SEBI ringfences MF investors’ funds from brokers using pool accounts

Suresh P Iyengar Mumbai | Updated on October 05, 2021

Pay-in, pay-out should be handled by clearing corporation

Capital market regulator SEBI has clipped the role of stock brokers and clearing members in mutual fund transactions by discontinuing the option of transacting on behalf of investors through a pool account.

Pooling of funds and units by stock brokers and clearing members will be discontinued for MF transactions and they will not be allowed to handle pay-in and pay-out of funds of investors, SEBI said in a circular on Monday.

Similar to the platform for distributors and investment advisors, stock exchanges will put in a mechanism for stock brokers and clearing members to ensure that funds pay-in and pay-out are handled by the clearing corporation, it said. In the same manner, credits and debits of units have to be made into the investors’ account for both demat and non-demat mode transactions without routing it through the pool account of the stock brokers, said SEBI.

However, for the redemption of units held in dematerialised mode, the practice of issuance of Delivery Instruction Slip to the Depository Participant to debit the units for delivery to clearing corporation will continue.

The new norms will come into effect from April 1, 2022.

SIP not in broker’s name

Stock brokers and clearing members have been barred from accepting mandates for Systematic Investment Plans or lump-sum transactions in their name and accept cheque payments in their name.

Onus on AMCs

They are also stopped from handling funds or units of investors in their proprietary accounts or pool accounts and do not accept payment through one-time mandate or mandates in their name for MF transactions, it said.

The onus of compliance with Prevention of Money Laundering Act provisions and stopping transactions with third party bank account continues to lie with the AMCs, which can validate investors bank details through clearing corporations.

Stock Exchanges, depositories, AMCs, Registrar and Transfer Agents and other entities involved in MF transactions will share relevant information to all stakeholders including investors, banks, payment aggregators, stock brokers, clearing members, clearing corporations, RTAs and AMCs. Cost towards system development for sharing information will not be passed on to the investors, said SEBI. Stock exchanges and AMFI will jointly in consultation with SEBI issue Operating Guidelines to stock brokers, clearing members and AMCs to facilitate the MF transactions on stock exchange platforms and information sharing.

Published on October 04, 2021

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