Ahmedabad Times

Markets regulator Sebi on Wednesday proposed permitting third-party funds in mutual funds in sure eventualities, similar to funding by an employer on behalf of its staff and cost of commissions by AMCs, supplied enough safeguards are in place.

The present regulatory framework mandates that every one funds for investments in mutual funds should originate immediately from the investor’s personal checking account and be routed solely by means of RBI-authorised cost aggregators or Sebi-recognised clearing firms.

After receiving suggestions from the trade, Sebi felt a must overview the prevailing framework for third-party funds in mutual funds by allowing particular, well-defined eventualities the place such funds could also be allowed with out compromising the overarching targets of investor safety and compliance with the provisions of the Prevention of Cash Laundering Act (PMLA).

“The intent is to strike a balanced method that facilitates ease of investing in real instances whereas reinforcing sturdy safeguards towards potential misuse,” Sebi mentioned.

Accordingly, in its session paper, Sebi proposed a third-party cost state of affairs the place an employer pays for worker investments in mutual fund items by means of payroll deduction.

“The proposed state of affairs acknowledges the established follow of employers providing numerous advantages and financial savings avenues to their staff. This mechanism would permit asset administration firms (AMCs) to just accept consolidated funds for mutual fund investments by means of wage deduction,” Sebi mentioned.
Additional, the regulator advised one other state of affairs involving third-party cost, the place AMCs pays mutual fund distributors (MFDs) within the type of mutual fund items as a substitute of path fee.The proposed state of affairs — allotting mutual fund items as a substitute of path fee, as agreed between AMC and the mutual fund distributor — will present a handy, seamless and disciplined method for the MFD to put money into MF items and can encourage MFDs to avoid wasting and make investments for the long run, it added.

Moreover, Sebi has proposed to allow buyers to contribute a portion of the subscription quantity or a scheme’s return towards a social trigger. This goals to facilitate investor contributions to social causes by means of a regulated, clear and investor-protected framework.

To handle PMLA dangers in third-party funds, Sebi has advised safeguards like sturdy KYC for each the payee and beneficiary, a transparent written mandate, and an auditable, non-cash digital fund path through segregated accounts with common reconciliation.

AMCs should carry out due diligence and guarantee transparency, guaranteeing beneficiaries full redemption liquidity, Sebi advised.

The Securities and Trade Board of India (Sebi) has sought public feedback until June 10 on the proposals. PTI