‘Nominate or opt out’: SEBI directs mutual funds to set March 2023 deadline

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For this, all mutual fund houses will have to ensure that adequate systems are in place for providing the e-sign facility and take all necessary steps to maintain the confidentiality and safety of client records. SEBI, through this circular, aims to protect the interests of investors in securities and promote the development of and regulate the securities market.

In April, in a bid to safeguard the interest of mutual fund investors, SEBI had imposed a ban on the ‘intermediate pooling’ of funds and units by mutual fund distributors, investment advisers, and other entities. The rule, effective from April 1, 2022, is not applicable to SEBI-registered portfolio managers. The decision to ban intermediate pooling of funds was taken in consultation with the representatives of the association of mutual funds in India (AMFI) on the same. The action was taken in wake of increasing reports of investors being defrauded by fraudulent money pooling schemes.

SEBI also extended the deadline for discontinuation of usage of pool accounts for transactions in the units of mutual funds, and other processes, including third-party verification (TPV), two-factor authentication (2FA), and verification of key investor details as applicable to stock brokers/clearing members, and other entities operating online. The ban on such activities was proposed to be implemented from April 1, 2022, however, it will now be extended to July 1, 2022.

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