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One of our readers called us with this query:
I read about execution only platforms (EOPs) on Cafemutual today. I am an individual MFD and would like to become EOP to distribute direct plans along with regular plans. I would like to understand if I am allowed to obtain EOP registration and if yes, what are the points I should keep in mind?
Siddharth Varma, Kolkata
Dear Siddharth,
Yes, anyone including an individual MFD, can float execution only platforms (EOPs).
SEBI defines EOP as any digital or online platform, which facilitates transactions such as subscription, redemption and switch transactions in direct plans of the schemes of mutual funds.
However, you need to float a corporate body before applying for such a license.
Also, you need to segregate both the businesses i.e. EOP and MF distribution and avoid conflict of interest (if any). Both the entities will have to maintain arm’s length distance between both the functions. Overall, you need to have a different office with different employees for both the businesses.
Also, you will have to ensure family level segregation between direct and regular business. For instance, if a father is your distribution client, his son cannot become your EOP client. Family of investor includes individual investor, dependent spouse, de-pendent children and dependent parents.
AMFI and stock exchange will soon issue guidelines to define upper cap on transaction fee that EOPs can levy. Currently, stock exchange platform charge Rs.6 per transaction irrespective of application size. The upcoming structure is likely to be on similar lines.
Overall, while you can become an EOP and open a new line of business, remember, it would be very costly affair for an individual considering the increasing cost of developing & managing apps and cost of acquiring clients.
