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SEBI discontinues use of pool accounts for mutual fund transactions

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SEBI said the move has been taken “to protect the interest of investors in securities”.

New Delhi: The Securities and Exchange Board of India (SEBI) on Monday decided to ban the use of pool accounts for mutual fund transactions. Markets regulator SEBI has said in its notification that from April 1 next year, pooling of funds by stock brokers, MF distributors and investment advisors will be stopped.

SEBI said the move has been taken “to protect the interest of investors in securities”.

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The regulator asked asset management companies (AMCs) to ensure that the withdrawal corporation should receive payment of funds directly from the investor’s account and the money should be paid directly into the investor’s account. “Pay-in/pay-out of the fund shall not be controlled by the stockbrokers or clearing members.”

It states that the same direction should be followed for demat and non-demat transactions.

“The responsibility of complying with the provisions of PMLA (Prevention of Money Laundering Act) and not allowing transactions with third party bank accounts remains with the AMC. AMC gets SEBI accreditation to validate the source bank account information of investors. The recipients can avail the services of clearing corporations. In such cases, the clearing corporation shall provide the necessary source account details to the AMC,” read the SEBI notification.

SEBI further said that stock brokers or clearing members facilitating MF transactions should not accept mandates for SIPs (Systematic Investment Plans) or lump sum transactions in their own name.

It clarified that stockbrokers or clearing members should not accept lump sum mandate for MF transactions or payment by way of issue of mandates/instruments in their name.

However, a one-time mandate can be accepted in favor of SEBI recognized clearing corporations, the market regulator noted.

However, SEBI highlighted that checks issued in favor of SEBI recognized clearing corporations or MF scheme(s) belonging to investors may be accepted for payment.

Also read: ‘What a junior employee working in a fund house needs to know’

It also said that stock exchanges and AMFIs (Association of Mutual Funds in India), stock brokers or clearing members and AMCs, in consultation with SEBI, should issue operating guidelines for facilitating MF transactions on the stock exchange platform.

The regulator, through its two circulars in 2009 and 2010, had allowed entities of MF schemes to transact through registered stock brokers and clearing members using exchange infrastructure.

It allowed MF distributors and investment advisors to use the infrastructure of stock exchanges to buy and redeem mutual fund units on behalf of their clients.

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