With this, the process of setting up a SRO for mutual fund distributors begins.
SEBI has recently notified regulations to set up a Self Regulatory Organization (SRO) to monitor distributors of mutual fund and portfolio management products. The notification states, “SEBI hereby appoints the date of this notification as the date on which the regulations shall come into force in relation to distributors engaged by asset management companies of mutual funds and distributors engaged by portfolio managers."
With this notification, the first tangible step to set up a SRO has been taken. It is believed that AMFI could offer to set up this SRO, if asked by SEBI.
Last year in August, SEBI in its board meeting had approved the proposal made by its Mutual Fund Advisory Committee (MFAC), to set up an SRO to regulate the Mutual Fund distribution business.
According to the SEBI concept paper issued in September, 2011, the SRO set up for the regulation of Investment Advisors shall follow the rules/regulations laid down by respective regulators for products falling in their jurisdiction, including but not limited to suitability and appropriateness of the products.
The concept paper further states, “The SRO formed to regulate investment advisors will be registered under the SEBI (Self Regulatory Organization) Regulations, 2004. SRO will have sufficient resources to perform its functions. Its duties would include registering and setting minimum professional standards, including certification of investment advisors, laying down rules and regulations and enforcing those; informing and educating the investing public; setting up and administering a disputes resolution forum for investors and registered entities etc. Persons desirous of registration as Investment Advisors shall obtain registration with the SRO established for the purpose. The SRO will be entitled to charge a fee for granting registration and an annual fee.”
Presently, the distributors need to register with Association of Mutual Funds in India (AMFI) and their registration can be cancelled by AMFI for violation of a prescribed Code of Conduct or for any other malpractice.
