SAT adjourns appeal over regulator for MF distributors

The matter would now be heard on December 23

The Securities Appellate Tribunal (SAT) has adjourned an appeal over selection of a regulatory body for mutual fund distributors. The matter will now be heard on December 23.

The Securities and Exchange Board of India (Sebi) had earlier invited applications for setting up a self-regulatory organisation (SRO) for mutual fund distributors.

It subsequently announced that one of the applicants, the Institute of Mutual Funds Intermediaries (Imfi), had received approval to be an SRO. The Association of Mutual Funds of India (Amfi) set up Imfi. Amfi is an industry association for mutual fund houses.

Another applicant was the Organisation of Financial Distributors, which was promoted by Financial Intermediaries Association of India. The Financial Standards Planning Board, a financial planning body, had also applied. It had set up the Financial Planning Supervisory Foundation (FPSF) to act as regulator.

The latter objected to the Sebi decision on the grounds that IMFI had not been set up in time for the application deadline.

“The regulation expressly says such companies may make an application to the board…admittedly the respondent was not a section 25 company (at the time),” said Darius Khambatta, senior advocate who appeared on behalf of the FPSF on Tuesday.

Senior Advocate Shiraz Rustomjee appeared on behalf of Sebi. He said the deadline was not a statutory date, and had only been put in place to “speed things up", as no applications had been forthcoming after Sebi had initially asked for it.

According to a source, another objection was the distributors of a product would be regulated by a body set up by the product manufacturers. Another source denied this, saying the board of SRO would have representation from the regulator as well, and that fears of manufacturer domination were unfounded.

The appellant’s counsel concluded his arguments on Tuesday.