Sebi to SAT: Appeal against SRO nod technical, unsustainable

Written by fe Bureau | Mumbai | Updated: Jul 4 2014, 14:14pm hrs
In a detailed reply to the Securities Appellate Tribunal (SAT), market regulator Sebi has said the appeal filed by the Financial Planning Standards Board of India (FPSB) against the in-principle nod given to the Institution of Mutual Funds Intermediaries (Imfi) is unsustainable and merely technical, having no substance.

Sebi has clarified that the cut-off date of July 31, 2013, was merely a cut-off for receipt of applications from interested group/associations of intermediaries and that the compliances confirmation regarding other requirements was taken by Sebi from all the applicants after July 31.

The market regulator further said FPSB was merely trying to raise technical objections to grant of in-principle approval to Imfi, which, otherwise, satisfied requirements of being licensed under Section 25 of the Companies Act, 1956 and basic requirement under Regulation 3.

Sebi said it had taken into consideration the fact that Imfi's promoter entity Amfi had been around since 1995 and was responsible for registering MF distributors since more than a decade. The regulator pointed out that it had granted in-principle approval to Imfi based on the condition that the four elected directors on the SRO board would include an equal number of representatives from both the distributor community and the AMCs.

On April 23, SAT had asked Sebi to give a detailed reply to an appeal filed by the FPSB, the promoter of Financial Planning Supervisory Foundation (FPSF), an SRO applicant.

The appeal states that Imfi was incorporated on August 2, 2013, implying that Sebi had granted in-principle approval for acting as an SRO to a phantom applicant, which was not a legal person at the time of 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 points out that under Regulation 4(a) of the Sebi SRO Regulations, for a valid application to be made for recognition of SRO, the applicant must be a company and the company must have a licence under Section 25 of the Companies Act, 1956.