SEBI Proposes Standing Instructions For SWP & STP In Demat-Held Mutual Fund Units To Boost Ease Of Doing Business

Mumbai: The Securities and Exchange Board of India (SEBI) has proposed to allow investors to set up standing instructions for systematic withdrawal plans (SWP) and systematic transfer plans (STP) for mutual fund units held in demat accounts, a facility currently available only for units held in the statement‑of‑account mode.

Under the proposal, demat investors would be able to do one time registration of SWP or STP mandates with depositories or stock Exchanges, which removes the need to submit separate instructions for each SWP or STP transaction, according to a statement. Currently, investors holding MF units in demat form are required to place separate instructions for redemption of units (through Delivery Instruction Slip (DIS) for each withdrawal or transfer.

Investors also give such instructions by way of two-factor authentication by the DP or through authorisation given by the investor to the stockbroker through Power of Attorney (PoA) or Demat Debit and Pledge Instructions (DDPI). However, in case of PoA, this reduces the direct control of investors on their investments, the market regulator said in a statement. Therefore, SEBI proposed to "extend the facility of standing instruction for SWP/STP may for the MF units held by investors in demat form, thereby facilitating EoDB to the various stakeholders of the MF industry".

The regulator has outlined a two‑phase rollout. In the first phase, investors would register unit‑based SWP and STP mandates through depositories or stock‑exchanges, with transactions executed on order entry platform of stock exchanges, the statement said. The second phase would move processing to registrars and transfer agents and could introduce more flexible options such as "amount‑based and other variants of SWPs and STPs," like as appreciation‑based withdrawals and swing‑STPs.

SEBI has invited public comments on the proposal until February 26, after which the final framework may be notified. Analysts said the change would remove a key operational difference between demat‑held mutual funds and traditional mutual fund accounts, and improve ease of long-term investing.

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