Mutual fund intermediaries have asked the Securities and Exchange Board of India (Sebi) to

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bring chan-ges in the allotment and redemption process of mutual fund units sold through

exchanges. These suggestions came in a recent meeting held between stock brokers selling mutual funds thro-ugh the exchange platform and Sebi.

The stock exchange platform has failed to garner good volume in mutual fund sales since the schemes started selling through exchanges – the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) – in December 2009.

One of the major concerns of brokers is the direct allotment of units to an investor’s account by mutual fund companies. The distributors have contended that most investors buy mutual funds through cheques, which take two-three days to get cashed, and in many cases, the cheques bounce after the mutual fund units have been debited in the investor’s account.

“We have been demanding that the present rules be changed to route the mutual fund units through a broker’s pool account so that the units get allotted to investors only after the broker has received the money,” D K Agarwal, managing director, SMC Wealth, told FC.

Rakesh Goyal, senior vice-president, Bonanza Portfolio, a Mumbai-based broking house, said the company has been asking for the change in this rule for a long time but Sebi is yet to take any action in this regard. “Due to this, many brokers are reluctant to sell mutual funds,” he added.

To buy or sell mutual fund units through stock exchanges, a mutual fund investor needs to have a demat account.

The brokers have also demanded a similar payment structure in case of redemption of units.

Mukesh Gupta, a Delhi-based financial adviser and broker, said in many cases, investors sell units of a particular scheme to buy units of another fund. “As the money after redemption is debited to an investor’s demat account, the investor has to again transfer that amount to brokers to buy the desired funds. This results in losing of seven-eight days, by which time the net asset value of the scheme may have changed drastically,” he said.

Sebi has also been considering limited purpose membership of stock exchanges to non-broking mutual fund distributors such as independent financial advisers (IFAs) at a nominal cost. This is to alley the fear of IFAs, who have shown their inability to avail of exchange membership due to lack of funds.

Gupta said Sebi has not done much to actually implement the step.

Brokers have also asked for availability of all mutual fund schemes on the exchange terminals.

At present, out of 41 asset management companies, only 18 have started selling their schemes on both the exchanges.

dipakmondal@mydigitalfc.com