SEBI Execution-Only Platform framework of 2023

The SEBI Execution-Only Platform (EOP) framework of 2023 is the regulatory framework introduced by SEBI Circular SEBI/HO/IMD/IMD-POD-1/P/CIR/2023/74 dated 12 July 2023 that formalises the regulatory status of online platforms providing execution-only access to direct-plan mutual fund transactions, without providing investment advice. The framework was a response to the structural ambiguity that had existed since the SEBI January 2013 direct plan mandate , under which a generation of commercial digital platforms (Groww , Kuvera , ET Money , INDmoney , Zerodha Coin , Paytm Money) had collectively acquired tens of millions of retail users for direct-plan investing without a clear regulatory category. The 2023 framework defines two EOP categories with distinct registration routes and produces a clear regulatory safe harbour for the direct-plan execution-only model.

The EOP framework is anchored in the SEBI Act, 1992 , the SEBI (Mutual Funds) Regulations, 1996 , and the SEBI (Investment Advisers) Regulations, 2013, with operational responsibility resting with the SEBI Investment Management Department . It is part of the post-2020 SEBI policy direction of formalising the regulatory perimeter for online retail-finance platforms, alongside the Investor Charter for Mutual Funds of August 2021 and the consequential expansion of the regulatory framework for online intermediaries. The EOP framework was effective from a phased implementation period beginning in late 2023, with full registration compliance required by 2024.

The framework’s defining structural feature is the two-category architecture:

• EOP Category 1: Registration with AMFI as a mutual fund distributor (ARN holder) with EOP-specific operating conditions. Suitable for pure-play direct-plan platforms not engaged in stockbroking.
• EOP Category 2: Registration with SEBI as a stockbroker, with EOP services offered as an ancillary activity. Suitable for broking-integrated platforms.

The dual-category framework reflects the practical reality of the post-2020 direct-plan platform ecosystem: some platforms (Kuvera , ET Money ) are dedicated direct-plan or wealth-management platforms; others (Groww , Zerodha Coin ) operate direct-plan distribution as part of a broader broking-integrated service. The framework accommodates both operating models while maintaining a consistent investor-protection standard.

Background

The pre-2023 regulatory ambiguity

Following SEBI’s January 2013 direct plan mandate, a new category of online platforms emerged to serve direct-plan retail investors. The first wave (2016 to 2020) included Groww , Kuvera , Zerodha Coin , and Paytm Money. By 2020, these platforms had collectively acquired over 2 crore users for direct-plan mutual fund investing. The second wave (2020 to 2023) added ET Money , INDmoney , and similar platforms, with the total user base crossing 5 crore by 2023.

Through this period, the platforms operated under a patchwork of regulatory registrations:

• AMFI ARN as MFD: Most platforms held AMFI ARN registration as Mutual Fund Distributors, despite not providing distribution services in the traditional sense (no investor handholding, no commission, pure execution).
• SEBI RIA: Some platforms (Kuvera , ET Money ) held SEBI Investment Adviser registration to provide advisory services, with the ARN registration enabling execution.
• SEBI broker registration: Broking-integrated platforms (Groww , Zerodha Coin ) operated under SEBI stockbroker registration.

The structural ambiguity was that none of these registrations specifically addressed the execution-only direct-plan model. The MFD framework assumed distribution services that EOP platforms did not provide; the RIA framework assumed advisory services beyond what EOP platforms typically offered; the stockbroker framework assumed equity-trading focus rather than mutual fund distribution.

Pre-2023 SEBI deliberations

SEBI’s deliberations on the regulatory framework for online direct-plan platforms began in 2020 and accelerated through 2021 to 2023. The deliberations covered:

• Investor protection: Defining minimum cybersecurity, operational, and investor-protection standards.
• Regulatory category: Whether to create a new EOP category, modify the MFD framework, or amend the RIA framework.
• Cybersecurity: Cybersecurity standards for platforms handling large volumes of retail investor data.
• Cross-product permissions: Whether and how EOP platforms could distribute non-MF products (insurance, FD, US equities, NPS).
• Disclosure and conflict-of-interest management: Standards for platforms with affiliated AMC, distributor, or broking arms.

A SEBI consultation paper in 2022 proposed the two-category structure that was eventually adopted in the July 2023 circular.

