In a significant reversal from its earlier position, the Association of Mutual Funds in India (Amfi) is in talks with the Securities & Exchange Board of India (Sebi) to take on a modified self-regulatory organisation (SRO). The discussions centre around the possibility of Amfi taking on some?but not all?of the functions of a conventional SRO, while retaining its core role as a trade body.
Amfi chairman AP Kurian told FE that an initial round of talks had already been held between the regulator and Amfi and further talks would be held to fine-tune the role and responsibilities. The Amfi board is also discussing the matter.
Amfi had earlier stoutly opposed any SRO role, saying there was an inherent conflict of interest. However, Sebi has been keen that Amfi take on a self-regulatory role in the interest of the industry and investors.
Said Kurian: ?We are now open and are talking to Sebi. It is important to see what Sebi regulations are going to come. In terms of the old regulations of 2004, our stand was we are not prepared to take up the responsibility. Now, in the new scheme of things, we are open, we are not closing our minds. We would like to work closely with Sebi to evolve a suitable structure.? Amfi expects new regulations in the altered context.
The new structure, Kurian said, would involve Amfi taking on some of Sebi?s responsibilities and getting the regulator?s stamp of authority on its circulars so that mutual funds are obliged to comply.
?We are open and prepared to take some of the regulatory responsibilities. We issue several guidance notes on best practices. These could get a regulatory stamp. Today, the best practices circular has no regulatory sanctity. So, if anyone wants to ignore it, they can. Simple things can be done, like saying the circulars issued by Amfi will have regulatory sanction. That can be done. Then, those circulars can be cleared by Sebi.?
Amfi has already studied the SRO frameworks for mutual funds in Canada, China, Japan and Korea for the purpose of coming up with a modified structure that addresses all the concerns. According to the broad parameters of discussion, the conventional concept of an SRO would need to be changed to enable Amfi to be a ?modified? SRO for the MF industry. Said Kurian: ?We have to evolve an indigenous and unique model.?
Amfi is, however, clear that it does not want any dilution of its role as a trade body. ?We are the eyes, ears and voice of the industry. We have to see, hear and tell. We reactively respond to Sebi in a constructive manner. Because we are a trade body, we have the freedom, the strength to convey to them that this is what the industry feels. Going forward, we do not want any dilution in that trade body role,? Kurian explained.