Sebi Mulls To Allow Firms To Pay Salaries In Mutual Fund Units

The hassle of starting an SIP (systematic investment plan) or investing in a mutual fund may soon end if the latest proposals made by the Securities and Exchange Board of India (Sebi) are implemented.

The market regulator, in a consultation paper, has proposed allowing employers to invest in mutual funds (MFs) on behalf of employees. The amount will be deducted from the employee’s salary.

The proposal is aimed at allowing companies to pay a part of an employee’s salary in the form of mutual fund units.

“The proposed scenario acknowledges the established practice of employers offering various benefits and savings avenues to their employees,” Sebi said.

“This mechanism would allow asset management companies (AMCs) to accept consolidated payments for MF investments through salary deduction.”

Moreover, Sebi has also proposed allowing mutual funds to pay commissions to distributors in the form of MF units.

The facility will be available to listed companies, firms registered with the EPFO, and asset management companies. Investments under the framework would remain voluntary for employees.

The move would provide a convenient, seamless, and disciplined way of investing in mutual fund units for distributors and encourage mutual fund distributors to save and invest for the long term, Sebi said in the consultation paper.

Currently, investments in mutual funds have to be made by investors themselves using their bank accounts.

This requirement was introduced to prevent misuse and ensure compliance with anti-money laundering rules.

However, the securities regulator said it is planning to allow third-party payments under certain circumstances, as recommended by the Mutual Fund Advisory Committee.

The regulator has proposed various measures to safeguard third-party payments. A process will be followed to validate the relationship between the payer and beneficiary, along with enhanced know your customer (KYC) checks, audit trails, and ensuring that redemption proceeds are credited only to the beneficiary’s verified bank account.