July 2023 circular

The framework was notified through SEBI Circular SEBI/HO/IMD/IMD-POD-1/P/CIR/2023/74 dated 12 July 2023, with a phased implementation:

• Existing platforms operating in the EOP space could continue operating pending registration.
• New EOP platforms must register before commencing operations.
• All existing platforms required to complete registration by a defined deadline in 2024.

By 2024, the major platforms had completed registration under one of the two EOP categories.

Regulatory framework

The EOP framework derives from a layered set of provisions:

The framework operates alongside the AMFI ARN framework for traditional MFDs and the SEBI IA Regulations for full-service investment advisers.

EOP Category 1: AMFI route

Definition

EOP Category 1 is the framework for pure-play direct-plan execution platforms that are not engaged in stockbroking. Registration is with AMFI as a mutual fund distributor with EOP-specific operating conditions.

Eligibility

EOP Category 1 is suitable for:

• Pure-play direct-plan mutual fund platforms (Kuvera, ET Money, INDmoney in their primary MF function).
• Wealth-management apps with mutual fund execution as a primary product.
• Platforms not operating a separate SEBI-registered stockbroking arm.

Registration requirements

EOP Category 1 platforms must:

• Hold an AMFI ARN registration.
• Comply with EOP-specific operating conditions (cybersecurity, disclosure, investor protection).
• Maintain a separate brand or sub-brand identifiable as EOP if the same legal entity also operates non-EOP services.
• Comply with AMFI Best Practice Guidelines specifically tailored for EOP operations.

Permitted activities

EOP Category 1 platforms may:

• Execute direct-plan mutual fund subscriptions, redemptions, switches, and systematic-transaction registrations.
• Provide non-advisory information (scheme factsheets, riskometer levels, TER data).
• Distribute non-MF products (insurance, FD, NPS) under separate appropriate registrations (IRDAI for insurance, PFRDA for NPS).
• Offer goal-based planning tools that do not constitute “advice” under the SEBI IA Regulations.

Prohibited activities

EOP Category 1 platforms may not:

• Provide investment advice on specific mutual fund schemes.
• Receive trail commission from AMCs on advised products (because they cannot advise).
• Operate as a SEBI-registered stockbroker through the same legal entity.

EOP Category 2: SEBI route

Definition

EOP Category 2 is the framework for broking-integrated platforms that offer direct-plan mutual fund execution alongside stockbroking. Registration is with SEBI as a stockbroker, with EOP services offered as an ancillary activity.

Eligibility

EOP Category 2 is suitable for:

• Broking-integrated platforms with direct-plan distribution (Groww , Zerodha Coin ).
• Stockbrokers expanding into mutual fund distribution as an adjacent product.
• Platforms where stockbroking is the principal product and mutual fund distribution is a complementary service.

Registration requirements

EOP Category 2 platforms must:

• Hold a SEBI stockbroker registration.
• Comply with the standard SEBI stockbroker regulations alongside the EOP-specific operating conditions.
• Maintain segregation of broking-account funds from mutual fund subscription funds.
• Comply with both SEBI broker regulations and AMFI guidelines for the mutual fund function.

Permitted activities

EOP Category 2 platforms may engage in the full range of stockbroker activities (equity, F&O, currency, commodity, IPO applications) alongside the direct-plan mutual fund execution function.

Cross-product synergies

EOP Category 2 platforms benefit from cross-product synergies: a single login, a single KYC, and a unified portfolio view across equity holdings and mutual fund holdings. The integration is operationally important for broker-integrated platforms (Groww, Zerodha Coin) and is a competitive differentiator versus pure-play EOP Category 1 platforms.

Operational standards

Both EOP Category 1 and Category 2 platforms must comply with operational standards covering:

Cybersecurity

• ISO 27001 certification or equivalent.
• Defined disaster-recovery infrastructure.
• Two-factor authentication for investor logins.
• Encryption standards for data in transit and at rest.
• Periodic vulnerability assessment and penetration testing.

Investor onboarding

• KYC compliance through the KRA-CKYC ecosystem.
• Aadhaar-based eKYC where applicable.
• FATCA compliance.
• Risk-profile capture (without crossing into advisory territory).

Transaction execution

• Compliance with applicable NAV and cut-off rules under the SEBI NAV applicability rule of 2021 .
• Integration with CAMS and KFin Technologies RTAs.
• UPI AutoPay and NACH mandate support for SIPs.
• Same-day confirmation of executed transactions.

