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Delayed implementation of pooling norms has prompted the market regulator Securities and Exchange Board of India (Sebi) to adopt a sterner approach towards the Rs 39-trillion domestic mutual fund industry.
To ensure timely implementation of the framework around two-factor authentication for subscription of MF units, Sebi has directed the Association of Mutual Funds in India (Amfi) to provide a timely activity schedule and progress reports.
Market observers say such a move is a departure from the past. Typically, the regulator only sets an implementation deadline, and rarely does it ask for updates, said one industry official.
According to a senior MF executive, the regulator seems to be miffed by industry’s failure to smoothly implement new frameworks around the discontinuation of pooling of funds and introduction of two factor authentication for redemptions. This despite providing the industry with an extension.
“Amfi shall furnish by October 14, the activity-wise schedule for implementation so as to ensure compliance. Amfi shall also furnish progress reports on implementation of provisions of this circular to Sebi on a bi-monthly basis, starting from December 01,” Sebi said in a circular last week.
The second phase of the two-factor authentication framework for subscription of MF transactions will come into effect from April 1, 2023. In the first phase, the two-factor authentication for redemption of MF units was implemented starting July 1 for non-stock exchange platform transactions.
These new operational changes are being introduced to prevent third-party payments and to safeguard the interest of unitholders.
The framework around pooling and two-factor authentication were to come into effect in April 2022 but were pushed to July 2022 on Amfi’s recommendation. The extension came with a condition that fund houses will not launch any scheme between April and June.
However, the implementation still didn’t go through as expected even on the extended deadline. One of the major MF transaction platforms BSE StAR MF developed glitches, which resulted in failure of several transactions. The platform said the problems were a result of incorrect investor information provided by payment aggregators.
“Sebi gives proper time to implement circulars. The regulator is bound to be disappointed if you seek extensions every time. The regulator’s frustration was first visible when it enacted a three-month ban on NFOs,” the official said on condition of anonymity.
The stricter tone of Sebi, in the latest circular, follows the absence of Sebi officials from Amfi’s recent annual general meeting (AGM) despite confirming their participation. AGM attendees were not apprised of any reason for the absence of Sebi officials despite the agenda having them listed as speakers, said people in the know.
“We were surprised that Sebi officials didn’t turn up for the AGM. They used to be always there and that tradition now stands broken. Given the fact that no explanation was provided for absence, it’s evident that something’s not right between Sebi and Amfi,” said the senior AMC official.
Emails sent to Sebi and Amfi seeking comments on this issue remained unanswered.
Delayed implementation of pooling norms has prompted the market regulator Securities and Exchange Board of India (Sebi) to adopt a sterner approach towards the Rs 39-trillion domestic mutual fund industry.
To ensure timely implementation of the framework around two-factor authentication for subscription of MF units, Sebi has directed the Association of Mutual Funds in India (Amfi) to provide a timely activity schedule and progress reports.
Market observers say such a move is a departure from the past. Typically, the regulator only sets an implementation deadline, and rarely does it ask for updates, said one industry official.
According to a senior MF executive, the regulator seems to be miffed by industry’s failure to smoothly implement new frameworks around the discontinuation of pooling of funds and introduction of two factor authentication for redemptions. This despite providing the industry with an extension.
“Amfi shall furnish by October 14, the activity-wise schedule for implementation so as to ensure compliance. Amfi shall also furnish progress reports on implementation of provisions of this circular to Sebi on a bi-monthly basis, starting from December 01,” Sebi said in a circular last week.
The second phase of the two-factor authentication framework for subscription of MF transactions will come into effect from April 1, 2023. In the first phase, the two-factor authentication for redemption of MF units was implemented starting July 1 for non-stock exchange platform transactions.
These new operational changes are being introduced to prevent third-party payments and to safeguard the interest of unitholders.
The framework around pooling and two-factor authentication were to come into effect in April 2022 but were pushed to July 2022 on Amfi’s recommendation. The extension came with a condition that fund houses will not launch any scheme between April and June.
However, the implementation still didn’t go through as expected even on the extended deadline. One of the major MF transaction platforms BSE StAR MF developed glitches, which resulted in failure of several transactions. The platform said the problems were a result of incorrect investor information provided by payment aggregators.
“Sebi gives proper time to implement circulars. The regulator is bound to be disappointed if you seek extensions every time. The regulator’s frustration was first visible when it enacted a three-month ban on NFOs,” the official said on condition of anonymity.
The stricter tone of Sebi, in the latest circular, follows the absence of Sebi officials from Amfi’s recent annual general meeting (AGM) despite confirming their participation. AGM attendees were not apprised of any reason for the absence of Sebi officials despite the agenda having them listed as speakers, said people in the know.
“We were surprised that Sebi officials didn’t turn up for the AGM. They used to be always there and that tradition now stands broken. Given the fact that no explanation was provided for absence, it’s evident that something’s not right between Sebi and Amfi,” said the senior AMC official.
Emails sent to Sebi and Amfi seeking comments on this issue remained unanswered.