What is a self regulatory organization (SRO)?
SRO is an organization that exercises certain degree of regulatory authority over a profession or industry. The regulatory authority of this organization can be applied in addition to some form of government regulation or it could work in the absence of government oversight.
What does it do?
An SRO is responsible for the formation of rules and guidelines at the micro-level with an oversight from a regulator or government at the macro level.
Why does the MF industry need an SRO?
During the 7th CII Mutual Fund Summit, the SEBI Chairman UK Sinha encouraged the industry to consider turning AMFI in to a SRO. This is not the first time that such a proposal has been put forth. In fact ever since AMFI was set up, there has been much discussion about the extending its role to becoming a SRO so that the industry could achieve greater standards in governance without too much of regulatory oversight.
What does the industry feel?
According to a poll run on www.cafemutual.com, 80% of the participants in the opinion poll were in favor of converting AMFI in to a SRO. However, when we spoke to a few head honchos, the reaction was ambiguous. Some felt that there was no compelling reason for AMFI to turn itself in to a SRO.
Some industry observers pointed to the slow and patchy progress made by Association of Merchant Bankers of India in turning itself in to a SRO.
In any case, much work will have to be done by SEBI and AMFI to make it happen. Even assuming that some work has been initiated in this direction, we are still a few years away from seeing this turn in to a reality.