The wait for the outcome of FPSB’s one and a half year long tussle with SEBI on its decision to grant in-principle approval to Institution for Mutual Fund Intermediaries (IMFI) just got over.
Securities Appellate Tribunal (SAT) has 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 its order which has come out on Wednesday, SAT has said, “SEBI requires to give opportunity of hearing to the unsuccessful applicant at the time of selecting and granting in-principal approval to an applicant. Since SEBI has failed to comply with the requirements of regulation, we quash and set aside the impugned decision of SEBI and direct to select an applicant afresh for grant of certificate of recognition in respect of distributors of mutual fund products.”
In March 2014, Financial Planning Supervisory Foundation (FPSF) had filed the appeal with SAT. In its first hearing on April 23, SAT had directed SEBI not to grant a final approval to IMFI to set up SRO.
In its appeal, FPSF has argued that the decision making process adopted by SEBI in granting in-principle approval to IMFI was not fair and just. It stated 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 Institution for Mutual Fund Intermediaries (IMFI).
IMFI received an in-principle approval to set up SRO on February 6, 2014.
SEBI, in its reply to Securities Appellate Tribunal (SAT), had said that it gave equal and fair opportunity to all the three applicants before taking a final decision.
The third contender was Organization of Financial Distributors (OFD) promoted by Financial Intermediaries Association of India (FIAI), an association of large distributors.
It is understood that SEBI will have to reinitiate the process of inviting applications to grant a license for SRO. Any entity or association registered under section 25 of the Companies Act, 1956, and having a minimum net worth of Rs.1 crore can apply to become SRO. All the three entities – AMFI, FIAI and FPSB are eligible to apply for SRO. Unconfirmed sources said that all these three applicants are likely to apply again to become SRO for the distributors.
