SEBI has requested the Supreme Court to allow them to start afresh the appointment on self regulatory organisation (SRO) of mutual fund distributors.
The court has reportedly asked the market regulator to submit an application explaining to them why there is a need to introduce an SRO for the mutual fund distributors.
In the latest hearing on September 20, the apex court said, “SEBI would like to proceed in the matter afresh in view of the period of time that has elapsed in the meantime (three years) and many other entities have become eligible in the meantime. The SEBI is permitted to bring the aforesaid developments on record and file an application with the aforesaid prayer(s), which would be considered once such an application is filed. Registry is directed to list the application immediately after such an application is filed.”
As the name suggests, SRO or self regulatory organisation for mutual fund distributors will be responsible for micro-regulations of its members (MF distributors). The SRO will spread awareness about mutual funds among people, educate and train distributors and conduct screening test for them.
Earlier, SEBI had invited applications for SRO in March 2013. The market regulator has given its go ahead to AMFI promoted Institution of Mutual Funds Intermediaries (IMFI) to form SRO in February 2014.
There were two more applicants in the race for SRO - Organization of Financial Distributors (OFD) floated by Financial Intermediaries Association of India (FIAI) and Financial Planning Standards Board of India. While AMFI is the trade body of mutual fund manufacturers (albeit with the responsibility of distributor registrations), FIAI is an association of 15 large distributors and FPSB provides CFP certification.
In March 2014, Financial Planning Supervisory Foundation (FPSF) had filed the appeal against SEBI with Securities Appellate Tribunal (SAT). After many hearings, SAT had quashed SEBI’s decision to grant in-principle approval to IMFI to act as an SRO for the mutual fund distributors. SAT has asked the market regulator to start the selection procedure afresh in September 2015.
Recently, the RBI committee headed by Dr. Tarun Ramadorai, Professor of Financial Economics, Imperial college London has proposed introduction of SRO to grant license to distributors. It said, “We propose the creation of a unique ‘license number’ for financial advisors to replace the diversity of current registrations such as the ARN, RIA, RA, and EUIN number. An SRO-driven regulatory system for financial advisors across all products will use this unified identification number.”
