SAT to hear plea on MF self-regulatory body on April 23

FPSF has moved SAT over the decision to give in-principle approval to the Institution for Mutual Fund Intermediaries

Financial Planning Supervisory Foundation's (FPSF) appeal against capital markets regulator Securities and Exchange Board of India (Sebi) over the appointment of a self-regulatory organisation (SRO) will be heard by the appellate tribunal on April 23.

The body has moved the Securities Appellate Tribunal (SAT) over the decision to give an in-principle approval to the Institution for Mutual Fund Intermediaries (IMFI), promoted by the Association of Mutual Funds of India (AMFI), to act as a self-regulatory organisation (SRO).

SAT is a quasi-judicial body that hears appeals by entities aggrieved by Sebi. The AMFI is a body set up to promote and safeguard the interests of mutual fund houses.

FPSF's appeal, filed last week, was mentioned before the tribunal on Thursday.

FPSF, chaired by former Financial Sector Legislative Reforms Commission (FSLRC) chairman Justice B N Srikrishna, has challenged a February 6 order of Sebi, which gives preliminary approval to the entity.

IMFI, FPSF and Organization of Financial Distributors (OFD) had submitted applications to Sebi to form an SRO.

An SRO is a non-government body with powers to enforce norms and guidelines.

In its appeal, FPSF has said, “The proposed SRO is for the distributors of mutual funds. Hence, there would be a conflict of interest if a company, established by a sector group that has been protecting the interests of manufacturers, is appointed as an SRO, and which would now be in charge of regulating the same distributors/agents of the same manufacturers’ financial products.”

Financial Planning Standards Board India (FPSB)-backed entity's appeal also states IMFI was incorporated as a company after it had filed its application to Sebi.

“Sebi had granted an in-principle approval for acting as an SRO to a phantom applicant which was not a legal person at the time of the application, in direct and clear violation of the Sebi SRO regulations and of common law principles and jurisprudence relating to incorporation creating a legal person,” the appeal says.

Sebi's last day for filing SRO applications was July 31. FPSF, in its petition has said IMFI was incorporated on August 2 and had filed the application on July 29.