ETMarkets.comThe Securities and Exchange Board of India (SEBI) has made it mandatory for providers of execution-only platforms for direct plans of mutual fund schemes to get registered in case they wish to offer services. While investors may find it convenient to avail services of such online platforms, those who are not clients of such intermediaries under the regulations may not have recourse or protection for the risks associated with the transactions.
In order to strike a balance between investor convenience and protection, SEBI laid necessary regulations. The execution only platforms (EOPs) may be granted registration under two categories - Category 1 EOP as an agent of asset management companies (AMC), registered with AMFI, or Category 2 EOP as an agent of an investor, registered as a stock broker.
The need to put in a framework to facilitate execution-only platforms (EOPs) for direct plans of mutual fund schemes was proposed by the market regulator in December last year. The regulator on Tuesday provided the detailed framework, which will come into force from September 1, it said in a circular.
The regulator has asked stock exchanges wanting to provide an execution-only platform (EOP), to put in an appropriate framework. Exchanges will need to monitor the operations carried out by EOPs, who have obtained membership under the EOP segment.
Similarly, the Association of Mutual Funds in India or AMFI will make necessary amendments to implement the framework and issue necessary guidelines for Category-1 EOP. It will also monitor the operations carried out by EOPs registered with AMFI.
Operational Risk Management
* Have a comprehensive risk management framework covering all aspects of operations and ensure that risks associated with their operations are identified and managed.
* Ensure access control for their clients and prevent unauthorized access to their platform.
* Formulate data governance, protection and dissemination policy which is fair and non-discriminatory.
* Maintain all data relating to their activities in an easily retrievable media. Also maintain confidentiality and security of all data.
* EOPs may share investors’ data with their other departments/divisions, their group entities and/or with any third party, only with the specific consent of investors
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
In order to strike a balance between investor convenience and protection, SEBI laid necessary regulations. The execution only platforms (EOPs) may be granted registration under two categories - Category 1 EOP as an agent of asset management companies (AMC), registered with AMFI, or Category 2 EOP as an agent of an investor, registered as a stock broker.
The need to put in a framework to facilitate execution-only platforms (EOPs) for direct plans of mutual fund schemes was proposed by the market regulator in December last year. The regulator on Tuesday provided the detailed framework, which will come into force from September 1, it said in a circular.
The regulator has asked stock exchanges wanting to provide an execution-only platform (EOP), to put in an appropriate framework. Exchanges will need to monitor the operations carried out by EOPs, who have obtained membership under the EOP segment.
Similarly, the Association of Mutual Funds in India or AMFI will make necessary amendments to implement the framework and issue necessary guidelines for Category-1 EOP. It will also monitor the operations carried out by EOPs registered with AMFI.
Operational Risk Management
The entities under both categories of EOPs shall ensure the following things:
* Have a comprehensive risk management framework covering all aspects of operations and ensure that risks associated with their operations are identified and managed.
* Ensure access control for their clients and prevent unauthorized access to their platform.
* Formulate data governance, protection and dissemination policy which is fair and non-discriminatory.
* Maintain all data relating to their activities in an easily retrievable media. Also maintain confidentiality and security of all data.
* EOPs may share investors’ data with their other departments/divisions, their group entities and/or with any third party, only with the specific consent of investors
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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