The Securities and Exchange Board of India (Sebi) has barred the launch of mutual fund schemes till July 1 in order to facilitate the discontinuation of the practice of pooling of accounts.
The regulator has agreed to the Association of Mutual Funds in India (Amfi) request to extend the existing timeline of April 1 for implementing the discontinuation of pooling of accounts to July 1 The extension in the deadline is to facilitate efficient technology overhaul and its smooth transition to serve growing investor needs, the industry body said.
“To stay focused on its efficient and effective implementation of the said October 4, 2021, SEBI circular, we as mutual fund industry, have agreed to keep new fund offers (NFOs) launches on hold during this period. We are confident that NFOs will be back on track soon,” said N S Venkatesh, chief executive, AMFI
According to Amfi, after mutual discussion and agreement, Sebi has given the mutual fund industry extended timelines until July 1, 2022, to enable the industry to bring in a high level of operational efficiency in the interest of investors and efficient functioning of mutual fund subscriptions and redemption.
The platforms of financial advisers, distributors and brokers have been using the fund pooling mechanism.
When an investor puts money through an aggregator, the money goes into a pool account. The money gets aggregated there and is then sent to individual asset management companies.
The regulator’s view is that there is a risk involved in pooling of accounts because the money comes to the aggregator’s account and there could be some scope for misuse at that level, or delay of the transaction or some scope for errors to happen, which could affect the investors.
“Sebi had given fund houses time till April 1, but they couldn’t stop this practice. Sebi should not extend the timeline beyond July 1,” said an investor.
“We are confident of faster implementation owing to adoption of new-age technology and with the help of other stakeholders such as stock exchanges and channel partners, so that we can further strengthen investor service and their evolving savings needs towards newer mutual fund solutions,” said A Balasubramanian, chairman, AMFI.