Securities and Exchange Board of India on Friday introduced optional mutual fund account freeze to strengthen digital safety for investors. This move is to create a new security layer and reduce fraud in mutual fund accounts. The new rules will take effect from April 30, 2026 across the mutual fund industry.
Under the new rules investors can voluntarily freeze their demat and non-demat folios to ensure that no units are debited from such folios till its unlocked. The locked folios block redemptions, transfers or debits from mutual fund, the securities regulatory body said in a circular on Friday. The investors will be able to unlock their folios anytime to resume transactions.
Only KYC-compliant investors with registered email and mobile will be eligible to freeze their mutual fund folios. AMFI shall prescribe the detailed process for locking and unlocking of folios to all AMCs/RTAs and shall also provide the processes to be followed by different types of investors after due consultation with SEBI.
In addition to this, the asset managers have been asked to disclose the process for freezing accounts and the other rules related to this process clearly.
ALSO READ: SEBI's New Mutual Fund Classification: Categories Revamped, Life Cycle Funds Introduced, And More
SEBI last month had unveiled a sweeping overhaul of mutual fund categorisation, introducing Life Cycle Funds as a new category and rolling out a detailed framework for Fund of Funds (FoFs) with multiple underlying schemes.
SEBI superseded earlier provisions on scheme classification and consolidated a revised structure aimed at ensuring funds remain “true-to-label,” while accommodating new asset classes and strategies.
To improve comparability, SEBI has mandated that scheme names match their category and avoid return-focused phrases. The "type of scheme" description must adhere to uniform wording.
Sectoral and thematic equity schemes will face portfolio overlap caps of 50% with other equity schemes, computed quarterly using a defined methodology. Existing schemes have a three-year glide path to comply.
Importantly, the "solution-oriented" category has been discontinued. Existing schemes under this label must stop fresh subscriptions and merge with similar schemes after regulatory approval.
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