Sebi discontinues the use of pool accounts for transactions in MFs

Redemption of units held in demat, issuance of delivery instruction slip to depository participant to debit units for delivery to clearing corporations may continue

The Securities and Exchange Board of India (Sebi) on Monday said that pooling of funds and units by stock brokers or clearing members shall be discontinued for mutual fund (MF) transactions.

Currently units of the MF schemes move through stock brokers’/clearing members’ pool accounts in an aggregate manner to client account or clearing corporation or the asset management company (AMC) account.

“Pay-in and pay-out of funds shall not be handled by the stock brokers / clearing members. In the same manner, for both demat and non-demat mode transactions, the units shall be credited and debited directly to/from the investors’ demat account/ folio account without routing it through the pool account of the stock brokers /clearing   members,” said Sebi in the circular.

Meanwhile, for 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 corporations may continue, Sebi has said.

AMCs can 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.

In another circular, markets regulator said that AMCs shall ensure that intermediate pooling of funds  in any manner by mutual fund distributors (MFDs), Investment Advisers (IAs), Mutual fund utilities (MFU), channel partners or any other service providers are discontinued for MF  transactions.

However, this requirement shall not apply to the Sebi-registered portfolio managers.

Sebi also stated that in consultation with Association of Mutual Funds in India (Amfi) , it shall issue guidelines for AMCs for mitigating risks of co-mingling of funds at the level of payment aggregators and payment gateways involved in mutual fund transactions.

To mitigate the risk of third party payments, AMCs shall ensure that payment is credited directly to the registered and verified bank account of the investor mapped with the concerned folio, after due verification. All these changes will be applicable from April 1, 2022.