Deadline for SEBI ban on pooling of money and mutual fund units extended to July 1

Share


Starting from April 1, 2022, stock brokers, mutual fund distributors, investment advisors and other service providers involved in mutual fund transactions for their clients were supposed to stop pooling of funds and / or mutual fund units. This was to comply with the Securities and Exchange Board of India (SEBI) October 2021 circular barring such pooling.  

The intent behind the SEBI move was to ensure the safety of investor money and prevent its possible misuse by intermediaries involved in such transactions.  

However, in a last-minute change, SEBI has extended the deadline for stopping this pooling of funds and MF units to July 1, 2022, providing a three-month breather to such entities.  

According to Ashish Rathi, Whole Time Director, HDFC Securities, under the existing system, when you place a buy order for mutual fund units through a stock broker, money from your account is credited to the broker’s pool account. From there, the money goes to the account of NSE Clearing or BSE Clearing Corporation to be credited to the mutual fund AMC’s account.  

Once this pooling is stopped, then funds will move directly from the investor’s account to the NSE Clearing or BSE Clearing Corporation and not to the stock broker’s account. Similarly, mutual fund units too are supposed to be directly credited to the investor’s account (in cases where this is not happening currently) once the SEBI-initiated move comes into effect.  

Several other measures such as the requirement for two-factor authentication for online redemption requests, too formed part of SEBI’s October 2021 circular. The deadline for these, too have been extended by a few months.

 

Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.


Download
the App to get 14 days of unlimited access to Mint Premium absolutely free!



Source link

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.