SEBI Guidelines & Compliance For Digital Payments For Mutual Funds & Stocks


The Securities and Exchange Bureau of India or SEBI needs no introduction because all mutual fund distributors and companies dealing in stocks need to be well versed with all the rules and regulations that SEBI has put into place. The stock market is an indicator of a country’s financial health and there was a time when the Indian stock market was riddled with malpractices, scams, and general disregard for the few rules that did exist. SEBI was set up in 1988 to act as a watchdog and then in 1992 given the status of a statutory body to start governing and policing everything around stock trading, including the setting up and management of funds.

In today’s scenario, the role of SEBI has grown and expanded to include a wide net of transactions but at the core of it, all are the basic fundamentals of protecting both investors and financial institutions from anyone who may target them. To successfully perform their role SEBI has a fairly large list of guidelines that financial institutions are expected to follow and adhere to. For all financial institutions that are involved in helping end customers invest money in the stock market either directly or through mutual funds, there are specific requirements from SEBI concerning collecting payments that go into the stock market as transactions.

Considering the wave of digitization of money transactions in India, it has become even more critical that financial institutions choose the right payment solution suite to comply with the code of conduct laid out by SEBI. Paytm is a holistic provider of payment solutions created specifically for financial institutions, keeping in mind the guidelines and compliance requirements provided by SEBI.

Take the necessary steps to ensure that the clients’ interest is protected

This is the very first point in the SEBI Code of Conduct for Mutual Fund Intermediaries. This is a very broad statement and brings almost everything into its ambit. When coupled with the fact that the code of conduct also mentions that all disclosures should be clearly made to clients, it is critical that a client understands that if they go in for a Systematic Investment Plan then it is advisable that they make each payment in the SIP on time. While their folio will stay intact in case they do miss the payments, if they are irregular then they will see lower growth than what they expected at the time of starting the SIP, and in all probabilities, they will miss their financial goal. This is where Paytm is the ideal payment solution partner for mutual fund intermediaries because Paytm provides a wide variety of pay modes from, UPI, NetBanking, all the way to setting up virtual accounts.

Maintain the necessary infrastructure to support Asset Management Companies and Registrars

The values of stocks, shares, and the NAV of mutual funds are extremely volatile in nature. So, the time difference between receiving an order from a client and realizing the funds so the asset management company can take necessary action has to be quick or the client’s interest is not protected. Financial institutions must opt for a payment solution that can provide funds fast, and accurate information regarding orders. The Paytm payment solution suite has a direct settlement feature with 8 banks so the monies can be realized immediately, and AMCs can take the action requested by the client. Without the direct settlement, money is realized only after 24 hours and by then the NAV could have changed, which can go on to create a bad customer experience.

Compliance and confidentiality of all investor transactions

SEBI requires investors to register with them their personal and bank details. Investors can then invest in mutual funds or stocks only from the registered bank account. To comply with this regulation there is a need to verify that the requests for investments are coming from the registered bank accounts which require the payment solution provider to have a tie-up with the banks. Paytm payment solution suite offers the widest third-party verification option with tie-ups with 31 banks to verify online that the request has come from the bank account registered with SEBI. Besides, whenever an investor does any transaction on Paytm their information is protected by 256 Bit encryption and Paytm is also PCI DSS compliant with ISO 27001 certification.

SEBI is working hard to protect investors and financial institutions from malintent and malpractice, and as companies working within the world of mutual fund and stock investments, it is important that the chosen payment solution not only provides investor delight in terms of ease of use but also complies with the rules and regulations so that the company remains compliant at all time. Paytm is the perfect partner for such financial institutions that care about increasing their business while following the rules.

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