SEBI Introduced Debit Freeze Facility for Mutual Funds Investors: What You Need to Know

The Securities and Exchange Board of India (SEBI) on Friday announced a new voluntary debit freeze facility for mutual fund investors across both demat and non-demat folios, a move aimed at enhancing digital security and protecting investor holdings.

SEBI said in a statement, “In order to promote digital security of units of Mutual Fund investors, in consultation with AMFI, it is decided that a voluntary debit freeze facility be introduced for Mutual Fund investors across demat and non-demat (i.e., Statement of Account) folios to ensure that no units shall be debited from such folios till the time they are unlocked.”

Investors Can Lock Mutual Fund Folios

Under this framework, investors will have the option to temporarily lock their mutual fund folios, preventing any debit of units from the account until the lock is removed. According to a circular issued by the regulator, the facility will come into effect from April 30.

In the initial phase, the folio-locking option will be available through the MF Central platform, which is operated by Registrars and Transfer Agents (RTAs). The facility will be accessible only to investors who are KYC-compliant and have both a valid mobile number and email ID registered in the system.

AMFI to Define Operational Framework

The Association of Mutual Funds in India (AMFI) will outline the detailed operational procedures for locking and unlocking folios for asset management companies (AMCs) and RTAs. In consultation with SEBI, AMFI will also define the processes applicable to different categories of investors.

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Additionally, AMFI will specify which financial and non-financial transactions will remain permissible while a folio is under the lock facility.

SEBI further stated that AMCs and RTAs will publish the detailed procedure for opting into the facility, along with its impact on transactions during the lock period, on their respective websites and within their Statement of Additional Information (SAI).

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