The Securities and Exchange Board of India (Sebi) has come out with its latest circular on mutual fund transactions through a one-time mandate, in a move that promises to smoothen mutual fund transactions for millions of investors across India.
The Sebi said in a statement: “On or after April 01, 2022, new mandates shall be accepted only in favour of Sebi recognised Clearing Corporations and those mandates shall exclusively be for subscriptions to units of Mutual Fund schemes and not for any other purpose.”
What it essentially means for the investors is that they can now make investments in mutual funds through their stock brokers and/or clearing houses through a one-time mandate, subject to two conditions – one being that the clearing house is recognised by Sebi, and second, the mandate is used solely for mutual fund transactions.
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Back in October 2021, the capital markets regulator had specified that stock brokers and/or clearing houses should not accept any payment in their name through a one-time mandate for mutual fund transactions.
The mandate was usually in the form of an authorisation or order, even an electronic authorisation form to effect payment by the investor to the broker/clearing house to make an investment on behalf of the investor.
Now, with today’s latest guideline, the Sebi has clarified that such one-time mandate is acceptable.
Tuesday’s circular specifies the norms for transactions for both at the stock exchanges as well as on online platforms. It comes in the wake of several recommendations to Sebi from the mutual fund advisory committee to smoothen mutual fund transactions.
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The circular further says that existing mandates currently in use for mutual fund transactions can continue to remain in the name of the stock brokers and/or clearing house. This would, however, be mandatory for the payment aggregator to ensure that the beneficiary of the mandate is an approved bank account of a mutual fund pool account or a mutual fund scheme.
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