The appeal filed by the Financial Planning Supervisory Foundation (FPSF) against the in-principle nod given to the Institution of Mutual Funds Intermediaries (Imfi) hasn't stopped MF industry body Amfi from going ahead with its preparations to get the SRO up and running.
Amfi has already appointed four directors for Imfi and the names are being sent to Sebi, said a person familiar with the matter. Amfi will also be interviewing 10-12 candidates for the post of Imfi's chief executive officer soon.
“Amfi hasn't got any intimation from Sebi on the SRO; so there's no reason the process of setting up Imfi should be stopped,” said the person. He further added that Amfi was confident that the final SAT decision would go in Imfi's favour.
Sebi had given an in-principle approval to Imfi in February to set up an SRO for distributors and gave it six months to get Imfi up and running. The SRO board will have five independent directors appointed by Sebi, two from AMCs and two from the distributor community.
On April 23, SAT asked Sebi to give a detailed reply to an appeal filed by the FPSF. Sebi will have to reply by mid-June and the final SAT hearing in this matter is scheduled for July 1.
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.
Besides the Amfi-promoted Imfi, the Organisation of Financial Distributors (OFD), floated by Financial Intermediaries Association of India (FIAI) and FPSF, promoted by Financial Planning Standards Board of India (FPSB), were the other two SRO applicants.
The MF industry is divided over the appointment of Imfi as SRO. Several fund houses support Imfi's candidature for SRO as Amfi has been around for more than a decade and has worked closely with fund houses and distributors.
However, some experts have expressed reservations.