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Paytm Money has announced that it will migrate its MF business, which is currently under RIA model to broking business.
Please note that stock brokers are allowed to offer direct plans of mutual funds provided they maintain arm’s length distance between their distribution business and broking business. A few direct plan platforms like Zerodha use broking license to offer direct plan of mutual funds.
Paytm Money will use BSE Star MF to facilitate transaction in mutual funds through demat mode of holding. The move is expected to give the company an opportunity to cross sell other financial products through BSE platform like stocks, derivatives and so on and levy broking and annual maintenance fees from investors.
With this, investors investing with Paytm Money will have to fulfil additional requirement of KYC to migrate their MF folio to BSE Star MF. Investors need to complete this formality by October 31; failure to do that will impact their fresh investment. In other words, investors will not be able to do fresh purchases including SIP through Paytm Money post October 31.
Please note that there is no compulsion on investors to shift their assets to demat account. They may continue to keep their existing investments with Paytm Money’s platform unless they want to do fresh investment.
Varun Sridhar, CEO, Paytm Money said that there will be no fee or charges for this transition. He said, "Paytm Money since inception in 2018 has been executing direct mutual fund transactions for lakhs of retail investors with our RIA code and using our own technology platform. We are migrating to the BSE StAR exchange platform and our transactions will use our broking code instead of RIA Code. To ensure continuity of investors' saving plan all investors are required as per regulations to have a UCC code. Consequently, they are required to update their KYC and complete account opening form for a Demat account. We have waived all charges & fees for this Demat account as long as clients are investing only in mutual funds.
However, if an investor holds other securities in their demat account, the company will levy fees and charges. “Further, the MF units will continue to be in statement of account (SoA) form and not in Demat form. Only if the investor transacts in equity they will be charged as per the current equity tariff which anyways is very competitive. Post launch of the migration process, many clients have already completed their demat account opening and KYC to the BSE StAR MF platform.”
