BackTribunal admits appeal against SEBI’s decision on mutual fund regulator
Petition had been filed against Sebi's decision to allow IMFI to act as a self-regulatory organization for mutual fund distributors
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Mumbai: The Securities Appellate Tribunal (SAT) on Wednesday admitted a petition by the Financial Planning Supervisory Foundation (FPSF) against the Securities and Exchange Board of India’s (Sebi’s) decision to allow the Institute of Mutual Fund Intermediaries (IMFI) to act as a self-regulatory organization for mutual fund distributors.
Markets regulator Sebi gave IMFI an in-principle approval on 6 February although it had applied for the permit before being registered as a company with the corporate affairs ministry, FPSF told SAT while filing its petition on 28 March.
Sebi, on 16 August 2012, approved a proposal to set up a regulatory body to better monitor and regulate mutual fund distributors.
FPSF, promoted by the Financial Planning Standards Board India, said in its petition that Sebi’s in-principle approval was illegal.
On Wednesday, Sebi told SAT that it will file its reply on the allegations by June, according to a person involved in the matter.
“SAT said that setting up of any such mutual fund SRO (self-regulatory organization) by IMFI will be subject to the tribunal’s final verdict," said this person on condition of anonymity. “Till the time SAT pronounces its final verdict on the matter, if IMFI goes ahead with its plan to launch the SRO, it will be doing so at its own risk and will be solely responsible for the costs incurred towards such an activity."
SAT is expected to rule on the matter on 1 July.
There were 47 fund houses that managed ₹ 8.76 trillion in the December quarter. Although there are 52,000 registered distributors, only 18% were active, Sebi said in a 20 February report.
The lack of quality distributors is a big reason for low penetration of mutual funds in India, the markets regulator said.
“Of all the fund houses surveyed, 61% of respondents said that finding quality distributors continues to present a formidable challenge. Fund houses are of the opinion that due to the current regulations that impose a limit on the incentives, good quality distributors are hard to find," Sebi said. “Finding quality distributors, especially in small towns and rural areas, is a major hurdle towards increasing mutual fund penetration."
The appointment of a regulatory agency may help in overcoming this issue, experts said.
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