Market watchdog Sebi today allowed Mutual Funds distributors to use the infrastructure of stock exchanges for purchase and redemption of mutual fund units directly from Assets Management Companies on behalf of their clients.
This would be in addition to the existing channels of mutual fund distribution.
The move is aimed at leveraging the stock exchange platform, which would eventually help MF distributors to improve their reach.
"It has been decided to allow MF distributors to use recognised stock exchanges' infrastructure to purchase and redeem mutual fund units directly from Mutual Fund/AMCs on behalf of their clients," Sebi said in a circular.
At present, this facility is available for stock brokers and clearing members only.
However, Sebi said only a MF distributor registered with Amfi (Association of Mutual Funds in India) and who has been permitted by the stock exchange concerned would be eligible for this purpose.
The stock exchange would grant permission on a request made by a Amfi registered MF distributor on the basis of criteria including fee and code of conduct among others as laid down by it.
Sebi said that MF distributors would not handle payout and pay in of funds as well as units on behalf of investor.
"The stock exchange shall put necessary system in place to ensure that pay in will be directly received by recognised clearing corporation and payout will be directly made to investor account," the regulator said.
In the same manner, units shall be credited and debited directly from the demat account of investors, it added.
Sebi asked respective stock exchanges, clearing corporations and depositories to provide detailed operating guidelines for MF distributor to facilitate this new norms.