Many individuals aim to invest in mutual funds every month to achieve their financial goals. They follow the spend first and invest first principle. However, by the end of the month, there is little or nothing left to invest after spending on basic needs and lifestyle expenses. However, SEBI has a scheme to help you invest in mutual funds through your employer. SEBI has proposed EPF-style employer contributions 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 to enable third party payments in mutual funds
As of today, the regulatory framework mandates that all payments for mutual fund investments will be made directly from the investor’s own bank account. On May 20, 2026, SEBI issued a consultation paper proposing to allow third party payments in mutual funds under certain scenarios, subject to adequate safeguards.
The Mutual Fund Advisory Committee (MFAC) has recommended enabling third party payments in the following two scenarios:
One. employer payment on behalf of employees
Employers will be allowed to make payments on behalf of their employees. This mechanism will allow employers to deduct employees’ salaries while processing monthly payroll and make consolidated monthly payments to AMCs. The AMC will have to utilize the amount to invest in mutual fund schemes selected on behalf of the employees.
This facility will be available for all listed companies and EPFO-registered companies and AMCs. Interested employees can opt for the facility and agree to salary deduction for mutual fund investments. The AMC has to invest the money in the mutual fund scheme chosen by the employee.
B. Commission payment to MFD
AMCs will be permitted to make commission payments to mutual fund distributors (MFDs) listed as mutual fund units. The allotment of mutual fund units to the MFD will be in lieu of trail commission or a share thereof as agreed between the AMC and the MFD.
This arrangement will provide MFDs a convenient, seamless and disciplined way of investing in mutual fund units. This will encourage MFDs to save and invest for the long term. The option to receive MF units in lieu of trail commission will be provided only to those MFDs who are registered with AMFI and selling the plans of the AMC.
Some of the key principles guiding AMC
AMCs, while facilitating payments from employers (on behalf of employees), may be guided by certain basic principles. These core principles include the following:
- Verification of relationship between payee and beneficiary
- Coverage of all listed and EPFO-registered companies
- Clearly defined responsibilities for AMCs and RTAs to ensure third party KYC verification and due diligence for compliance with PMLA provisions.
- Credit of any eligible payment income including dividends, redemption proceeds etc. only to the beneficiary’s account (in this case, the employee’s account).
Stringent precautions are required to manage PMLA risks in third party payments. Some of these security measures include strong KYC for the payer and beneficiary, a clear written mandate and an auditable, non-cash electronic fund transfer through separate accounts with regular reconciliation. 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 has until June 11, 2026 to submit their comments.
How will this help employees?
Currently, employers are allowed to contribute to the Employees’ Provident Fund (EPF) and National Pension Scheme (NPS) accounts of the employee. These investments help an employee accumulate wealth for 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 offer allows the employee to select the mutual fund scheme and investment amount. The employer can deduct the amount every month while processing the employee’s payroll and send it to the concerned 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 deposited directly into the employee’s bank account. The employee will have the facility to redeem their mutual fund investments at any time, and the redemption proceeds will be deposited directly into their bank account.
Employees who find it difficult to save and invest in mutual funds after receiving salaries can opt for this arrangement with their employers. This will enable them to save and invest money in mutual funds to achieve their financial goals in a disciplined manner. This will help them earn money, reach their financial goals and achieve financial freedom.