Sebi extends exchange platform to MF distributors

Earlier, only brokers were allowed to utilise exchange mechanism for redeeming, purchasing of mutual fund units

Mutual fund distributors have now been allowed to transact in mutual fund units using the stock exchange mechanism.

They can purchase or sell units directly from asset management companies on behalf of their clients, said a circular by the regulator on Friday.

Earlier, only brokers were allowed to utilise the exchange mechanism for the redeeming and purchasing of mutual fund units.

Only AMFI-registered distributors will be allowed to transact on the exchange platform.

“The recognised stock exchange shall grant permission on a request made by a AMFI registered mutual fund distributor on the basis of criteria including fee, code of conduct, etc. as laid down by it,” said the Sebi circular.

This move by Sebi is aimed at increasing the reach and distribution of mutual fund distributors. One of the biggest challenges before the mutual fund industry is the low-levels of penetration of the industry.

With regards to the payments for the transaction, Sebi has made it clear that the exchange should ensure that the payin is received by the clearing corporation and that the payout is made directly to the investor’s account.