Sebi introduces framework for direct mutual fund investment platforms

Opens doors for monetisation of platforms facilitating commission free MF investment

The Securities and Exchange Board of India (Sebi) on Tuesday introduced a regulatory framework for online investment platforms that facilitate investments in commission-free mutual fund (MF) schemes.  
 

The regulation brings clarity on obligations of such platforms while opening an avenue to monetise their business. It also addresses investor concerns on associated risks and introduces grievance redressal mechanism.
 

As per the framework, platforms providing MF investment services in direct (commission-free) plans will have to apply for 'execution only platform' (EOP) licence either with Sebi or the Association of Mutual Funds in India (Amfi) within three months of the regulation coming into force, which happens in September 2023. As of now, these MF investment platforms operate under a stock broker or  investment advisor (IA) licence.

Platforms of investment advisors and stock brokers will not need an EOP registration if it is open only for their advisory or broking clients. Experts say this would create some ambiguity if the EOP registration will be mandatory for popular direct investment platforms like Groww, Zerodha Coin and Paytm Money, which provide both stock broking and direct MF investment services to clients.

Sebi has provided two options to the platforms: they can either register with Amfi and become agents of asset management companies or register with a stock broker and become agents of investors. Whom they charge for the services will depend on whose agent they become.