Sebi to Launch Voluntary Lock-in Facility For Mutual Fund Investments

Mutual fund investments are stored in units within unique folios with identification numbers issued by asset management companies (AMCs) for each investor. These folios function similarly to bank account numbers.

“In order to promote the digital security of mutual fund units, and in consultation with AMFI (Association of Mutual Funds in India), it has been decided that a voluntary debit freeze facility will be introduced for mutual fund investors across demat and non-demat (i.e., Statement of Account) folios. This will ensure that no units can be debited from such folios until they are unlocked,” said a SEBI circular.

“In the first phase, the facility to lock the folio will be provided to mutual fund investors by the RTAs (Registrar and Transfer Agents) through the MF Central platform,” SEBI said.

Earlier, an interoperable RTA platform named MF Central was introduced by SEBI to enhance investor experience in mutual fund transactions and service requests.

The facility will be enabled only for KYC-compliant (registered/validated) investors who have a valid email ID and mobile number (both mandatory).

“AMFI shall prescribe the detailed process for locking and unlocking folios to all AMCs and RTAs. It will also provide the processes to be followed by different types of investors after due consultation with SEBI,” the circular said.

“AMFI is also advised to prescribe a detailed list of financial and non-financial transactions that will be allowed during the lock-in period to AMCs and RTAs. The detailed process for opting for this facility, along with its impact on different financial and non-financial transactions during the lock-in period, shall be disclosed by all AMCs and RTAs on their websites and in the Statement of Additional Information (SAI),” SEBI added.