Usage of Pool Accounts for Transactions in units of Mutual Funds on Stock Exchange Platforms discontinued:SEBI

1. The Securities and Exchange Board of India (SEBI) on Monday decided to ban the usage of pool accounts for mutual fund transactions. Market regulator SEBI, in its notification, stated that the pooling of funds by stockbrokers, MF distributors, and investment advisers will be discontinued from April 1 next year.

2. Based on discussions with stakeholders and recommendations of the Mutual Fund Advisory Committee, with respect to the transactions, the pooling of funds and/ or units by stockbrokers/clearing members in any form or manner shall be discontinued for mutual fund transactions. Similar to mechanisms for transactions in mutual fund units by MFDs and IAs, stock exchanges shall put necessary mechanisms in place for stock brokers/clearing members also, to ensure that funds pay-in is directly received by the clearing corporation from the investor account and funds pay-out is directly made to the investor account. Pay-in / pay-out of funds shall not be handled by the stockbrokers/clearing members. In the same manner, for both Demat and non-demat mode transactions, the units shall be credited and debited directly to or from the investors’ demat account or folio account without routing it through the pool account of the stockbrokers/ clearing members. However, for the redemption of units held in dematerialised mode, the practice of issuance of Delivery Instruction Slip (‘DIS’) (physical or electronic) to the Depository Participant to debit the units for delivery to clearing corporations may continue.

“The onus of compliance with PMLA (Prevention of Money Laundering Act) provisions and not permitting transactions with third party bank accounts continues to lie with the AMCs. AMCs may avail the services of SEBI-recognized clearing corporations to validate the investors’ source bank account information. In such cases, clearing corporations shall make the necessary source account details available to AMCs,” the SEBI notification read.

3. The market regulator stated that stockbrokers or clearing members facilitating MF transactions should not accept mandates for SIPs (Systematic Investment Plans) or lump sum transactions in their name. It clarified that stockbrokers or clearing members shouldn’t accept payment through a one-time mandate or issuance of mandates/instruments in their name for MF transactions. It also said that stock exchanges and AMFI (Association of Mutual Funds in India), in consultation with SEBI, should issue operating guidelines to stockbrokers or clearing members and AMCs to facilitate the MF transactions on stock exchange platforms.

4. The regulator had permitted units of MF schemes to be transacted through registered stockbrokers and clearing members by using exchange infrastructure via its two circulars in 2009 and 2010. It had also allowed MF distributors and investment advisers to use the infrastructure of the stock exchanges to purchase and redeem mutual fund units on behalf of their clients.

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