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SEBI has barred mutual fund companies from launching new schemes till they fix the pooled account issue.
In a letter sent to AMFI, SEBI said that fund houses will have to put a stop on usage of pooled accounts by MFDs, stock brokers and online investment platforms.
Currently, MFDs, stock brokers and online investment platforms receives money on their bank account (called pooled account) to facilitate transactions. However, SEBI feels that this practice is risky as these intermediaries can mis-use investors’ money through pooled account. In 2019, Karvy Stock Broking allegedly misused the pooling accounts of investors to raise loan against pledged shares.
SEBI has also asked fund houses to introduce two-factor authentication during redemption. This is basically authenticating redemption transaction through OTP.
Sharing its rationale behind the move, SEBI said that the ban on NFOs will provide fund houses with undivided time and attention to implement the new norms on pooled accounts and other measures in the interest of investors like two-factor authentication during redemption and prevention of payments through third-party bank accounts.
On October 4, 2021, SEBI had issued a circular asking AMCs to put an end to use of pooled accounts by MFDs, stock brokers and online platforms. However, in March 2022, the regulator allowed existing SIPs running through pooled accounts to continue, provided the money is routed directly to the mutual fund account.
The letter comes on the same day the regulator issued a circular pushing the last date of usage of pooled accounts to July 1, 2022 from April 1, 2022.
Commenting on the move, CEO of an AMC said that it doesn’t make sense to put a complete halt on NFOs. "I don't see any logic behind the move. With the ban on new investments in international funds, mutual funds were looking to launch ETF-based international schemes to receive the allocations meant for international exposure. But now, even that won't be possible," he said.
The regulator said that the move is based on recommendations from AMFI. "You (AMFI) have also represented that significant effort and high priority is required from your side to implement the aforesaid circulars and that approvals of new schemes may be kept on hold to ensure undivided attention to the proper execution of this project in coordination with large number of stakeholders," SEBI said in the letter.