Disclosure

• Prominent display of the direct-plan-versus-regular-plan distinction.
• TER disclosure for both Direct and Regular plans (even though the platform executes only Direct).
• Riskometer display on every scheme page.
• Conflict-of-interest disclosure where the platform earns referral fees on non-MF products.

Grievance redressal

• Internal grievance officer with defined response timelines (3-day acknowledgement, 30-day resolution).
• Integration with the SEBI SCORES portal for escalation.
• Compliance with the SEBI Investor Charter for Mutual Funds framework.

Data and AI standards

• Compliance with the Account Aggregator (AA) framework for consent-based data aggregation.
• Disclosure of any AI-assisted features (such as automated portfolio suggestions).
• Investor consent for data usage in marketing or product-improvement contexts.

Distinction from RIA framework

The EOP framework operates alongside the SEBI (Investment Advisers) Regulations, 2013 with a defined boundary:

Several platforms (Kuvera , ET Money , INDmoney ) operate dual structures: a SEBI RIA registration for the advisory function and an EOP Category 1 registration for the execution function. The dual registration permits the platform to offer both advice (under the RIA framework) and execution (under the EOP framework) with appropriate separation between the two.

Permitted activities matrix

Impact on the direct-plan ecosystem

Regulatory certainty

The 2023 framework’s principal impact was regulatory certainty. The pre-2023 ambiguity had been a constraint on platform expansion, particularly for pre-IPO platforms whose investors required clear regulatory positioning. The 2023 framework substantially reduced this uncertainty.

Platform registrations

By 2024, the major direct-plan platforms had completed EOP registration:

Investor protection enhancement

The framework’s operational standards have enhanced investor protection across the direct-plan platform ecosystem. Cybersecurity standards, disclosure requirements, and grievance-redressal obligations are now consistent across registered EOP platforms.

Direct-plan AUM growth

The post-2023 regulatory certainty has been one of the contributors to continued direct plan adoption growth. Direct-plan share of industry AUM crossed 50 per cent in FY 2022-23 and continued to approximately 60 per cent of equity-MF AUM by April 2026.

Cross-product integration

The framework’s accommodation of cross-product offerings (mutual funds, equity, insurance, NPS, US equities, FDs) within the same platform-entity structure (under separate appropriate registrations) has supported the development of wealth-management super-apps. INDmoney and Groww have been particular beneficiaries of this structural permissiveness.

Operational implementation

Phased transition

Existing platforms operating in the EOP space were given a transition window to complete registration. The transition involved:

• Submitting EOP-specific registration applications to AMFI (Category 1) or SEBI (Category 2).
• Demonstrating compliance with operational standards.
• Updating investor disclosures to reflect EOP status.
• Updating client agreements where applicable.

Ongoing compliance

Post-registration compliance includes:

• Annual operational-standards audit.
• Periodic SEBI inspection (for Category 2; AMFI inspection for Category 1).
• Cybersecurity certification renewal.
• Grievance-statistics reporting.
• Investor-disclosure update for material platform changes.

Cost and resource burden

The EOP framework imposes a non-trivial compliance burden, particularly for smaller platforms. Industry commentary has periodically noted that the cybersecurity and operational-standards requirements may produce barriers to entry for newer entrants, with potential consolidation of the platform landscape over time.

Comparison with international frameworks

The Indian EOP framework is broadly comparable to similar regulatory frameworks for online investment platforms in other jurisdictions:

• United States: The SEC’s “Best Interest Rule” and the FINRA framework for online brokers. The SEC also operates the “execution-only” framework under Rule 22c-1 for mutual fund transactions.
• European Union: The MiFID II framework distinguishes between “execution only” and “advice” services with similar boundary considerations.
• United Kingdom: The Financial Conduct Authority’s “execution only” framework under the Conduct of Business Sourcebook (COBS).
• Australia: The Australian Securities and Investments Commission’s “general advice” versus “personal advice” distinction.

The Indian framework is distinctive in its two-category structure (Category 1 versus Category 2) that explicitly accommodates the integrated-broker model alongside the pure-play platform model. Most peer markets do not have an explicit category structure of this kind.

Recent developments

Master Circular consolidation

The May 2024 SEBI Master Circular on Mutual Funds consolidated the EOP framework into the single operating document. Minor clarifications addressed operational implementation questions raised by the registering platforms.

