While SEBI has not banned the broker pooling accounts, it is now mulling a proposal to bank broker pool accounts in mutual funds altogether. Mutual fund distribution may therefore undergo a shift as pooling is moving out. SEBI announcement could have potentially far-reaching implications for the way mutual funds are distributed in India. In a direct plan, the investor directly submits the application to the AMC or registrar without a broker code. However, in regular plans the client submits the payment to the broker. That money remains in the pool account of broker before it’s credited to the individual bank account. That is where SEBI was uncomfortable, especially after the recent Karvy experience, as there is a window of 2-3 days when neither the AMC nor the registrar has control over the funds. This move will also impact digital MF platforms like Paytm that offer MF investments.

The problems in the Karvy case arose in the equity pool accounts of the broker but SEBI apprehends that such a situation could arise in the case of mutual funds too. After all, nothing stops a broker from misusing the mutual fund float of a client. It is in this light that SEBI wants to ban the concept of pooling accounts altogether. The set up will have to be such that any investment would mean a debit to the investor account and a seamless credit to the AMC bank account. The reverse case will apply in case of sale of fund units as the money will directly move from the AMC account into the client account.