SEBI Bans Pooling of Money, Mutual Fund Units by Online Platforms

Market regulator, Securities Exchange and Board of India has barred mutual fund distributors, investment advisers, online platforms from pooling of funds or units for MF transactions from 1st April. 
 
Presently, funds and units of mutual fund schemes move through stock brokers' or clearing members' pool accounts in an aggregate manner to client account or Clearing Corporation/AMC account, as the case may be.
 
According to a report in “The Economic Times”, S EBI said it observed that based on bilateral understanding with AMCs, a few platforms pool the client's funds into a nodal account and subsequently transfer to fund houses either on per transaction basis or lump sum basis. 
 
SEBI has now said that AMCs (asset management companies) shall ensure that MF transactions (either financial or non-financial) are executed only if there is a service agreement between the AMC and the service provider or platform.
 
While pooling of funds has been discontinued for MF transactions, this requirement will not apply to the SEBI registered portfolio managers subject to compliance with SEBI (Portfolio Managers) Regulations, 2020.  For subscription, funds should be credited directly from the investors’ account into the mutual fund scheme account without any intermediate pooling. 
 
Likewise, units should also be directly credited into the investors account without any intermediate pooling. For redemption, funds should be directly credited to investors’ bank account from the mutual fund scheme, the regulator said. 
 
The regulator has further clarified through its circular that stock brokers/clearing members facilitating mutual fund transactions will not accept one-time mandates for SIPs or lumpsum transactions in their name. Also, cheque payments from investor should be in favour of the respective mutual fund scheme only.
 

 

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Changes in Our Business Model
 
 
Greetings from Moneylife Advisory Services
 
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
 
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
 
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
 
What remains the same:
  • Recommendations on insurance, investment and Lion stocks, will continue as a part of the MAS premium subscription. Our strength has always been research and this will remain available to you through our recommendations.
  • The magazine and all textual content will remain as part of the service
  • The investools will have to be reworked and will offer model portfolios. We will have to suspend the restructuring tool.
 
What changes:
  • The interactions in Ask / Handholding will offer investment advice but not specific to your situation. It will offer information on investment products and also clarify your doubts about various financial products. It will be a forum for information, not for advice. This will be implemented with immediate effect and our guidelines in Ask, reflect this now.
 
Over the next few weeks our site and our communication to you will reflect these and other additional changes.
 
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
 
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Debashis Basu
Founder