Many individuals aim to invest in mutual funds each month to achieve their financial goals. They follow the spend-first, and invest what remains philosophy. However, by the end of the month, there is little or nothing left to invest after spending on basic necessities and lifestyle expenses. However, SEBI has a plan to help you invest in mutual funds through your employer. SEBI has proposed an EPF-style employer contribution to mutual funds on behalf of employees. In this article, we will understand what SEBI is proposing and how it can benefit employees.
SEBI proposes enabling third party payments in mutual funds
As of today, the regulatory framework mandates that all payments for mutual fund investments be made directly from the investor’s own bank account. On 20th May 2026, SEBI released a consultation paper proposing to allow third-party payments in mutual funds under certain scenarios, subject to adequate safeguards in place.
The Mutual Fund Advisory Committee (MFAC) has recommended enabling third-party payments in the following two scenarios:
a. Employer payment on behalf of employees
The employer will be allowed to make payment on behalf of its employees. The mechanism will allow employers to make salary deductions for employees while processing monthly payroll and to make a consolidated monthly payment to AMCs. The AMCs will have to use the amount to make investments in selected mutual fund schemes on behalf of the employees.
The facility will be available to all listed companies and EPFO-registered companies, and AMCs. Interested employees may opt for the facility and agree for salary deduction for mutual fund investment. The AMC must invest the money in the mutual fund scheme selected by the employee.
b. Commission payment to MFDs
The AMC will be allowed to make commission payment to the empanelled Mutual Fund Distributors (MFDs) in the form of mutual fund units. The allotment of mutual fund units to the MFD will be in lieu of the trail commission, or part thereof, as agreed between the AMC and the MFD.
The arrangement will provide the MFD with a convenient, seamless, and disciplined way of investing in mutual fund units. It will encourage MFDs to save and invest for the long term. The option to receive MF units in lieu of the trail commission will be provided only to those MFDs who are registered with AMFI and selling the AMC’s scheme.
Certain core principles guiding AMCs
The AMCs, while facilitating payments from employers (on behalf of employees), may be guided by certain core principles. These core principles include the following:
- Validation of the relationship between the payee and the beneficiary
- Coverage of all listed and EPFO-registered companies
- Clearly defined responsibilities for AMCs and RTAs for third-party KYC verification and ensuring due diligence to comply with PMLA provisions.
- Credit of any eligible payment proceeds, including dividends, redemption proceeds, etc., only to the beneficiary’s account (in this case, the employee’s account).
To manage PMLA risks in third-party payments, stringent precautions are necessary. Some of these safeguards include robust KYC for the payee and beneficiary, a clear written mandate, and an auditable, non-cash electronic fund transfer via segregated accounts with regular reconciliation. The final guidelines for these precautions may be specified by AMFI, in consultation with SEBI.
SEBI has invited public comments on the above proposals. The public must submit their comments by 11th June 2026.
How will it help employees?
Currently, employers are allowed to contribute to the employee’s Employee Provident Fund (EPF) and National Pension Scheme (NPS) accounts. These investments help an employee to accumulate money towards their retirement and other financial goals.
SEBI’s proposal to allow employers to contribute to mutual fund schemes on behalf of employees will open up an additional investment avenue for employees through their employer. The proposal allows the employee the flexibility to select the mutual fund scheme and the investment amount. The employer can deduct the amount every month while processing the employee’s payroll and pass it on to the respective AMC. The AMC will credit the equivalent units of the MF scheme to the employee’s MF folio account.
The above arrangement will work like a SIP for the employee through the employer. Dividends and any other payments from the mutual fund scheme will be credited directly to the employee’s bank account. The employee will also have the flexibility to redeem their mutual fund investments at any time, and the redemption proceeds will be credited directly to their bank account.
Employees who find it difficult to save and invest in mutual funds after receiving their salary can opt for this arrangement with their employers. It will enable them to save and invest money in mutual funds to achieve their financial goals in a disciplined manner. It will help them create wealth, reach their financial goals and achieve financial independence.
