Restriction on Acceptance of Third Party Payments for Subscription of Units

ADDENDUM to the Statement of Additional Information of HDFC Mutual Fund

RESTRICTION ON ACCEPTANCE OF THIRD PARTY PAYMENTS FOR SUBSCRIPTION OF UNITS OF SCHEMES OF HDFC MUTUAL FUND

The HDFC Mutual Fund has decided to restrict the acceptance of Third Party Payments by inserting the following under the Section 'How to Apply' in the Statement of Additional Information of HDFC Mutual Fund, effective from November 15, 2010 ('Effective Date'), in order to comply with AMFI (Association of Mutual Funds in India) best practice guidelines on 'risk mitigation process against third party instruments and other payment modes for mutual fund subscriptions' and also to enhance compliance with Know Your Customer (KYC) norms under the Prevention of Money Laundering Act, 2002 (PMLA).

Statement of Additional Information - Section II - How to Apply
A. Restriction on Acceptance of Third Party Payments for Subscription of Units
1. HDFC Asset Management Company Limited ("AMC") / HDFC Mutual Fund ("Mutual Fund"), shall not accept applications for subscriptions of units accompanied with Third Party Payments from the Effective Date except in cases as enumerated in para 2A below. "Third Party Payment"
means payment made through an instrument issued from a bank account other than that of the
first named applicant / investor mentioned in the application form. In case of payment instruments
issued from a joint bank account, the first named applicant / investor must be one of the joint
holders of the bank account from which the payment instrument is issued.
For example:
Illustration 1: An Application submitted in joint names of A, B & C alongwith cheque issued from
a bank account in names of C, A & B. This is a valid application.
Illustration 2: An Application submitted in joint names of A & B & C alongwith cheque issued from
a bank account in names of B, C & Y. This is an invalid application.
Illustration 3: An Application submitted in joint names of A, B & C alongwith cheque issued from
a bank account in name of A. This is a valid application.
2.A. As referred to in para 1 above, following are the exceptional cases where third party payments will be accepted subject to submission of requisite documentation / declarations.
i) Payment by Parents / Grand-Parents / Related Persons* on behalf of a minor in consideration
of natural love and affection or as gift for a value not exceeding ` 50,000 for each regular
purchase or per SIP installment (This limit of ` 50,000 shall not be applicable for investments
in HDFC Children's Gift Fund. However, the Donors will have to comply with all the
requirements specified in 2B below.);
ii) Payment by employer on behalf of employee under Systematic Investment Plan (SIP) facility
through payroll deductions;
iii) Custodian on behalf of an FII or a Client.
* 'Related Person' means any person investing on behalf of a minor in consideration of natural
love and affection or as a gift.
2.B. Investors submitting their applications through the above mentioned 'exceptional cases' are
required to comply with the following, without which applications for subscriptions for units will be
rejected / not processed / refunded.
(i) Mandatory KYC for all investors (guardian in case of minor) and the person making the
payment i.e. third party. In order for an application to be considered as valid, investors and the
person making the payment should attach their valid KYC Acknowledgement Letter to the
application form.
(ii) Submission of a separate, complete and valid 'Third Party Payment Declaration Form'
from the investors (guardian in case of minor) and the person making the payment i.e. third
party. The said Declaration Form shall, inter-alia, contain the details of the bank account from
which the payment is made and the relationship with the investor(s). Please contact the
nearest Investor Service Centre (ISC) of HDFC Mutual Fund or visit our website
www.hdfcfund.com for the said Declaration Form.
3. The Mutual Fund shall adopt the following procedures to ascertain whether payments are Third
Party Payments and investors are therefore required to comply with the requirements specified
hereinbelow.
(i) Source of funds - if paid by cheque
An investor at the time of his / her purchase of units must provide in the application form the
details of his pay-in bank account (i.e. account from which a subscription payment is made) and
his pay-out bank account (i.e. account into which redemption / dividend proceeds are to be paid).
Identification of third party cheques by the AMC / Mutual Fund / Registrar & Transfer Agent
(R&TA) will be on the basis of either matching of pay-in bank account details with pay-out
bank account details or by matching the bank account number / name / signature of the first
named applicant / investor with the name / account number / signature available on the
cheque. If the name is not pre-printed on the cheque or signature on the cheque does not match,
then the first named applicant / investor should submit any one of the following documents:
(a) a copy# of the bank passbook or a statement of bank account having the name and
address of the account holder and account number;
(b) a letter* (in original) from the bank on its letterhead certifying that the investor maintains an
