SEBI introduces regulatory framework for Execution Only Platforms for facilitating transactions in direct plans of schemes of Mutual Funds

The Securities and Exchange Board of India (“SEBI”) to facilitate transactions in direct plans of schemes of Mutual Funds has issued Regulatory framework for Execution Only Platforms that will come into effect from 1st September, 2023. Currently various SEBI registered Investment Advisors/Stock Brokers provide execution services in direct plans of Mutual Fund schemes through their technology/digital platforms and there is no specific framework available. Therefore, a need was felt to strike a  balance between investor convenience and investor protection.

Under the framework there will be 2 categories of Execution Only Platforms (“EOP”), additionally the framework has laid down the following directions –

1. Eligibility criteria for registering as an EOP
2. Process for onboarding investors
3. The agreements to be entered by EOPs.
4. The transaction and on boarding fees to be levied
5. Setting up of a comprehensive  risk  management framework
6. Setting up of grievance redressal mechanism
7. Process of handling conflict of interest
8. Technology requirements
9. Disclosure requirements
10. Maintenance of books of accounts and records.
11. Registrations to be obtained by existing platforms by 1st December, 2023.

For a detailed read, please refer to the hyperlink below.

Source : Securities and Exchange Board of India