SEBI Allows Mutual Funds to be Bought on Stock Exchanges via Distributors

5 October 2013

Although SEBI's circular reads that distributors will be allowed to purchase and redeem units directly from Mutual Fund/Assets Management Companies on behalf of their clients, it is not clear whether such investment would qualify for the 'direct' plan of investment in mutual funds. Direct plan funds have lower expense ratio and NAV.

Distributors would be granted permission by stock exchanges based on criteria such as fee, code of conduct etc and this cost can be expected to be passed on to investors.

This new facility will be similar to existing facility of investors transacting in mutual funds through a stockbroker. Distributors will not handle payments; it will be done directly by clearing corporation of the exchange and credited or debited to investor's account.

Once it gets running, investors having demat account and no trading account with a stock broker would have the option of buying units from the AMC using their demat account via online mutual fund distributors.

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