Home >market >stock-market-news >FPSF appeals against Sebi order for mutual funds distributors

Mumbai: The Financial Planning Supervisory Foundation (FPSF) has challenged the Securities and Exchange Board of India’s (Sebi) decision to give an in-principle approval to the Institute of Mutual Fund Intermediaries (IMFI) to act as a self-regulatory organization for mutual fund distributors.

IMFI was given the approval on 6 February although it applied for such a permit before being registered as a company with the corporate affairs ministry, FPSF, promoted by Financial Planning Standards Board India, told the Securities Appellate Tribunal (SAT) on Thursday.

To better monitor and regulate mutual fund distributors, Sebi on 16 August 2012 approved a proposal to set up a regulatory body.

There were 47 fund houses with total average assets under management of 8.76 trillion in the December quarter. Although there are 52,000 registered distributors, only 18% were active, Sebi said in a 20 February 2014report.

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 partly help in overcoming this issue, industry experts said.

FPSF alleged in its petition to SAT that Sebi’s decision to grant IMFI the in-principle approval was illegal.

“We have not seen the details of the appeal. So, we cannot comment at this stage," said V. Ramesh, deputy chief executive of Association of Mutual Funds in India, which is the promoter of IMFI.

Monika Halan, Editor of Mint Money, is also on the board of the Financial Planning Standards Board (FPSB) India and on the board of Financial Planning Supervisory Foundation (FPSF).

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