Investments in mutual funds won't be commenced from pooled accounts any longer; here’s why?

On July 1, pooled accounts will no longer be used to commence mutual fund investments, per a Securities and Exchange Board of India directive. Financial advisors or other providers engaged in mutual fund activities are required to stop pooling funds.

What are pooled funds?

A pooled fund is distinguished by its financial contributions from numerous retirement boards or investors. In contrast, a separate bank account would only have money through one retirement board or investor. The goal of implementing pooled funds is to take advantage of the scale economies that result from collecting sizable sums from numerous separate units. Cost reduction and an increase in investment opportunities are the benefits. Investors find pooling funds a desirable alternative because it opens up new investment possibilities.

The new mutual fund’s rules by SEBI:

Also Read: How are mutual funds taxed?

How does it influence investors in mutual funds?

Investors can no longer obtain mutual funds using their trading funds because of the new regulations. The investor's account will send the money immediately to the house's bank account. As a result, payments is for the mutual funds (MFs) and must be made directly to a bank account. The credit will also be applied to the bank account connected to the shareholder's demat account after mutual funds have been redeemed.

SEBI had additionally instructed the mutual fund sector to suspend releasing new fund offers to agree to the new rules (NFOs). The mutual fund houses were required by the authorities to make sure that no different investment distributor, online service, dealer, or financial advisor pools funds and then transfers those funds to the financial institution for the fund house to purchase units of those investors' chosen schemes. This protects against money being misused.

Also Read: Meaning of SIP

Conclusion:

As of July 1, mutual fund investments will no longer be made into a broker's or the fund manager platform's account. It will transfer immediately from the account to the account of the mutual fund business. As several Fund Management providers stopped pooling accounts, several investors had before expressed concerns about disrupted payment notifications. Later, they acknowledged that they are reorganising their procedures to make them simpler for investors.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.