Use depositories as MF collection centres: Sebi

MUMBAI: A task force appointed by the Securities and Exchange Board of India has suggested that securities depositories could be used as collection centres for mutual fund applications.

It has said that the existing collection centre can be replaced by the DP as the point at which investors or distributors deposit application forms.

According to a report by the Securities Market Infrastructure Leveraging Expert (SMILE) task-force, headed by PJ Nayak, “The depository model could become an alternative to the existing collection centre model, and every mutual fund would have the option of moving to the depository system.�

However, it said there should not be any regulatory compulsion for MFs to move to this mode. It also said that existing collection centres and registrars and mutual fund AMCs, which receive application forms could be made limited purpose depository participants.

The report also pointed out that the two central depositories, NSDL and CDSL, have wider reach than the MF industry.

The task force said barring liquid and money market schemes, the allotment of units in all other MF schemes is effected before the funds are realised. So, an incoming investment is provided an NAV before its funds are invested, which is violative of all sound canons of MF management.