Discontinuation of usage of pool accounts

Discontinuation of usage of pool accounts for transactions in the units of Mutual Funds, Two Factor Authentication (‘2FA’) for redemption and other related requirements: Extension of timeline

1. Based on discussions with stakeholders and recommendations of the Mutual Fund Advisory Committee, SEBI, vide circular no. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2021/635dated October 4, 2021and circular no. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2021/634 dated October 4, 2021discontinued intermediate pooling of funds and/or units in Mutual Fund transactions by stock brokers / clearing members on Stock Exchange platforms and by other entities including online platforms, respectively. The provisions of the said Circulars were to come into effect from April 01, 2022. Subsequently, for smooth implementation of the aforesaid circulars, SEBI, vide circular no. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/29 dated March 15, 2022, inter-alia, clarified various modalities of discontinuation of pooling and migration of existing mandates(the aforementioned circulars are collectively referred to as “Circulars”). Various other requirements related to the modalities of discontinuation of pooling, measures to prevent third-party payments and to safeguard the interest of unitholders including 2FA for redemption, were also prescribed in the “Circulars”.
   
2. SEBI is now in receipt of a representation from AMFI, sentin consultation with various stakeholders, seeking additional time for completion of various activities towards implementation of the “Circulars”. The activity-wise extended timelines sought by various stakeholders have been provided by AMFI (Annexure A).
   
3. On examination of the representation of AMFI, in the interest of the investors, it has been decided to extend the date of applicability of “Circulars” including the clauses relating to 2FA for redemption and source account verification to July 01, 2022.
   
4. Also, Clause 2.1.4 of the SEBI circular no. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/29 dated March 15, 2022 stands modified as under:
   “On or after July 01, 2022, new mandates shall be accepted only in favour of SEBI recognized Clearing Corporations and those mandates shall exclusively be for subscriptions to units of Mutual Fund schemes and not for any other purpose.”
   
5. The AMCs, recognised Stock Exchanges, Depositories, recognised Clearing Corporations and Registrar to an Issue and Share Transfer Agents shall take necessary steps for implementing the “Circulars”(along with the clauses relating to 2FA for redemption and source account verification) including the required processes and systems to ensure compliance with the provisions of the“Circulars”.Stock Exchanges/Clearing Corporations and AMCs are also advised to ensure strict adherence to the activity wise timelines given at Annexure –A.
   
6. Stock Exchanges and Depositories are directed to bring the provisions of this circular to the notice of their members / participants, disseminate the same on their websites and ensure strict adherence to the timelines.
   
7. All other requirements of the Circulars dated October 4, 2021 and March 15, 2022 shall remain unchanged.
   
8. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market.

Annexure

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