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Issuance of cheque on the name of third party
04-12-2010, 09:18 PM
Post: #1
Issuance of cheque on the name of third party
Dear Members,

In a mutual fund industry, account holders/investors may disinvest their money at any time in case of open-end fund.

There is a situation where our client - Mr. A has requested us to redeem his open-end fund units and to make a cheque of payment in the name of third party Mr. B (non-account holder).

I want to know whether AMC can do so or not?

Regards,

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04-13-2010, 12:40 AM
Post: #2
 
Dear,

Cheque may be made in favour of third party provided that account holder has authorized you, in writing, to make cheque in favour of third party.

Authority letter shall be used as a sufficient evidence, if such need is arisen.

Best Regards,
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04-29-2010, 03:43 PM
Post: #3
 
Agreed
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04-29-2010, 09:39 PM
Post: #4
 
But i dont agree with you guys that cheque can be issued to third party on the instructions of the fund's account holder.

I agree that there is no written law in my knowledge whether or not cheque may be given on the name of third party on the instructions of client.

However, i say it bad practice which may result into money laundering.

Regards,

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04-29-2010, 09:54 PM
Post: #5
 
Account holder has full rights to make such instructions. If authorised signatory is giving instructions then what is the issue? in what sense it will be money laundring plz explain
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04-30-2010, 04:42 PM
Post: #6
 
Suppose a non resident person made investment without opening Sp Rupee Account in Pakistan & he has no bank account in Pakistan. As per Forex Manual, the non resident person (if not opened Sp Rupees Account )can not take back the money of his investment.

In the instant case, non resident instructs to AMC to make a cheque on the name of his friend in Pakistan.

His friend can easily remitt the money of non resident which is not allowed under FERA.

Regards,


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04-30-2010, 05:32 PM
Post: #7
 
Okay, but we cant stop such practices if he send money to his friend and instruct him to make investment on his behalf and take profit from him so we can never now that who is behind the scene? we just can endure KYCs but nothing else.
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