Execution-Only Platforms (EOP) Explained: The Regulatory Framework Behind Direct-Plan Investment Apps
Every app that lets you buy a mutual fund's direct plan without going through a distributor — Groww, Zerodha Coin, Paytm Money, ET Money, and similar platforms — operates under a specific SEBI framework introduced via circular dated June 13, 2023, effective September 1, 2023. It's the regulatory backbone behind what most investors simply experience as "the app I use to invest."
What Qualifies as an EOP
SEBI defines an EOP as any digital or online platform that facilitates transactions — subscription, redemption, and switch — specifically in direct plans of mutual fund schemes. Notably, platforms offered by SEBI-registered Investment Advisers or Stock Brokers directly to their own advisory clients fall outside this specific framework, since EOP regulation is aimed at execution-only access, not advice-linked platforms.
The Two Registration Categories
Category 1 EOP — registers with AMFI, and operates as an agent of AMCs, with its systems integrated directly with AMCs and/or their authorised RTAs to facilitate transactions. Category 1 EOPs route investor orders directly to the AMC/RTA.
Category 2 EOP — registers as a stock broker under the SEBI (Stock Brokers) Regulations, 1992, specifically under the EOP segment of a stock exchange, and routes investor orders through the exchange's platform infrastructure rather than directly to the AMC/RTA.
An entity choosing the Category 1 route cannot simultaneously operate as a Category 2 EOP with a stock exchange — the two paths are structurally distinct alternatives, not layers.
Eligibility Criteria for Category 1 EOPs
- The entity must be a body corporate.
- Must appoint a Compliance Officer.
- The entity, its directors/partners, and key managerial personnel must satisfy "fit and proper person" criteria under Schedule II of the SEBI (Intermediaries) Regulations, 2008.
- Must maintain a minimum net worth of ₹1 crore, computed as paid-up capital plus free reserves, net of miscellaneous and deferred expenditure, intangible assets, and accumulated losses.
- Must enter into a formal agreement with each AMC it serves, clearly defining the scope of activities, rights, and obligations.
- Must maintain an objective, fair, and transparent policy for how it provides execution services across different AMCs' products, avoiding preferential treatment or steering.
Why EOPs Can Only Offer Direct Plans, Never Regular Plans
This is the structural core of the entire framework: an EOP, by definition, provides execution-only access — it doesn't provide advice, doesn't earn distributor commission, and isn't registered as a mutual fund distributor. Regular plans embed distributor commission within their expense ratio specifically to compensate for advisory or distribution services rendered — since an EOP renders no such advisory service, allowing it to offer regular plans would create a mismatch between the commission structure and the actual service provided, and would blur the clear separation SEBI has built between advice-linked distribution and pure execution.
Additional Requirements Across Both Categories
- Investor data may only be shared with specific investor consent.
- Category 1 EOPs must comply with AMFI-prescribed cybersecurity and cyber resilience requirements; Category 2 EOPs follow the stock broker cybersecurity framework.
- EOPs cannot list or promote schemes using ratings, rankings, or brand-based advertising in a manner that could be construed as investment advice.
- Records must be maintained for a minimum of five years.
- Existing platforms like MF Central and MF Utilities, which were already offering EOP-like services, were required to obtain formal EOP registration within a specified transition window and segregate access to Direct and Regular plan transactions accordingly.
Why This Matters
The EOP framework is what formally separates "helping someone execute a transaction" from "advising someone on what to invest in" — a distinction that matters enormously for cost structure (direct versus regular plan economics), regulatory accountability, and investor protection, and one that a growing number of fintech investment apps must navigate correctly to remain compliant.
How Anuj Desai & Associates Can Help
We assist fintech platforms and existing distributors evaluating entry into the EOP space — helping determine the right registration category, structuring the required AMC agreements, and building the compliance framework (net worth maintenance, fit-and-proper documentation, cybersecurity compliance) SEBI's EOP regulations demand. If you're building or scaling a direct-plan investment platform, we can help you get the regulatory foundation right.