New Delhi: The Supreme Court on Wednesday reprimanded market regulator Securities Exchange Board of India (Sebi) for pursuing a case already being heard by it.
The court’s rebuke came during the hearing of an appeal filed by Financial Planning Supervisory Foundation (FPSF), challenging an in-principle approval given to the Institute of Mutual Fund Intermediaries (IMFI) to act as a self-regulatory organization (SRO) for mutual fund distributors.
“It is thoroughly improper of you (Sebi) to issue the letter (asking for the case to be heard on 28 January). We respected you and your wisdom, so no stay was granted (on the last hearing). (You) have taken us for granted," justice Ranjan Gogoi told Sebi.
FPSF had moved the court against a securities appellate tribunal (SAT) order of 30 September, where it said that Sebi’s 6 February 2014 order was against SRO regulations. It then asked Sebi to hear all applicants for the position of the SRO again. Thereafter, by a 14 January letter, Sebi asked FPSF to appear before it in pursuance of SAT’s order asking it to hold fresh selections for an SRO.
The court also refused Sebi’s plea for an early hearing of the case. Lawyer for Sebi Arvind Datar told the court that the case needed to be heard early as there was a vacuum in the mutual funds market with the lack of an SRO.
The court, however, did not relent. “We’re examining the issue and now you’re giving a hearing…You’ve taken the law in your hands," the court retorted.
FPSF approached the top court seeking clarification on the definition of a company under the SRO Regulations. The court agreed to hear the case and issued notice to Sebi on 11 January.
The court said that it had to resolve an apparent contradiction with the SRO regulations and whether a charitable organization licence could be granted to a company under Section 25 of the Companies Act 1956 if it hadn’t been incorporated first.
In this case, IMFI had received a licence under Section 25 on 23 July 2013, but it was registered as a company on 2 August, 2013. SAT had held that Sebi was justified in granting a certificate of recognition in these circumstances under Regulation 3 of the 2004 SRO regulations.
FPSF is promoted by Financial Planning Standards Board India.