SEBI Wants to Allow e-Commerce Firms to Sell Online Mutual Funds

28 Jun

By Vishal Srivastava, The Tech Portal

In the age of digitization where people are increasingly gravitating towards online mediums to meet their needs, financial services still remain exclusive to professionals. A primary cause for that, is government hurdles and complicated norms. That might soon change though.

SEBI wants to allow selected e-commerce firms to sell mutual funds online with due precautions.

According to a report in the Mint, (and inline with our seven months old report) a SEBI panel on the digitization of financial services submitted a recommendation for the same on 30 May. Infosys co-founder Nandan Nilekani was the head of the panel.

The report said that the SEBI has forwarded the recommendations to Association of Mutual Funds in India (AMFI). AMFI will further give its feedback and additional inputs. It further said that authorities are planning to set things rolling within a month.

The recommendations
To sell mutual funds online, SEBI has recommended selecting few online marketplaces on the basis of certain criteria. These criteria include the net worth of the company, customer base, sales, brand popularity, after-sales track record, etc.

The idea is to ensure that only reliable companies sell these high-risk financial products. This will also prevent the confusion among customers. Moreover, SEBI believes that customers are more inclined to buy from reputed channels such as Flipkart, PayTm etc.

The idea is to attract as many potential MF investors as possible from day one without creating too much risk for customers. Allowing all existing players at one go will not only confuse the customers but also increase the risks for customers post investment,

said the person familiar with the matter.
The benefits
Under the new recommendations, people can buy mutual funds through e-commerce at the lowest commission rate. This is because, unlike individual companies and financial advisors, these firms won’t have to go through any additional efforts to convince customers to invest or buy mutual funds.

Moreover, customers will get a smooth and seamless experience without any technical snags when they buy these products through established online channels.

In addition to this, SEBI has also recommended reducing other hassles and formalities often faced while buying mutual funds. Customers won’t have to go for additional in-person KYC process before buying mutual funds online.

This is because banks would have already done that process. However, they may have to provide PAN/Aadhaar after submitting their other details while buying an MF scheme.

The safeguards
Keeping in mind the high risk associated with mutual funds, SEBI has suggested few safeguards in the system. Before buying mutual funds online, people will have to submit their age, income and location details in advance. The system will then offer suitable MF products based on profile of the person.

After the submission of their personal and income details, potential investors will be able to see a range of MF products that may generally suit their risk profile so that first-time buyers are enthused to select from the list of schemes.

said the person mentioned above.
The government will design the process in a manner, that will warn people if they choose unsuitable products. A person will see a warning message if he chooses a product involving high risk.

Furthermore, SEBI has also recommended putting an upper limit of Rs.50000 on these investments through e-commerce platforms. This is to prevent misuse of this service for money laundering activities.

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