InvestorQ : Why did SEBI bar mutual funds from launching NFOs till 1st July 2022?
Ira Shah made post

Why did SEBI bar mutual funds from launching NFOs till 1st July 2022?

4 months ago
The Securities and Exchange Board of India (Sebi) has stopped the mutual fund industry from issuing new fund offers (NFOs) for now, as the regulator provides time to the industry to comply with its new norms.

The regulator had asked mutual fund houses to ensure that no mutual fund distributor, online platform, stockbroker, or investment advisor pools accounts and then transfers them to the fund house for purchasing units of schemes for those investors. This is to ensure that the money does not get misused.

Stockbrokers and clearing corporations should not handle both pay-in and pay-out of funds. MF purchases and sales must be directly credited and debited from the respective investor’s demat/folio accounts without routing it through pool accounts.
The capital market regulator has also asked the Association of Mutual Funds in India (Amfi) to implement the circular on two-factor authentication for the redemption of mutual funds across the industry. One of the two factors for authentication will be an OTP sent to the email or mobile number of the investor. The other will be the app password or any other means as may be specified. For offline transactions, signature validation methods will continue.

Circulars asking the industry to comply with the above rules were issued on 4th October 2021 and subsequently on 15th March 2022. However, compliance remains pending. Last week, SEBI extended the deadline to 1st July 2022.