Sebi: Sebi proposes rules for fintech platforms

Mumbai: The Securities and Exchange Board of India (Sebi) has proposed a regulatory framework for fintech platforms that offer executive services in direct plans of mutual fund schemes to investors.

Today, investors have the option of investing directly (direct plan) or through a distributor in a mutual fund scheme (ordinary plan).

Both direct and regular plans are part of the same scheme of a mutual fund, but have different expense ratios.

Sebi said it has observed various investment advisers and stockbrokers have been providing execution services in direct plans for mutual fund schemes through their digital platforms.

However, not all investors transacting in Direct Plans of Mutual Fund Schemes through these platforms make use of any advisory services. Rather, they use the platform only to transact in direct plans for mutual fund schemes.

In the case of such investors, investment advisers and stockbrokers typically use their respective registration codes to gain visibility into the data feeds of their clients’ transactions conducted through their platform.

The regulator said in the context of the visibility of customers’ transaction data streams, it has clarified that a stockbroker and investment adviser can have visibility of customers’ direct plan transaction data streams from RTAs (Registrar and Transfer Agents) for customers using advice, brokerage and portfolio management services by using their codes .

“The use of investment adviser or stockbroker registration code by platforms for visibility of the transactions provides convenience for investors by providing an overall overview of their investments. But for investors who are not their clients in terms of investment adviser and stockbroker regulations, the risks associated with such transactions cannot is overlooked as the non-clients have no recourse or protection available under any regulatory framework. Hence, there is a need to strike a balance between convenience and investor protection,” Sebi said in a discussion. paper on Friday.

Currently, as per the Sebi rules for on-boarding of an investor as a client, investment advisers and stockbrokers are required to enter into an agreement with the clients.

“Investors who direct their mutual fund transactions through such platforms provided by investment advisers and stock brokers may find it impractical to execute agreements where many contractual provisions and similar documents required for investment advisers and stock brokers may not be relevant to investors who use execution-only services through them for transactions in mutual funds,” Sebi said.