Cross-jurisdiction implications

Discussions in 2024 to 2025 have addressed the cross-jurisdiction implications of the EOP framework, particularly for international users (NRIs) and for platforms with operations in multiple jurisdictions.

AI and automated tools

SEBI’s 2025 to 2026 consultations have addressed the boundary between EOP-permitted generic content and RIA-required personalised advice in the context of AI-assisted investor tools. The boundary is currently being clarified through SEBI guidance.

Cybersecurity standards evolution

The post-2023 cybersecurity standards have been progressively tightened in response to emerging threats. RBI’s parallel cybersecurity framework for payment intermediaries has produced complementary updates.

Investor-charter integration

The SEBI Investor Charter for Mutual Funds framework has been integrated with the EOP operational standards, ensuring consistent investor-rights disclosure across the platform ecosystem.

Criticism and debates

Pure-play versus integrated-broker level playing field

Industry commentary has periodically debated whether the EOP Category 1 and Category 2 distinction produces a level playing field. EOP Category 2 platforms (broking-integrated) have structural advantages including cross-product synergies and shared KYC infrastructure that EOP Category 1 platforms cannot fully replicate.

Boundary between EOP and RIA

The boundary between permitted EOP content (generic information) and RIA-required personalised advice is interpretively contested. The line between “you might be interested in this scheme” (generic) and “we recommend this scheme for your portfolio” (personalised) is not always clear in practice. SEBI guidance has clarified some specific cases but residual ambiguity persists.

Cybersecurity cost burden

The cybersecurity and operational-standards requirements may produce barriers to entry for newer EOP platforms. Industry commentary has periodically suggested tiered compliance based on platform scale, with limited regulatory traction.

Cross-product registrations complexity

The EOP framework’s accommodation of cross-product offerings produces a complex registration matrix for multi-product platforms. INDmoney, for example, operates under EOP Category 1 (mutual fund), SEBI stockbroker (equity), IRDAI (insurance), and PFRDA (NPS) simultaneously. The cumulative compliance burden is substantial.

Limited investor advisory under EOP

Investors using EOP platforms do not receive personalised investment advice. The framework structurally protects platforms from advisory-related liability but may leave investors without professional guidance. The SEBI policy position is that advisory needs are addressed through the RIA framework; investors seeking personalised advice should engage an RIA separately.

See also

• Direct plan adoption in India
• Regular plan versus direct plan
• Mutual fund
• Mutual fund industry in India
• Mutual fund distribution in India
• SEBI Investment Management Department
• SEBI (Mutual Funds) Regulations, 1996
• SEBI Act, 1992
• AMFI
• AMFI ARN
• AMFI Best Practice Guidelines
• SEBI Investor Charter for Mutual Funds
• SEBI SCORES portal
• Applicable NAV and cut-off rules
• SEBI NAV applicability rule 2021
• Total Expense Ratio (TER)
• Mutual fund riskometer
• Mutual fund consolidated account statement (CAS)
• Groww
• Kuvera
• ET Money
• INDmoney
• Zerodha Coin
• MF Central
• MFU (Mutual Fund Utility)
• CAMS
• KFin Technologies
• SIP in India
• SEBI scheme rationalisation circular 2017
• Mutual fund exit load cap
• Scheme Information Document (SID)
• SEBI scheme merger and conversion rules

References

1. SEBI Circular SEBI/HO/IMD/IMD-POD-1/P/CIR/2023/74 dated 12 July 2023, Execution-Only Platform Framework.
2. SEBI (Mutual Funds) Regulations, 1996, as amended.
3. SEBI (Investment Advisers) Regulations, 2013, as amended.
4. SEBI Master Circular on Mutual Funds, SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/137, 27 May 2024.
5. SEBI Act, 1992, Section 11(2)(c) and related provisions.
6. AMFI Best Practice Guidelines on EOP Operations, Association of Mutual Funds in India.
7. SEBI Consultation Paper on Online Direct-Plan Platforms, Securities and Exchange Board of India, 2022.
8. SEBI Investor Charter for Mutual Funds, August 2021.
9. RBI Account Aggregator Framework, Reserve Bank of India.
10. SEBI Cybersecurity and Cyber-Resilience Framework, Securities and Exchange Board of India.