The compliance with the deposit requirement is one of the conditions for the registration as IA or RA. This requirement needs to be fulfilled on a continuous basis to keep the registration in force.
Currently, they are required to comply with this requirement by June 30, 2025.
However, Sebi has received representations from IAs and RAs, whereby they highlighted about facing practical issues about opening fixed deposit accounts and a lien marking the same in favour of the Administration and Supervisory Body.
They cited difficulties such as inconsistent procedures across bank branches, delays in issuing required documents, confusion around Sebi’s lien marking rules and limited awareness among bank staff. Accordingly, in its consultation paper, Sebi has “proposed to accept lien marked liquid mutual fund units as deposit for compliance with the deposit requirement under IA Regulations and RA Regulation. Lien on such units of mutual fund shall be marked for at least one year”. Sebi noted that liquid mutual funds are generally low-risk and easy to convert to cash.
It suggested that these mutual fund units can be held in Statement of Account (SOA) or demat form. The value of these mutual funds, after deducting exit load and a specified haircut, will be counted toward the deposit.
The value should be reviewed annually. If it falls below the required threshold or if more deposit is needed due to more clients, the IA or RA should top it up by adding more.
The Securities and Exchange Board of India (Sebi) has sought public comments till May 29 on the proposal.
