Market regulator Securities and Exchange Board of India (SEBI) has again shown strictness to check the misuse of investors’ money. SEBI has banned the launch of any new mutual fund scheme for three months for the next three months. SEBI has taken this decision to stop pooling of investors’ money.
what is pooling
Actually, right now brokers or intermediaries keep investors’ money in their account first. The money is then sent to clearing corporations or asset management companies. This process is called pooling. SEBI has been showing strictness in this regard since last year. In October last year, SEBI had told the industry that this practice should stop and money should go directly from investors’ accounts to mutual funds. In compliance, the mutual fund industry had sought time. Its deadline has already been extended twice. Now once again SEBI has extended it till June 30.
In a statement issued by AMFI, an association of mutual fund companies, it has been said that the mutual fund industry has also agreed to stop New Fund Offering (NFO) during this period for the time being. According to AMFI, the objective of extending the deadline for closure of pooling of fund accounts is to facilitate an efficient technology and smooth transition to meet the growing needs of investors.
After discussions and agreements with the mutual fund industry, SEBI has extended the deadline for the mutual fund industry to close pooling of accounts till July 1, 2022. AMFI said that this deadline has been extended in the interest of industry investors to bring in higher level of operational efficiency and efficient functioning of mutual fund subscriptions and redemptions.
There will be no problem in following the orders of SEBI
A Balasubramanian, chairman of AMFI and CEO of Aditya Birla Sun Life AMC, says that SEBI wants to completely change the existing system of pooling money. According to Balasubramanian, the majority of the investment is coming from existing schemes. In such a situation, there will not be much problem in following the instructions of SEBI.
Brokers’ role will be limited
As per SEBI directives, stock brokers or clearing members will not be able to handle pay in pay out. Banks, stock exchanges, payment gateways and clearing corporations need to work on a war footing with Asset Management Companies (AMCs) to comply with the SEBI directives as there will be changes in technology platforms, payment gateways and transaction platforms.
AUM crossed 37 lakh crores
Investment in mutual fund schemes is continuously increasing. This is the reason that the total Asset Under Management (AUM) of the mutual fund industry has reached 37.56 lakh crores. According to AMFI data, there has been an increase of Rs 31,533 crore in AUM in February.
Mutual fund industry reaches average level in terms of fees and expenses
Due to continuous strictness by SEBI, transparency in the mutual fund industry is increasing. This is reducing the cost of investment. This is why India’s mutual fund industry has reached average levels in Morningster Inc’s fee and expense scorecard. The ranking of the Indian industry in 2019 was below average.
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