InvestorQ : Is it true that the permission to allow investors to directly buy mutual funds from the stock exchange been driven by the Karvy Crisis? How would it help?
Moii Chavate made post

Is it true that the permission to allow investors to directly buy mutual funds from the stock exchange been driven by the Karvy Crisis? How would it help?

Answer
user profile image
Sam Eswaran answered.
6 months ago


While this may not be directly driven by the Karvy crisis, it has surely been inspired by the need to avoid a situation where the broker is able to use the shares pledged with them or the money in float. It is a key step towards professional clearing of all equity market and mutual fund transactions. Now investors will move from buying MFs through brokers to buying on the stock exchange and hence the transaction risk is largely reduced. You have well capitalized clearing houses taking care of mutual fund clearing and settlement. This is much safer than leaving the float with the broker, as is the case now when MFs are bought through brokers. SEBI may have thought of this measure as a first step to put an end to trading members doubling up as clearing members. If the MF experiment works, then the clearing corporations could handle all the clearing for the equities also. That could be a big step towards making mutual funds and equities a lot safer!