Execution-Only Platform Registration for Mutual Funds
An execution-only platform (EOP) lets investors buy, redeem and switch direct plans of mutual funds online, with no advice and no commission. Since 1 September 2023, SEBI requires every such platform to register either with AMFI or as a stock broker in the EOP segment.
What it is
An execution-only platform is a website or app that facilitates subscription, redemption and switch transactions in direct plans of mutual fund schemes. It executes the order the investor gives. It does not recommend schemes, rank them or nudge people towards one.
The rules come from SEBI circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/86 dated 13 June 2023, effective 1 September 2023. Platforms that existed before that date had three months to register. The circular creates two categories, and which one you fall in decides the regulator you register with, the fee model and the compliance burden.
Who it applies to
Building a direct-plan investing app?
A fintech founder whose app lets users invest in direct plans without a distributor needs one of the two registrations before going live. Think of a Faridabad team building a simple SIP app for first-time investors.
Running a wealth or personal-finance platform?
Say a Delhi personal-finance blog with a large audience wants an invest button next to its fund explainers. It must pick a category first, and it must keep that button separate from any regular-plan distribution.
Already a stock broker or a broker applicant?
A stock broker can add the EOP segment and act as the investor’s agent through the stock exchange platforms. This is the Category 2 route.
Why it matters
Operate lawfully from day one
Facilitating direct-plan transactions without registration breaches the SEBI framework. Registration puts your platform on a clear regulatory footing.
Give investors a clean, low-cost route
Direct plans carry no distributor commission, and the circular allows only flat transaction fees on EOPs, not percentage-based ones.
Build trust with AMCs and exchanges
AMCs onboard registered EOPs and stock exchanges admit Category 2 members. Without registration, neither door opens.
Category 1 vs Category 2 EOP
| Category 1 EOP | Category 2 EOP | |
|---|---|---|
| Registers with | AMFI | SEBI, as a stock broker in the EOP segment |
| Acts as agent of | Asset management companies | Investors |
| Order route | Integrated with AMCs and registrar agents | Stock exchange platforms only |
| Aggregating transactions | Allowed | Not allowed |
| Flat transaction fee paid by | AMCs | Investors |
| Grievances | AMFI framework | SCORES, mediation and arbitration |
In practice, a team that wants direct integration with fund houses and bulk order handling leans to Category 1. A team that wants to be the investor’s own agent through the exchange leans to Category 2. We map your product to a category before any application work starts.
Documents required
About the entity
- Certificate of incorporation, MoA and AoA
- PAN, GST and registered office proof
- Shareholding pattern and KYC of directors
- Net worth proof where the category needs it
About the people
- Compliance officer appointment
- Two key personnel with at least three years of securities-market experience and a finance, law, accountancy or management qualification (Category 2)
- Fit-and-proper declarations
About the platform
- Description of the order flow and AMC or exchange integration
- Disclosure screens: scheme data and filter tool
- Cybersecurity and data-protection arrangements
- Grievance redressal and record-keeping policy
How it works
Choose the category
We review your product, funding and tie-ups, then fix Category 1 or Category 2.
Set up or tidy the entity
If you do not have a company yet, we incorporate a private limited company with the right objects, and keep the capital and net worth in line with the category.
Prepare the application
We compile the entity, people and platform documents, draft the policies and map your disclosure screens to the circular. In practice, a Gurugram founder who builds the app first and reads the circular later usually has to redo the screens.
File and coordinate
For Category 1 we coordinate with AMFI. For Category 2 we prepare the stock broker registration and exchange membership papers and answer queries from SEBI and the exchange. Here is the catch: reviewers read the screen flow closely, so we fix the disclosure design before filing.
Onboard and stay compliant
After registration we help with AMC or exchange onboarding and set up the records, KYC checks and annual compliance calendar.
Timelines
1 September 2023
The EOP framework took effect. Platforms already operating had three months from this date to register.
6 October 2023
SEBI set a ₹10 lakh base minimum capital deposit with the exchange for members working only in the EOP segment (Category 2).
Five-year record keeping
Category 2 platforms keep investor transactions, failed transactions and KYC documents for five years.
What happens if you miss it
Platform can be stopped
Operating outside the SEBI framework exposes the platform and its promoters to regulatory action. AMCs will not onboard an unregistered platform, so the launch stalls.
Mixing roles breaks the model
Giving advice, taking commission or showing fund advertisements on an EOP is prohibited. A platform that does so loses its EOP footing.
Fund houses and exchanges say no
Without AMFI registration or broker status, you cannot integrate with AMCs or reach the exchange order route, so the product cannot launch.
Frequently asked questions
What is an execution-only platform in mutual funds?
It is a digital platform that only executes subscription, redemption and switch orders in direct plans of mutual fund schemes. It does not advise, recommend or earn commission. SEBI’s circular of 13 June 2023 defines it and splits such platforms into two categories.
Do I need SEBI registration to run an EOP?
Yes, in one of two ways. Category 1 platforms register with AMFI and act as agents of AMCs. Category 2 platforms register as stock brokers in the EOP segment with SEBI and act as agents of investors. Which route fits you depends on your model, and we help you choose before filing anything.
Can an EOP sell regular plans?
No. An EOP can serve direct plans only, with no regular-plan services, no advice and no commission arrangements. The circular also keeps EOP activity separate from regular-plan distribution. If your business also distributes regular plans, we help you separate the two activities properly before you apply.
What deposit does a Category 2 EOP need?
Members of a stock exchange who work only in the EOP segment must keep ₹10 lakh with the exchange as base minimum capital deposit, per SEBI’s announcement on 6 October 2023. The deposit is not cumulative with other segments: the highest applicable requirement applies. We confirm the current exchange requirement when we prepare your application.
Who can I employ as key personnel in a Category 2 EOP?
A Category 2 EOP needs a compliance officer and two key personnel. Each key person must have at least three years of securities-market experience and a professional qualification in finance, law, accountancy or management. The platform must also meet SEBI’s fit-and-proper criteria. We check your team against these before filing.
Can an EOP charge investors a fee?
Only a flat transaction fee, not a percentage of the investment. In Category 1, AMCs bear the flat fee within AMFI limits. In Category 2, investors bear it within stock exchange limits. AMCs cannot charge scheme fees for EOP payments. We help you set the fee model within these limits.
What must an EOP show to investors?
Factual scheme information such as performance, assets under management, NAV, expense ratio and risk measures, plus a filter tool that does not auto-recommend schemes. Investors must also get a real-time order receipt and continuous status updates. We review your screens against this list before you file.
How does Taxhint help with EOP registration?
We review which category fits, set up the company, prepare the documents and policies, file the application and reply to queries from AMFI, SEBI or the exchange. Where the work needs a practising CA or lawyer to sign, a qualified professional does it. We stay with you for onboarding and annual compliance.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Government and exchange charges depend on the category: Category 2 involves SEBI stock broker registration charges and the exchange’s base minimum capital deposit of ₹10 lakh. We confirm the current figures for your case before you commit.
Ready to begin?
Tell us your product idea and we will tell you which EOP category fits and what the registration will involve.