AMFI says it will provide time for the industry to upgrade to regulator’s norms
The first of its kind ban on launch of new fund offer (NFO) by mutual funds is expected to put the brakes on fresh inflows into the mutual fund industry, which had witnessed one of the highest flows from NFOs last fiscal.
On Friday, SEBI told MF houses to ensure that no distributor, online platform, stockbroker or investment advisor use pool accounts and then transfer it to the fund house for purchasing units of schemes for investors. The regulator also directed the industry to implement a two-factor authentication for redemption and verification of source accounts when MF investments are made.
The ban is expected to delay 15-20 issues that were waiting in the wings to hit the market after the start of the new financial year. Most of the new offers are from the debt fund category and exchange traded funds, said a source.
During the NFO period, most retail investors subscribe to the issue by parking their money in the pool account of stock brokers and online platform. However, the amount is transferred to the fund houses only on the last day of NFO, said Rakesh Jain, an investor. Since the pool account holds money across different asset class, it is difficult to track usage of investors’ money, sources said.
On the same page
A Balasubramanian, chairman of the Association of Mutual Funds in India (AMFI), told BusinessLine that mutual funds are on the same page with the SEBI on halting NFO as it will provide ample time to upgrade and test the technology for meeting norms. The industry is confident of beating the July 1 deadline, he added.