SEBI prohibits pooled accounts for MF transactions by stockbrokers, MFDs and IAs

Market regulator SEBI has banned the use of pool accounts for mutual fund (MF) share trading on stock exchanges.

Currently, funds and units of mutual funds flow through the collective accounts of securities dealers or clearing members on an aggregated basis to the client account or the Clearing Corporation/AMC account, as the case may be.

This is based on a bilateral agreement with AMCs, where a few platforms, including Mutual Fund Distributors (MFDs) and Investment Advisors (IAs), pool client funds into a nodal account and transfer them then to the AMCs either on a transaction basis or as a package. based.

SEBI has now stated that AMCs (asset management companies) must ensure that MF trades are only executed if there is a service agreement between the AMC and the service provider or platform .

Although pooling of funds has been discontinued for MF transactions, this requirement will not apply to SEBI registered Money Managers subject to compliance with the SEBI (Money Managers) Regulations 2020.

The circular further clarifies that all MF trades for subscription must be credited directly from the investors account to the MF system account without any intervening pooling. To facilitate the transaction, funds may be routed through payment aggregators authorized by clearing houses recognized by RBI or SEBI, as applicable.

For redemption, funds must be credited directly to the investor’s registered bank account from the MF program account without any intermediary pooling, SEBI said.

The regulator has further clarified in its circular that stockbrokers/clearing members facilitating mutual fund transactions will not accept mandates for SIP or lump sum transactions on their behalf and will not accept check payments. investors issued to SEBI-recognized clearing houses or mutual funds. alone.

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Dolores W. Simon