Regulator also unhappy with phase-1 of two-factor authentication framework, asks Amfi for schedule and progress reports
Mutual funds (MF) allegedly delaying pooling norms has prompted the market regulator to press the Rs 39-trillion industry for timely action.
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The Securities and Exchange Board of India (SEBI) last week asked the Association of Mutual Funds in India (Amfi) to provide an activity schedule and progress reports on ensuring timely implementation of its framework for two-factor authentication, a security measure for subscribers of MF units.
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SEBI usually sets implementation deadlines and rarely does it ask for regular updates, said one industry official. According to a senior MF executive, SEBI appears miffed by the industry’s failure to properly implement new frameworks for the discontinuation of pooling of funds and the introduction of two-factor authentication for redemptions. This is despite the industry getting an extension.
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“Amfi shall furnish by October 14, the activity-wise schedule for implementation so as to ensure compliance. Amfi shall also furnish progress reports on implementation of provisions of this circular to SEBI on a bi-monthly basis, starting from December 01,” said the regulator in a circular. The second phase of the two-factor authentication framework for MF subscriptions comes into effect from April 1, 2023. In the first phase, two-factor authentication for redemption of MF units was implemented on July 1 for non-stock exchange platform transactions.
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The operational changes aim to prevent third-party payments and safeguard unitholders. The framework around pooling and two-factor authentication was to come into effect in April 2022 but was deferred to July 2022 on AMFI’s recommendation. The extension was given on the condition that fund houses will not launch any scheme between April and June.
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However, the implementation didn’t go through even after the extended deadline. BSE StAR MF, a major MF transaction platform, developed glitches that resulted in several transactions failing. The platform said the problem was the result of incorrect investor information provided by payment aggregators.
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“SEBI gives proper time to implement circulars. The regulator is bound to be disappointed if you seek extensions every time. The regulator’s frustration was first visible when it enacted a three-month ban on NFOs,” the official said on condition of anonymity.
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Sebi’s stricter tone, as reflected in its latest circular, follows the absence of its officials from Amfi’s recent annual general meeting (AGM). AGM attendees were not apprised of any reason for the absence of SEBI officials who were listed as speakers on the agenda, said people in the know. “We were surprised that Sebi officials didn’t turn up for the AGM. They used to be always there and that tradition now stands broken. Given the fact that no explanation was provided for absence, it’s evident that something’s not right between Sebi and AMFI,” said the senior AMC official.
Source : Business Standard
