The appeal is likely to come up for hearing on April 23.
Financial
Planning Supervisory Foundation, one of the contenders for self-regulatory
organization (SRO) of distributors has appealed against SEBI’s order of
granting in-principle approval to Institution for Mutual Fund Intermediaries
(IMFI) with Securities Appellate Tribunal (SAT).
IMFI,
which is promoted by AMFI, received an in-principle approval to set up SRO on February
6, 2014.
The
third contender was Organization of Financial Distributors (OFD) promoted by
Financial Intermediaries Association of India (FIAI), an association of
national distributors.
Sandeep
Parekh of Finsec Law Advisors told Cafemutual that the hearing of the case is scheduled
on April 23. FPSF had filed the appeal with
SAT on March 27.
Some
experts argue that there can be conflicts of interest if AMFI promoted IMFI
becomes SRO since AMFI promotes the interests of AMCs. They say that ideally
distributor association should become SRO. It may be recalled that U K Sinha in
a public forum had suggested that AMFI should become the SRO of mutual fund
distributors.
FPSF
has also contested SEBI’s order on the grounds of conflict of interest.
The
last date for submitting applications for SRO was July 31, 2013. An SRO is
required to be registered as a company under section 25 of the Companies Act to
be eligible to apply for SRO. FPSF in its appeal has claimed that IMFI was
incorporated under the Companies Act only on August 2, 2013. Thus, SEBI gave an
approval to a phantom applicant.
IMFI
had filed the application on July 29, 2013 and thus was not incorporated under
the Companies Act, 1956 on the date (July 29, 2013) of filing its application
as SRO with SEBI.
Further,
the appeal states that the decision making process adopted by SEBI in granting in-principle
approval to IMFI was not fair and just. It states that neither did SEBI conduct
any formal interview to determine the most suitable applicant for SRO nor did
it offer any substantive reasoning regarding its decision to grant in-principle
approval to act as SRO to IMFI.
It
said that SEBI did not reply to an RTI application filed by Gaurav Kumar Baweja
to share the details of the selection process for the proposed SRO.
The
appeal, a copy of which is with Cafemutual, states that FPSP had sought the
intervention of Chairman of SEBI in the irregularity of SEBI’s decision.
Also, FPSP had written to Ministry of Finance seeking its intervention in this case. FPSF did not receive any response from SEBI and Finance Ministry and hence it approached SAT as the last resort.
