Quick summary
SEBI is seeking public comments on a proposal to permit third-party payments in Mutual Funds for specific scenarios. The proposal aims to balance ease of investment and legitimate financial transactions with the objective of preventing money laundering and fraudulent activities.
Who is affected
- Mutual Funds (MFs)
- Asset Management Companies (AMCs)
- Trustee Companies / Board of Trustees of Mutual Funds
- Registrar to an Issue and Share Transfer Agents (RTAs)
- Association of Mutual Funds in India (AMFI)
- Listed and EPFO registered companies
- Mutual Fund Distributors (MFDs) registered with AMFI
What changes
The proposal suggests permitting third-party payments in the following scenarios:
- Employer Payments: Payment for investment in mutual fund units by an employer on behalf of its employees through salary deduction. This would be available to all listed and EPFO registered companies and AMCs.
- AMC Commission Payments: Allotment of MF units in lieu of trail commission or part thereof to AMFI-registered MFDs who sell AMC schemes.
- Social Cause Contributions: Permitting investors to contribute a part of the subscription amount or a scheme’s return towards a social cause. This may be facilitated via:
- Option A: A dedicated mutual fund scheme where specified portions of dividend/redemption payouts are contributed via subscription towards Zero Coupon Zero Principal (ZCZP) instruments in the name of the investor, or directly to an NGO specified in the scheme's SID.
- Option B: Existing mutual fund schemes offering a facility to mandate a specified portion of subscription/redemption to be contributed via subscription towards ZCZP in the name of the investor, or directly to a specified NGO.
Required Safeguards and Principles:
- Validation of the relationship between the payee and the beneficiary.
- Clearly defined responsibilities for AMCs and RTAs for third-party KYC verification and due diligence to comply with PMLA provisions.
- Credit of eligible payment proceeds, including dividends, only to the beneficiary’s account.
- Implementation of stringent precautions, including robust KYC for both payee and beneficiary, a clear written mandate, and an auditable, non-cash electronic fund trail via segregated accounts with regular reconciliation.
Action items
- Submit comments or suggestions latest by June 10, 2026, through the online web-based form.
- In case of technical issues with the web-based form, send an email to priyankam@sebi.gov.in and kritika@sebi.gov.in with the subject "Enabling third party payments in Mutual Funds in certain scenarios".
Key dates-deadlines
- Comment Submission Deadline: June 10, 2026.
- Effective Date: The provisions of the circular shall come into effect within 30 days from the issuance of the circular.
Source reference
SEBI/HO/IMD/PoD2/CIR/P/2026, May 20, 2026