorney in Mutual  Fund folio

The investor can easily cancel the power of attorney by giving a letter to the fund company to cancel the registered POA. The POA registration and cancellation will be reflected in the account statement as a non-financial transaction. Generally, the investor cancels the POA but do not intimate with the mutual fund company so the holder continues the transaction on the behalf of the investor. So if the investor is canceling the POA then he must inform the mutual fund company immediately.

A Final Note

The power of attorney helps you in the smooth execution of your investment decision. A financial plan helps you in taking the right investment decisions. Investors are advised to make POA  holder their spouse to transact on their behalf.

Related Topic: Mutual Funds Based On Financial Goals

Become a Mutual Fund Agent