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MFDs having stock broking arm feel that there will be huge impact on their business and inflows in mutual funds due to discontinuation of pooled account.
Currently, MFDs having stock broking arm execute MF transaction seamlessly through their pooled account. Pooled account is a bank account of brokers that they use to facilitate transactions across financial products.
One such MFD told Cafemutual that pooled account offer convenience to investors to execute seamless transaction between MF schemes and capital market instruments. “The move will disrupt inflows in mutual funds. For instance, one of my clients has recently booked profit of Rs.10 lakh by selling a security. We recommended him to put money in fixed income funds as he has a three-year horizon and doesn’t want to take risk. Practically speaking, since the money will now reach his bank account, he may change his mind.”
Another MFD with broking arm said that many investors find comfort in using pooled account for MF transactions. “Many clients use liquid funds and arbitrage funds to park money that they use for investing in capital market instruments. This will now be stopped,” he said.
The Association of National Exchanges Members of India (ANMI) approached SEBI urging the regulator to leave the discretion of using pooled accounts to investors.
In a letter sent to SEBI, ANMI said, “ANMI has received concerns from its members who have expressed reservations on difficulties that will be faced by the clients specially in tier 2 and tier 3 cities and there will be operational difficulties faced by the client in terms of doing the Mutual Fund transaction and the circular will have large scale implication on all types of stock brokers and distributors. ANMI requests your good office to allow the members to continue to use pool accounts for doing transactions in units of Mutual Funds on the Stock Exchange Platforms and choice should be left with the client to route his investment either through the member or to do a direct transaction.”
