SEBI mulls over ecommerce to leverage mutual fund schemes

The capital market regulator has announced ecommerce companies about the possibility of these firms selling financial products on their platforms, indiatimes.com reports. SEBI chief UK Sinha met Nandan Nilekani — former chairman of Unique Identification Authority of India ( UIDAI) — who heads the regulator-appointed committee to suggest measures to reduce cost structure of mutual funds, and representatives of ecommerce companies such as Flipkart, Scripbox, FundsIndia.com and Paisabazar.com, among others.

SEBI wants automation of mutual fund sales architecture including e-KYC (know your client) which will reduce the cost of buying mutual fund schemes. This will make it easier for investors to buy mutual fund products, said a person who attended the meeting, the source cites. A SEBI note on the topic sent to executives, who attended the meeting in Bengaluru, said that electronic payments for purchases and sales in the securities market is not on par with developments in ecommerce.

Currently, investors can buy mutual funds directly or through distributors or financial advisors. Investing directly is cheaper than tapping the services of distributors for investors save on the fee they pay to the intermediary. This would result in the creation of the third category of net asset value (NAV) as the expense ratio — the amount that mutual funds charge investors to manage the money — of schemes sold through online platforms would be different from that of direct and distributor channels.

Through the Online Only Distribution Model, the expense ratio of mutual fund schemes would be between the cost of money invested through the direct and distributor routes. Wealth managers said the proposed system will add to the complexity of investing in mutual funds.

One of the major bottlenecks identified was the present KYC process for onboarding of the investors through electronic /online platform, for example, the need for oneon-one interaction for in-person verification, requirement of wet signature, etc, the Sebi note said, the source cites. The capital market regulator said the e-KYC route with the use of Aadhar cards, validations using biometric phones and e-signatures will make investing through ecommerce platforms a success.