SEBI has extended the deadline to stop pooling funds until July 1, 2022
The Securities and Exchange Board of India (SEBI) has extended the deadline to stop pooling accounts by three months until July 1, 2022. The previous deadline to stop the exercise was April 1, 2022.
Discontinuation of account pooling will ensure that funds used for the purchase of a mutual fund by an investor will go directly to the account of the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), and not to the account of the stockbroker.
Likewise, mutual funds are also deemed to be credited directly to the investor’s account (in cases where this is not currently done) once the move initiated by SEBI takes effect.
The extension of the deadline will help efficient technology overhaul and its smooth transition to meet the growing needs of investors, said a statement from the Association of Mutual Funds in India (AMFI).
The association said it had asked SEBI to extend the deadline to give more time for the transition and help investors with the change in the system.
When an investor places a “buy” order for mutual funds through a stockbroker, money from his or her account is credited to the broker’s pool account. From there, the money goes into the account of NSE Clearing or BSE Clearing Corporation, to be credited to the account of the investment company for asset management (AMC).
After the pooling system ends, the funds are moved directly from the investor’s account to the NSE Clearing or BSE Clearing Corporation and not to the broker’s account.
Effective April 1, 2022, stockbrokers, mutual fund distributors, investment advisers and other service providers involved in mutual fund transactions for their clients would stop pooling funds. This was to be done in accordance with SEBI’s October 2021 order, which had ruled out such pooling.
The intent of the SEBI movement was to ensure the safety of investors’ money and prevent possible misuse of it by intermediaries involved in such transactions.
The AMFI statement said that, after mutual discussion and agreement, SEBI gave the mutual fund industry until July 1 to stop pooling accounts. This would enable the industry to achieve a high level of operational efficiency for the benefit of investors and also enable efficient operation of investment fund subscriptions and redemptions.
Commenting on the development, A Balasubramanian, Chairman of AMFI, said: “We are confident in a faster implementation thanks to the adoption of new technology and with the help of other stakeholders such as exchanges and channel partners so that we can further strengthen our investor service and their evolving savings needs. to newer mutual fund solutions.”
