Capital market regulator SEBI has directed existing Execution-Only Platforms (EOPs) such as MF Utilities India, MF Central and that of RTAs facilitating transactions in direct plans of mutual fund (MF) schemes to obtain registration in three months.
While the other category of MF platforms promoted by Market Infrastructure Institutions such as the stock exchanges are exempted from registration, they have to comply with new norms in three months, said SEBI setting new regulations and dividing EOP into two categories.
The new norms will come into force from September 1. An EOP is described as a digital or online platform which facilitates transactions such as subscription, redemption and switch transactions in direct plans of MF schemes.
Clubbing entities already associated with MF and AMFI as a separate category, SEBI said these entities may levy a flat transaction fee, which will be borne by AMCs, within the upper limit as specified by AMFI. On-boarding fees, if levied, will be borne by the AMCs, it said.
AMCs shall not pass on any fees paid to the EOPs to MF schemes, said SEBI.
The category-II EOP, promoted by stock exchanges and brokers, may levy a flat transaction fee which will be borne by the investors, within the upper limit as specified by the stock exchanges. Further, on-boarding fees, if levied, shall be borne by the AMCs or investors.
SEBI-registered investment advisors and stock brokers have been providing execution services in direct plans of MF schemes through their digital platforms which are often used by investors who are not their clients.
Currently, there is no specific norms to provide execution-only services in direct plans and to obtain data feeds with respect to such transactions. While many may find it convenient to avail the services of such online platforms, investors who are not clients of such intermediaries may not have recourse or protection for the risks associated with such transactions, it said.
As part of the regulations, EOPs have to appoint at least two qualified key managerial personnel with experience of at least three years each in the securities market and will not provide services related to regular plans of MF schemes on its platform.