The Financial Planning Supervisory Foundation (FPSF) has moved the Supreme Court against markets regulator Sebi’s in-principle approval to the Institution for Mutual Fund Intermediaries (Imfi) to act as a self-regulatory organisation (SRO) for distributors of mutual fund products.
A bench headed by justice Ranjan Gogoi last week sought response from the Sebi and Imfi, promoted by mutual fund industry body Association of Mutual Funds in India (Amfi), a grouping of all fund houses in the country and entrusted with the responsibility of distributor registrations.
A notice was issued on an appeal filed by FPSF, which was one of the applicants for setting up this SRO. However, it was Imfi which got the nod from the markets regulator on February 6, 2014 to set up a regulatory body. FPSF is promoted by Financial Planning Standards Board India.
Questioning the in-principle approval given by Sebi, FPSF said Imfi was not a registered company on July 31, 2013 when the applications were called for by Sebi. It got registered only on August 2, 2013 which was after the cut-off date for submission of applications. “Imfi was ineligible to apply as on July 31, 2013 and Sebi should have rejected its application in accordance with Sebi SRO Regulations,” the foundation stated.
It said the date of incorporation of Imfi according to the records of the ministry of corporate affairs was August 2, 2013, while the application to Sebi for becoming an SRO was filed on July 29, 2013, that is much before its registration.
Sebi had called for applications for an SRO for mutual fund distributors until July 31, 2013. FPSF alleged that Sebi’s decision to grant Imfi the in-principle approval was illegal.
Challenging the SAT’s September 30 judgment that rejected its plea, senior counsel Shekhar Naphade argued that the tribunal had erroneously held that Regulation 3 permits any group or association of intermediaries holding a licence under Section 25(1) of the Act, as opposed to an incorporated company, to submit an application for being recognised as an SRO and therefore, Imfi was eligible to apply and Sebi was justified in entertaining its application.
FPSF had said as Imfi was not a legal entity at the time of its application, the act was in violation of Sebi’s regulations for SROs.
FPSF had also written to the department of economic affairs and the ministry of finance, seeking intervention in the matter.