In a move to simplify mutual fund investments for existing and prospective investors, the Securities and Exchange Board of India (Sebi) has proposed a common platform for non-financial transactions such as updating address, mobile and email, tracking of queries and complaints, access investment related reports of mutual fund holdings and at a later stage, for purchase and redemption of mutual fund units.
The platform will be jointly developed by the Registrar and Transfer Agents (RTAs)—the two major ones are Computer Age Management Services and KFin Technologies—will have standardized practices and will be interoperable to deliver an integrated experience to the investors. Sebi has asked all the asset management companies (AMCs) and depositories to facilitate the RTAs for the development of the proposed platform. They have to provide data through Application Programming Interface (API) on a real-time basis to the proposed platform and also share their respective data feeds between themselves for the generation of investment-related reports.
What will the platform do?
In the initial phase (by December 31, 2021), the proposed platform will do all types of non-financial transactions. Later, it may provide services to the distributors, registered investment advisors, AMCs, stock exchange platforms, and digital platforms for transacting in mutual funds. Through the proposed platform, all mutual fund companies, RTAs, and depositories will have to harmonize the processes across the industry to provide a single-window, integrated, simplified investment and service experience for the investors. Experts say a consumer-facing website should be easy to navigate and ensure ease of investing.
Benefits for investors
Individuals invest in mutual funds through the websites of the fund houses, MF Utilities (a transaction aggregation portal owned by the fund houses), distributors such as banks or fintech companies. The proposed platform by Sebi will help investors as they can get all solutions related to mutual fund investments at a single place in an integrated manner. However, the platform cannot give any investment advice. Experts say the platform will save investors the hassles of reaching out to each RTAs for all their investment and redemption needs or any kind of non-financial transactions including capital gains/loss report, details of unclaimed dividend/redemption, etc.
Brijesh Damodaran, managing partner, BellWether Associates, says Sebi’s proposed platform has created excitement and anxiety at the same time. “For the investors, it is a welcome move as all non-financial transactions across the RTAs can be executed at one place,” he says.
At present, if a mutual fund investor has to update the bank details or the contact details across the mutual fund holdings, he has to first submit the documentation across all the schemes/folios. So, if an investor has five holdings in five schemes of different AMCs, he has to submit the same documents five times. “In the proposed platform, the investor will have to submit the documents at one place and only once. This was a long-standing pain, which is now sought to be addressed. This is going to save time and efforts of investors,” says Damodaran.
Competition for fintech firms
At present, fintech firms provide customers a platform to invest in various mutual fund schemes free of costs. However, they monetize by cross-selling other financial products. Damodaran says the proposed platform will be a competition to fintech firms and can wean away existing investors. “For AMCs, however, the platform will help increase their reach with the investors and increase mutual fund penetration,” he says.