Tribunal scraps Sebi's pick of self-regulator for MF agents

Asks market regulator to re-do selection process

The Securities Appellate Tribunal (SAT) on Wednesday trashed the market regulator's selection of a self-regulator for mutual fund (MF) distributors.

It asked the regulator to start a new selection process.

In February 2014, market regulator Securities and Exchange Board of India (Sebi) gave an in-principle approval to the Institution for Mutual Fund Intermediaries (IMFI) to act as a self-regulator for MF distributors.

But the SAT said Sebi had failed to give other aspirants a hearing.

IMFI is promoted by the Association of Mutual Funds of India (Amfi). The other contenders for the self-regulator for MF distributors were: Organisation of Financial Distributors, promoted by Financial Intermediaries Association of India; and Financial Planning Standards Board (FPSB).

In 2013, Sebi invited applications for self-regulator to outsource some of its functions. In February 2014, the market regulator granted an in-principle approval to IMFI. In March 2014, the FPSB challenged the decision and moved the SAT.

The FPSB challenged Sebi's decision on the grounds that IMFI's application was not valid, as it was not a registered company as of July 2013 (the deadline for filing applications for self-regulator).

FPSB said in its appeal that Sebi didn't grant a hearing to candidates, as required by a rule.

An Amfi official said the body would file a fresh application for self-regulator.