Two-Factor Authentication for transactions in units of Mutual Funds
Summary
This circular extends the mandatory Two-Factor Authentication requirement to subscription transactions in Mutual Fund units, building upon previous measures for redemptions. It modifies Clause 4.4 of an earlier SEBI circular to specify authentication methods for online and offline transactions, including demat and non-demat cases. The provisions are scheduled to become effective from April 1, 2023, with AMFI required to submit implementation schedules and progress reports.
Text
Two-Factor Authentication for subscription transactions in the units of Mutual Funds is extended to further safeguard investor interest.
In case of subscription and redemption of units, Two-Factor Authentication (for online transactions) and signature method (for offline transactions) shall be used for authentication.
One of the Factors for such Two-Factor Authentication for non-demat transaction shall be a One-Time Password sent to the unit holder at his/her email/phone number registered with the AMC/RTA.
In case of demat transaction, process of Two-Factor authentication as laid down by the Depositories shall be followed.
In case of mandates/systematic transactions the requirement of Two-Factor Authentication shall be applicable only at the time of registration of mandate/systematic transactions.
AMFI’s best practice guidelines issued for AMCs with regard to Two-Factor authentication for redemption transactions of Mutual Funds shall be revised suitably to include subscription transactions of Mutual Funds.
It shall be mandatory for all AMCs to follow such guidelines.
The provisions of this Circular shall be applicable with effect from April 01, 2023.
The AMCs, AMFI, recognized Stock Exchanges, Depositories, recognized Clearing Corporations and Registrar to an Issue and Share Transfer Agents shall take necessary steps for implementing the circular, including putting required processes and systems in place to ensure compliance.
AMFI shall furnish by October 14, 2022, the activity wise schedule for implementation so as to ensure compliance with para 2 above.
AMFI shall also furnish progress report on implementation of provisions of this circular to SEBI on a bi-monthly basis, starting from December 01, 2022.
This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.
Source: SecMarx — Two-Factor Authentication for transactions in units of Mutual Funds. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.