account with the bank, along with information like bank account number, bank branch,
account type, the MICR code of the branch & IFSC Code (where available).
# Investors should also bring the original documents along with the documents mentioned in
(a) above to the ISCs / Official Points of Acceptance of HDFC Mutual Fund. The copy of
such documents will be verified with the original documents to the satisfaction of the AMC
/ Mutual Fund / R&TA . The original documents will be returned across the counter to the
investor after due verification.
* In respect of (b) above, it should be certified by the bank manager with his / her full
signature, name, employee code, bank seal and contact number.
Investors should note that where the bank account numbers have changed on account of the
implementation of core banking system at their banks, any related communication from the
bank towards a change in bank account number should accompany the application form for
subscription of units.
The Mutual Fund has also provided a facility to the investors to register multiple bank
accounts. By registering multiple bank accounts, the investors can use any of the registered
bank accounts to receive redemption / dividend proceeds. These account details will be used
by the AMC / Mutual Fund / R&TA for verification of instrument used for subscription to ensure
that third party payments are not used for mutual fund subscription, except where permitted
in (2A) above. Investors are requested to avail the facility of registering multiple bank
accounts by filling in the Application Form for Registration of Multiple Bank Accounts available
at our Investor Service Centres (ISCs) or on our website www.hdfcfund.com
(ii) Source of funds - if funded by pre-funded instruments such as Pay Order, Demand
Draft, Banker's cheque etc.
Investors should attach a Certificate (in original) from the issuing banker with the purchase
application, stating the Account holder's name and the Account Number which has been
debited for issue of the instrument. The said Certificate should be duly certified by the bank
manager with his / her full signature, name, employee code, bank seal and contact number.
The account number mentioned in the Certificate should be a registered bank account or the
first named applicant / investor should be one of the account holders to the bank account
debited for issue of such instruments.
(iii) Source of funds - if paid by RTGS, Bank Account-to-Account Transfer, NEFT, ECS, etc. Investors should attach to the purchase application form, an acknowledged copy of the
instruction to the bank also stating the account number debited. The account number mentioned
on the transfer instruction copy should be a registered bank account or the first named
applicant / investor should be one of the account holders to the bank account debited for such
electronic transfer of funds.
(iv) Source of funds - if paid by a pre-funded instrument issued by the Bank against Cash
The AMC / Mutual Fund / R&TA will not accept any purchase applications from investors if
accompanied by a pre-funded instrument issued by a bank against cash for investments of
` 50,000 or more. The investor should submit a Certificate (in original) obtained from the bank
giving name, address and PAN (if available) of the person who has requested for the payment
instrument. The said Certificate should be duly certified by the bank manager with his / her full
signature, name, employee code, bank seal and contact number. The AMC / Mutual Fund /
R&TA will check that the name mentioned in the Certificate matches with the first named investor.
The above broadly covers the various modes of payment for mutual fund subscriptions. The
above list is not a complete list and is only indicative in nature and not exhaustive. Any other
method of payment, as introduced by the Mutual Fund, will also be covered under these provisions.
B. In order to prevent frauds and misuse of payment instruments, the investors are mandated to
make the payment instrument (cheque, demand draft, pay order, etc.) favouring either of the
following (Investors are urged to follow the order of preference in making the payment instrument
favouring as under):
1. "XYZ Scheme A/c Permanent Account Number"
2. "XYZ Scheme A/c First Investor Name"
For example: HDFC Top 200 Fund A/c ABCDE1234F OR HDFC Top 200 Fund A/c Bhavesh Shah.
C. Investors transacting through MFSS / BSE StAR MF Platform under the electronic order collection
system for schemes which are unlisted and Stock Exchange(s) for the listed schemes will have
to comply with norms / rules as prescribed by Stock Exchange(s).
In case the application for subscription does not comply with the above provisions, the AMC /Trustee retains the sole and absolute discretion to reject / not process such application and refund the subscription money and shall not be liable for any such rejection.
The Trustee reserves the right to modify the aforesaid requirements at their sole discretion. All other terms and conditions of the Statement of Additional Information will remain unchanged.
This addendum shall form an integral part of the Statement of Additional Information of HDFC Mutual Fund as amended from time to time.

Thanks,
Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd