The Securities and Exchange Board of India has appointed Institution for Mutual Fund Intermediaries (IMFI), promoted by the Association of Mutual Funds of India (AMFI), to set up a self-regulatory organisation (SRO) for mutual fund distributors.
While the market regulator has informed the association of its decision, a formal announcement is still awaited.
A source close to the development told The Indian Express that IMFI has been appointed as the SRO.
A regulatory source, however, while confirming that the selection has been made, declined to disclose the name of the entity. “We have selected the organisation that will form the SRO and have intimated them about our decision,” a Sebi official said.
When asked about when Sebi would come out with a notification on the same, he said, “We will not issue notification on this as it was a selection process and the entity is now required to begin the process of setting up the SRO.”
Sebi, in March 2013, had invited applications for setting up a self-regulatory organisation under the SRO Act for mutual fund distributors. Three organisations — Association of Mutual Funds of India, Financial Planning Standards Board, India (FPSB) and Organisation of Financial Distributors (OFD) — had applied to form the SRO.
The decision, however, does not come without a touch of controversy. While Sebi gave July 31, 2013, as the last date for submission of applications by interested entities, the certificate of incorporation (CoI) of IMFI accessed from Registrar of Companies (RoC) show that IMFI received the CoI only on August 2, 2013, two days after the date of application expired.
While FPSB-led Financial Planning Supervisory Foundation had received its certificate of incorporation on July 28, OFD received it on August 13.
The SRO regulations state, “Any group or association of intermediaries, which is desirous of being recognised as a self-regulatory organisation, may form a company registered under Section 25 of the Companies Act, 1956, and such company may make an application to the board for grant of certificate of recognition as a SRO.” Company law experts said that that if AMFI had not formed IMFI for this purpose within the stipulated time then Sebi should not have gone ahead with the appointment.
However, Dhirendra Swarup, chairman, FPSB, who is looking forward to the formal announcement from the Sebi, said, “AMFI was initially created for this purpose. I think that the fact that they have been there in the field for much longer time than other contenders, could have gone in their favour.”