Mutual fund investors will now be protected from “intermediate pooling” of money and units by mutual fund distributors, investment advisers, channel partners, platform providers, and other entities, according to the Securities and Exchange Commission (SEC). Portfolio managers who are registered with the Securities and Exchange Board of India (Sebi) will be immune from the new rule until April 1, 2022.
Asset management companies (AMCs) will also need to put in place a system to ensure that mutual fund accounts held by investors are directly connected to mutual fund subscription and redemption operations. According to the Securities & Exchange Board of India, there would be no intermediary pooling of money.
Following the implementation of a new regulation, asset management companies (AMCs) will be accountable for compensating unitholders who have suffered losses as a result of prohibited transactions as a result of fraud, negligence, or inadequacy.
As observed by the Sebi, certain platforms pool their clients’ funds into a nodal account and subsequently transfer those monies to AMCs on a per transaction or lump sum basis, depending on the terms of their bilateral arrangement with AMCs.
In the case of MF transactions, “any intermediary pooling of funds and units by MFDMs, IAs, MFUs, channel partners, or any other service providers or platforms by whatever name is called will be halted,” according to the circular. Mutual fund service providers include a variety of entities such as investors, mutual fund distributors, and mutual fund utilities, to name a few.
The recommendations of the Mutual Fund Advisory Committee of the Securities and Exchange Board of India (Sebi) were taken into consideration during discussions with stakeholders.
All financial and non-financial transactions can only be conducted when an agreement between the AMC and the service provider/platform has been established.
According to the Securities & Exchange Board of India, a one-time mandate or the issuing of mandates/instruments in the names of MFDs, IAs, MFUs, channel partners, or other companies (including online platforms) will not be sufficient to permit mutual fund transactions.
In addition, investors should only make checks to the specific mutual fund schemes they are interested in.
After consulting with Sebi, AMFI has developed a set of guidelines for asset management companies (AMCs) to address the issue of co-mingling funds at payment aggregators/payment gateways that are involved in mutual fund transactions.
According to the Securities & Exchange Board of India, AMCs are responsible for ensuring that all parties involved in transactions have access to complete information at each stage of the transaction, including the stage of rejection.
The payment aggregators will only have access to the information that is required for reconciliation and traceability and nothing else.
According to Sebi, it is still the responsibility of the AMCs to ensure that they are complying with PMLA requirements and are not accepting payments from third-party bank accounts.
When doing online transactions, two-factor authentication will be required, whilst offline purchases would require a signature.
No matter whether the unitholder reports the fraud, the AMC is liable for any losses incurred by the unitholder as a result of any unauthorized transactions in the unitholder’s folio that occur as a result of fraud, negligence, or a deficiency on the part of the AMC, an employee of the AMC, or other persons or entities who provided services to the AMC on the AMC’s behalf. b.
The AMC, on the other hand, would not be accountable for any illegal activities carried out by investment advisors while providing services to unitholders.
It is expected that Amfi and the Securities and Exchange Board of India (Sebi) will jointly issue rules to improve controls on the verification of critical information about investors, such as their bank account information, email address, and mobile number. —PTI
The Securities & Exchange Board of India (SEBI) has announced operational guidelines for silver exchange-traded funds (ETFs), allowing investors to have exposure to the commodity in a more transparent manner. Silver ETF investment objectives, valuation, net asset value (NAV) determination, tracking error, tracking difference, and disclosure requirements have all been established by the regulator, and these criteria are included in the rules. According to a circular released by the Securities and Exchange Board of India, silver exchange-traded funds (ETFs) must invest at least 95 percent of their net assets in silver and silver-related products. Silver-based Exchange Traded Commodity Derivatives (ETCDs) will also be deemed silver-related instruments for the purposes of silver exchange-traded funds (ETFs).
With the introduction of silver exchange-traded funds, the Securities and Exchange Board of India (Sebi) has updated its guidelines to provide more options for investors looking to invest in commodities through stock markets. Indian mutual funds are currently permitted to construct exchange-traded funds that track gold (Exchange Traded Funds). According to the Securities & Exchange Board of India, a silver exchange-traded fund (ETF) scheme is a mutual fund that invests largely in silver or silver-related items, with silver as the underlying product. The revised regulations will become effective on December 9, 2021.