Digital platforms such as Zerodha and Paytm Money that allow investors to buy, redeem or switch units in direct plans of mutual funds will now have to comply with the new norms.
Markets regulator SEBI has followed up on last year’s consultation paper with final guidelines to lay out a detailed regulatory framework on execution-only platforms (EOPs).
One of the restrictions imposed on these platforms is that such EOPs cannot sell regular schemes of mutual funds on their website. Another restriction is that these EOPs cannot advertise specific mutual funds or mutual fund schemes on their platform.
Please tell that SEBI-
Online platforms run by registered investment advisors will not be covered under this new framework.
charge fees from AMC
SEBI has divided such EOPs into two categories. Category 1 EOPs have to be registered with the Association of Mutual Funds in India (AMFI) and collect fees directly from Asset Management Companies (AMCs). These entities will have to enter into an agreement with the AMC.
Whereas, Category 2 EOP will be registered with SEBI as a stock broker and will charge fees from the investors. Existing platforms will have to register under any one category of EOP by September 1, 2023.
In terms of fees, Category 1 EOPs can charge a flat fee from asset management companies, which will not be based on the volume of trades. However, Category 2 EOPs will charge the same fees from investors. The fee structure will be nominal and will be decided by AMFI and the stock exchange.
SEBI has also asked EOPs to desist from advertisements of specific mutual funds. At present, many digital platforms selling mutual funds are running advertisements of various funds and fund houses.