Discontinuation of usage of pool accounts for transactions in units of Mutual Funds on the Stock Exchange Platforms
Summary
This circular discontinues the usage of pool accounts for mutual fund transactions on stock exchange platforms, mandating direct settlement between investors and clearing corporations. It imposes strict prohibitions on stock brokers and clearing members handling investor funds or units in their proprietary or pool accounts. The provisions become effective from April 1, 2022, requiring all relevant intermediaries to implement necessary systems and adhere to new operating guidelines.
Text
Pooling of funds and/ or units by stock brokers / clearing members in any form or manner shall be discontinued for mutual fund transactions.
Stock exchanges shall put necessary mechanisms in place... to ensure that funds pay-in is directly received by the clearing corporation from the investor account and funds pay-out is directly made to the investor account. Pay-in / pay-out of funds shall not be handled by the stock brokers / clearing members.
For both demat and non-demat mode transactions, the units shall be credited and debited directly to/ from the investors’ demat account/ folio account without routing it through the pool account of the stock brokers / clearing members.
Stock brokers / clearing members facilitating mutual fund transactions shall not accept mandates for SIPs or Lumpsum transactions in their name.
Accept cheque payments from investors issued in favor of the respective SEBI recognized Clearing Corporations or mutual fund scheme(s) only.
Not accept or handle funds or units of investors in their proprietary accounts or pool accounts in any form or manner.
Not accept payment through one-time mandate or issuance of mandates/ instruments in their name for mutual fund transactions. However, one-time mandates in favour of SEBI recognized Clearing Corporations may be accepted.
The onus of compliance with PMLA provisions and not permitting transactions with third party bank account continues to lie with the AMCs.
Relevant information shall be made available to all the stakeholders involved in the transactions... in line with the Operating Guidelines issued by the Stock Exchanges in this regard.
The information sharing as above, shall be system generated and adequately secured. Cost towards system development / improvement in this regard, if any, shall not be passed on to the investors.
Stock Exchanges and AMFI shall jointly, in consultation with SEBI, issue Operating Guidelines to stock brokers/ clearing members and AMCs respectively... All the concerned intermediaries shall comply with the aforesaid Operating Guidelines.
Stock brokers are required to comply with general obligations and responsibilities specified in Chapter III of SEBI (Investment Advisers) Regulations, 2013, which, inter-alia, provide that client level segregation of advisory and distribution activities needs to be ensured at the entity and group level.
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Source: SecMarx — Discontinuation of usage of pool accounts for transactions in units of Mutual Funds on the Stock Exchange Platforms. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.