NEW DELHI: The capital market regulator — Securities and Exchange Board of India (Sebi) — has eased the rules for use of pool accounts by mutual funds.
The regulator has in a circular issued on Friday allowed the mutual funds to use pool accounts, only for those transactions which are executed at mutual fund level owing to certain operational and regulatory requirements.
Earlier, the Sebi rules prohibited such use of pool accounts.
As per existing rules trustees and asset management companies (AMCs) are to ensure the assets and liabilities of each scheme are segregated and ring-fenced from other schemes of the MF, and bank accounts and securities accounts of each scheme are also segregated and ring-fenced.
However, after the mutual fund industry apprised the regulator of instances where pool accounts are used at mutual fund level for operational ease and certain regulatory requirements, the agreed to allow the industry to use pool accounts.However, such use of pool accounts is subject to certain conditions.
AMCs should have internal policies to ensure that adequate operational processes and internal controls are in place to segregate and ring-fence the assets and liabilities of each scheme along with segregation and ring-fencing of securities and bank accounts.
In cases where pool accounts have been used for certain transactions, at the end of day, the assets and liabilities of each scheme should be segregated and ring-fenced from other schemes.
“The pool accounts for both securities and funds should have nil balance at the end of the day,” says Sebi.
In case if the funds lying in the pool bank account of the mutual fund are not identified, due to unavoidable reasons, the fund should be transferred to the respective scheme account not later than one business day from the day such transactions are identified.
At no point of time the securities or funds of one scheme should be used for another scheme(s) and there should not be any conflict of interest amongst investors.