SEBI’s MITRA Platform: A Regulatory Approach to Unclaimed Mutual Fund Folios

Introduction

Many mutual fund investors often lose track of their investments gradually with time. Usually, it is because of incomplete KYC details, changes in contract information, or reliance on physical documents. Consequently, a significant number of folios remain inactive or unclaimed, thus leaving investors vulnerable to fraud. This creates inefficiencies in the system.

With an aim to address these challenges, SEBI has recently, through a circular, introduced a centralized platform Mutual Fund Investment Tracing and Retrieval Assistant (MITRA).[1] This platform is designed to help investors in tracing and reclaiming their dormant mutual fund holdings. 

Background and Purpose of MITRA

• Many Mutual Fund (MF) investors lose track of their investments, especially those made in physical form or with minimal KYC details.
• Investments in open-ended mutual fund schemes may remain invested indefinitely unless investors, nominees, or legal heirs actively redeem or transfer them.
• Some mutual fund folios are not reflected in the Consolidated Account Statement due to missing PAN, email ID, or address.
• Inactive folios often become vulnerable to redemptions by fraud.
• With an aim to address these concerns, SEBI has introduced MITRA. It is a centralized platform to assist investors in tracing their inactive and unclaimed Mutual Fund folios.

Objectives of MITRA

• Assist investors in identifying the investments they have lost track of or any investments that were made on their behalf where they are the rightful legal claimants.
• Encourage investors to ensure KYC compliance so that the number of non-KYC-compliant folios can be reduced.
• Reduce unclaimed Mutual Fund folios across the industry.
• Enhance transparency in the financial market and serve as a reliable tool for investors to trace their inactive/unclaimed investments.
• Incorporate fraud mitigation measures to safeguard investors.

Definition of an Inactive Mutual Fund Folio

• A folio is considered inactive if there has been no investor-initiated financial or non-financial transaction for the past 10 years, but there is still a unit balance.
• Inactive folios may include investments where investors:
  • Have deliberately chosen to stay invested.
  • Have lost track of their holdings.
• Important: There is no penalty or consequence for those aware of their inactive investment and wish to remain invested.
• The MITRA platform will encourage investors to locate forgotten investments and update their KYC details.

Details of the MITRA Platform

• MITRA will be jointly hosted by two Qualified RTAs (QRTAs):
  • Computer Age Management Services Limited (CAMS)
  • KFIN Technologies Limited
• Platform Accessibility: Available through links on the websites of MF Central, AMCs, AMFI, QRTAs, and SEBI.
• Security & Compliance:
  • The platform is required to comply with SEBI’s Master Circular on Mutual Funds (June 27, 2024) regarding cybersecurity and cyber resilience.[2]
  • QRTAs are jointly and severally responsible for compliance with all regulatory requirements. These include system audits, cybersecurity audits, Business Continuity Plans (BCP), and Disaster Recovery (DR) measures.

Implementation and Awareness

• All AMCs, QRTAs, RIAs, AMFI, and Mutual Fund Distributors are required to promote awareness of the MITRA platform among investors. They must also encourage investors to keep a check on their investments and claim their inactive or unclaimed folios.
• Operational Timeline:
  • MITRA will be operational within 15 working days from the date of issuance of this circular.
  • A beta version will be launched for 2 months.
• Future RTAs servicing Mutual Funds must comply with MITRA-related guidelines from SEBI.

Role of Unit Holder Protection Committee (UHPC)

• As per Regulation 25(24) of SEBI (Mutual Funds) Regulations, 1996[3], every AMC must have a Unit Holder Protection Committee (UHPC) to safeguard investor interests.
• As per SEBI’s Master Circular on Mutual Funds (June 27, 2024), UHPC already has the responsibility to review unclaimed dividends and redemption amounts. They are also responsible for taking steps to reduce the quantum of unclaimed funds.
• Amendment to Clause 4.3 (c) of Annexure 15 of the same Master Circular:
  • UHPC is now also required to review inactive folios alongside unclaimed amounts of dividends and redemptions.
  • AMCs, through their RTAs, are required to ensure that MITRA is effectively available for investors.

Impact of MITRA on Stakeholders: A Practical Overview

The MITRA platform has been introduced with the aim of assisting investors in tracking and reclaiming their inactive mutual fund folios. It significantly benefits investors, but at the same time, it also gives rise to operational and compliance challenges for AMCs, RTAs, and distributors.

Investors: Easier Access with Some Hurdles

For investors, MITRA makes it simpler to recover investments that they have lost track of. This is particularly for those with outdated KYC or legal heirs seeking unclaimed funds. It also reduces fraud risk by ensuring accurate investor records.

Challenges:

• Claiming funds still involves documentation and procedural formalities.
• The platform’s success depends on investor awareness and proactive use.

AMCs: Improved Efficiency but Added Responsibility

• The platform will ensure better data management, which would thus lead to fewer unclaimed folios and increase investor trust.
• However, it gives rise to certain compliance burdens because AMCs are required to fund and support MITRA, ensure security, and assist investors.
• It can also potentially risk the reputation of AMCs as any system flaws or inefficiencies would reflect poorly on them.

RTAs: High Responsibility, High Scrutiny

Since CAMS and KFIN are MITRA’s core operators, they are required to ensure smooth functionality, compliance, and security. This reinforces their important role, but it also increases pressure because:

• They bear the consequences for any system failures or security breaches.
• Any inaccurate data or inefficiencies would lead to distrust among investors.

Distributors & RIAs: A Double-Edged Sword

MITRA offers distributors and RIAs an opportunity to strengthen client relationships by helping them reclaim lost investments. However, it also adds to their workload because it requires them to educate clients and assist them with their claims. This often comes without any direct financial benefits.

Industry Impact: A Step Toward Greater Transparency

MITRA is an indication of SEBI’s commitment to investor protection and governance. If it is implemented successfully, it has great potential to enhance confidence in the mutual fund sector.

• If it is executed properly, it could set a benchmark for other financial markets.
• However, if it is poorly adopted or is difficult to use and not user-friendly, it would end up becoming just another bureaucratic hurdle.

Ultimately, MITRA has potential, but its success depends on execution and investor participation.

Conclusion

MITRA represents a welcome push for greater transparency in the mutual fund industry. It directly addresses the persistent issue of unclaimed and inactive folios. While the platform offers evident benefits for investors, its ultimate success is contingent on several factors. How it is adopted by investors is crucial, and therefore, there is a need for effective outreach and a user-friendly experience. In regard to AMCs and RTAs, MITRA presents both opportunities and challenges. It demands investment in infrastructure and a commitment to seamless operation. The long-term impact of MITRA will be measured by its ability to not only recover lost assets but also to build stronger trust between investors and the mutual fund ecosystem.

[1] https://www.sebi.gov.in/legal/circulars/feb-2025/service-platform-for-investors-to-trace-inactive-and-unclaimed-mutual-fund-folios-mitra-mutual-fund-investment-tracing-and-retrieval-assistant-_91847.html.

[2] https://www.sebi.gov.in/legal/master-circulars/jun-2024/master-circular-for-mutual-funds_84441.html.

[3] https://www.sebi.gov.in/sebi_data/commondocs/mutualfundupdated06may2014.pdf.