Securities and Exchange Board of India (Sebi) on Wednesday directed asset management companies to make additional announcements with regards to transfer of mutual fund units.

Regulation 37(1) of Sebi (Mutual Fund) Regulations, 1996 said, “A unit unless otherwise restricted or prohibited under the scheme, shall be freely transferable by act of parties or by operation of law.” While the spirit and intention of this regulation is not to prohibit transferability of units as a general rule or practice, Sebi has noticed that MF schemes prohibit transfer on a regular basis.

In order to facilitate transferability of MF units held in one demat account to another demat account, Sebi has decided that all AMCs shall issue necessary clarifications. This should be done by way of an addendum that units of all mutual fund schemes held in demat form shall be freely transferable from the date of the issue of the said addendum, which shall be not later than October 1.

However, Sebi has clarified that restrictions on the transfer of units of ELSS schemes (tax-saving) during the lock-in period shall continue to be applicable as per the ELSS guidelines.