SEBI To Allow Mutual Fund Platforms To Charge Transaction Fee

Mutual Fund Platforms Could Start Charging Transaction Fees Soon

SUMMARY

SEBI chairperson has said that MF platforms can charge some money but commission-like structure won't be allowed

On Tuesday, SEBI introduced a regulatory framework for Execution Only Platforms (EOP) for direct plans of Mutual Fund schemes

Under the approved framework, EOPs may be granted registration under the two categories

Online mutual fund (MF) investment platforms such as Groww, Zerodha Coin, and Paytm Money will soon be able to charge their customers or fund houses for executing transactions.

The chairperson of the Securities and Exchange Board of India (SEBI), Madhavi Puri Buch, has said that these platforms can charge some money but commission-like structure won’t be allowed.

On Tuesday, SEBI introduced a regulatory framework for Execution Only Platforms (EOP) for direct plans of Mutual Fund schemes.

“A number of entities, including Investment Advisers (IAs) and Stock Brokers, offer execution services in direct plans of MF schemes through digital mode. Presently, there is no regulatory framework in place to facilitate the provision of such “execution only services” in direct plans of MF schemes, independent of the regulatory requirements applicable to IAs and Stock Broker,” the board said.

Under the approved framework, EOPs may be granted registration under either of the two categories – Category 1: EOP as an agent of asset management companies (AMCs) registered with Association of Mutual Funds in India (AMFI), or Category 2: EOP as an agent of Investor registered as a stock broker.

SEBI is yet to disclose further details.

Earlier this year, SEBI proposed a regulation framework for investech players offering execution-only services in direct plans offered by mutual funds.

“To promote the penetration of MFs and ensure that ease of investment comes with adequate investor protection and grievance redressal mechanism, a framework for working of these platforms may be the stepping stone towards strengthening the investors with the power of technology along with the ability to invest directly in MF schemes,” SEBI said in a consultation paper.

SEBI said that the mutual funds industry has grown manifold in the last decade, adding that the industry had INR 38 Lakh Cr worth of assets under management (AUM) by the end of April 2022.

The market regulator also noted that AUM routed through direct plans of mutual fund schemes stood at INR 16.94 Lakh crore by the end of April 2022, with the remaining routed through regular plans.

According to Inc42 analysis, the Indian investment tech market, which stood at $6.4 Bn in 2021, is projected to touch $14.3 Bn by 2025, growing at a compounded annual growth rate (CAGR) of 22.4%.