In today’s digital age, we invest in mutual funds using online platforms or apps. Have you ever thought about what if your mutual fund platform or App closes?
Recently there was news that the Kuvera platform was acquired by CRED. In such a situation few feel uncomfortable about such a takeover or what if the platform shut its door permanently.
Before June 2023, these platforms used to register as SEBI RIA but most of their business was just to allow investors to buy and sell mutual fund schemes on their platforms. Investment advisory was not a service that these platforms offered to their users. Hence, as there is no fee transaction between such platforms and customers, there is no protection for customers in case of any issue.
Understanding this, in June 2023, SEBI came out with a regulatory framework for execution-only platforms for facilitating transactions in direct plans of mutual funds.
As per the aforesaid SEBI circular, an entity desirous of operating as an EOP (Execution Only Platform) may choose to operate under either of the following two categories:
Category 1 EOP: The entity shall obtain registration from the AMFI and act as an agent of AMCs and integrate its systems with AMCs and/or RTAs authorized by such AMCs, to facilitate transactions in Mutual Funds.
Category 2 EOP: The entity shall obtain registration as a Stock Broker in terms of the SEBI (Stock Brokers) Regulations, 1992 under the EOP segment of the Stock Exchanges and shall operate as an agent of investors and operate only through the platforms provided by the Stock Exchanges.
As there is a huge competition to offer direct funds free of cost, many such online platforms may choose Category 1 EOP. Hence, from now onwards your platform may be under Category 1 or Category 2. Accordingly, the charges are also earned from these platforms (either charging to AMCs or its customers).
However, if you look at the whole regulation published by SEBI on June 2023 and also the AMFI guidelines, they both are silent about what should be the course of action if such platforms shut their doors or sell their platforms to some other entities.
Hence, in such a situation, it is you who has to know what you have to do.
What If Your Mutual Fund Platform Or APP Closes?
# Accept the reality
As of now, I am unable to find any such regulations of what should be the fate of users in such a takeover or closure, it is always to be prepared for such incidents. Many of these platforms are kind of startups. How long they sustain and what is their future business plan is unknown to us as users of such platforms and apps. Hence, prepare mentally yourself for what should be your course of action in case of such a takeover or closure.
# Relax!!
Yes, relax. Nothing going to happen with your money. Your money is safe with respective mutual fund companies’ products but not with these platforms. Even if they are shut down or taken over by some other entities, nothing is going to happen to your money nor such platforms can misuse your money.
# Choose what to do
If you are comfortable with a new takeover (in case of a sale), then continue your investment with the same platform or app. However, if you are uncomfortable, then choose the one which makes you feel comfortable.
In case of shutdown, you have no option but to choose a different platform or app.
# Don’t rely too much on a single platform
As the regulations are unknown in this aspect of a takeover or shut off such platforms or apps, it is wise for you not to rely too much on a single platform. Instead, create one more layer by creating a login in one more platform as a safety measure or backup.
# Have a login at AMC level too
If possible, create a login at the AMC level too, or on platforms like CAMS and KFintech (as they are the only two R&T Agents serving all AMCs in India).
This will be handy for you in case the current platform you are using shuts its door or is taken over by some other entity and you are in a phase of what to do, then safely you can transact through the AMC website or using CAMS and KFintech.
Conclusion – In this digital world, launch, takeover, or closure is a common thing. Hence, rather than relying too much on such platforms blindly, prepare yourself with what to do if such a situation of takeover or closure of platforms or apps happens. As I mentioned above, your money is safe with AMCs. Hence, in reality, nothing is going to happen with your money.
Dear Basu Sab,
Thanks for highlighting an important and likely issue, In fact some MF distributors also had/have such platforms . They use to give advice and suggestions for investment in various MFs. Investment thro them are eligble for commision from Mf and as such they are/were surviving on that income. In fact I had an account with one such MF dDistributor by name “fundssupermart .com”. It was operationg from Mumbai. They were supposed to be a part of a Singapore based firm. suddenly one fine or not so fine morning they closed the Indian operation and told all account holders to contact some other agency who will take carre of our interrest, The firm identified by them does not appear to be their succeessors and I am also not comfortable with their service. I am still searching for a suitalbel platform which I can use, Only saving grace, as already pointed out by you is that my money is still safe with the MFs. Thanks once againg for the caution message sab.
Dear Jambunathan,
Thanks for sharing your own horrific experience with all of us. True, such instant takeover and shutting their shops are actually concern for all investors (Regular or Direct). Let us wait for some regulatory framework in this regard.
1. I have been using Kuvera for the last six years. Initially their customer service used to be very responsive, but off late there was a significant lag in their responses. The issue with players like Kuvera is that by dealing in direct MFs they don’t have any significant revenue stream. Due to the competitive nature, they can’t charge premium fee.
2. Kuvera (and presuming other players) are only a front end to consolidate all your MF investments at one place and facilitate transactions. Kuvera uses the BSE Star platform for all transactions. All the MF units are registered and maintained by CAMS and Fintech. Any transaction you do from anywhere (direct for AMC website, through distributor, through Kuvera etc) will all reflect within the CAMS statement. In fact Kuvera relies on CMAS reports to upload your transaction history. Therefore a service provider closing down does not mean that you will loose your investment.
3. You can use the foll link to access all your transactions and valuation statements at one place (CAMS + KFintech) – https://www.camsonline.com/Investors/Statements/Consolidated-Account-Statement
4. The reason I rely on Kuvera is that it gives me the flexibility to track my portfolio across all AMCs at one place and data analytics, such as XIRR etc. I have tried the direct CAMS site, which I did not find user friendly. I have not tried MF Utilities. The next best option in my view would be MF Central, but its not as user friendly. For eg I cant separately see my investments in Debt and Equity MFs, together with XIRR on MF Central. Besides setting up STPs etc is not that efficient.
5. I plan to continue on Kuvera for the time being. If required I will shift to MF Central.
Dear Prashant,
Thanks for airing your valuable feedback.
There is Central MFU , instead of login at individual AMC
Dear Viresh,
You can use either MF Central or MFU.
what kind of problems we will face once CRED started acquired Kuvera. I mean ,if any cross selling products promotional mails keep disturbing existing kuvera users. As you said ,when our money is with AMC, Should i be worried if CRED takes in
Dear Devan,
As per the new regulations, they can’t cross sell or promote the products. However, few may feel uncomfortable when such changes happen. Regarding your concern, I have already answered of what you have to do.
Dear Basu Sir,
Thanks for the information. I use Kuvera app only, One month back, I raised bank add and delete request to them. Still, they are not modifying my bank account details. I have called them and sent multiple emails, no response from them. They are still saying that we are working on this. Now, I understood the real reason.
Meanwhile, I changed my bank details in respective AMC’s in a short span of time. Only HDFC allowed online mode, other AMCs, I visited in person. I thought it would long time. It is done very shortly.
I have already created separte login at the AMC level and MF Central as well.
Could you please let us any best alternative platforms?
Thanks for your information.
Dear Rajan,
You can stick to MFU or MF Central.
I have failed to understand why people go for such third party platforms. In fact, AMC websites are much more effective, convenient, fail-safe and reliable and far more equipped – technologically – to conduct your business in seconds. At the most one can consider doing business with registered RTA like Cams or KFin, etc.
Dear Kamal,
The world looks for comfort over safety 🙂