Understanding SEBI’s new guideline on routing your Mutual Fund money.

Mutual Fund distributors/intermediaries used to collect your funds in an interim pool account and then channelize the same to Mutual Fund houses/ exchange. However, to provide more convenient and transparency to mutual fund investors, SEBI in its circular dated 4^th October 2021 has directed that, there will be “discontinuation of usage of pool accounts for transactions in units of Mutual Funds on the Stock Exchange Platforms”.

By this circular, intermediaries will not be able to accept payments/transactions in their name or in their pool account. SEBI wants that, investors money should go directly from the investor’s account to that of the mutual fund company account.  To comply with the new directive, intermediaries who carry out mutual funds transactions have to put in new process to ensure that funds pay-in are directly received by the clearing corporation from the investor’s account and in case of funds pay-out it directly goes to the investors account. In short, SEBI wants mutual funds money Pay-in/ pay-out should not be handled by the stock brokers/clearing members. This change in process will be applicable for both SIP and lumpsum mutual fund investments.

Market regulator SEBI has initially asked AMCs, recognised Stock Exchanges, Depositories and recognised Clearing Corporations to make necessary changes and implement system requirements to comply with the circular by 1^st April 2022. Recently SEBI has further extended the timeline to comply till 1^st July 2022 on request of various industry players but in the meantime to build pressure to comply with the new directive the regulator has put a stop on any NFO launch for next three months.

As the industry is developing new process and system changes for this initiative, all mutual fund investors will receive communication from their mutual fund distributor of the new process that they have planned for future. Read the communication that you receive and follow the new process. If you have running SIP or you have scheduled lumpsum purchase, then you may have to adhere to the new changes that your distributor is implementing.

Industry is looking forward for e-NACH registration from mutual fund investors as a solution to this new directive.

You can refer the details of the SEBI circular at the below link.

https://www.sebi.gov.in/legal/circulars/oct-2021/discontinuation-of-usage-of-pool-accounts-for-transactions-in-units-of-mutual-funds-on-the-stock-exchange-platforms_53104.html.