SEBI to introduce regulatory framework for 'execution only platforms' for direct plans of mutual fund schemes

The move would add convenience to investors in making investments through Execution Only Platforms (EOPs) and would help in ease of doing business for the platforms by mandating only such appropriate regulatory compliances as is required for the EOP activity.

Under the mechanism, an entity desirous of providing execution-only services in direct plans of mutual funds may be granted registration under either of the two categories — category 1 EOP as an agent of asset management companies registered with the industry body Association of Mutual Funds in India (AMFI) or category 2 EOP as an agent of investor, registered as a stock broker.

The detailed framework and the modalities of implementation of the same, nature of services that may be offered by the EOPs, cyber security requirements, pricing of services, and grievance redressal mechanisms, among others, would be notified through circulars, Sebi said.

The 43-player mutual fund industry has seen tremendous growth in the past decade and currently, the industry has Asset Under Management (AUM) worth Rs 40 lakh crore. As on April 30, 2022, AUM routed through direct plans of MF schemes stood at Rs 16.94 lakh crore.