The Financial Planning and Standards Board of India (FPSBI), a professional standards setting body for financial planners in India, has set in motion a restructuring exercise that will see a major change in the constitution of its board.
A nominations committee consisting of three non-rotational members and three charter members, will select the board members, which is unlike the earlier system when the board was elected directly by members. FPSB India is a body set up under section 25 of the Companies Act and was incorporated in January 2005.
In fact, according to the FPSBI's articles of association in 2005, each full member (who have given the Certified Financial Planner (CFP) exam) and charter member (who are basically product providers) must have one right to vote at the annual general meeting and extraordinary general meeting.
But an FPSBI resolution, cleared recently, has changed all that, making a section of financial planners wonder whether product providers will have more say in a body that is meant for financial planners. The main bone of contention is that full members have been left out of the process.
This is because the resolution, approved at the annual general meeting of FPSB India on August 27, says that the definition of 'member’ has been changed to include only charter members.
Charter members are those who have contributed to the FPSBI's corpus and comprise primarily product providers such as mutual funds, insurance companies, banks as also the World Gold Council.
FPSB India has 48 charter members and at least 266 CFPs, according to the FPSB India website. Some estimates peg the number of CFPs at over 500.
A section of the certified financial planners, however, said this restructuring exercise will leave them with no voting rights at all. They also said that even while the Articles of Association of 2005 mandates FPSB India to inform each member about the AGM, full members have neither received copies of the annual report from FPSB India, nor intimation about the date of the any AGM or EGM.
However, FPSB India ex-CEO Ranjeet Mudholkar said, "When the body was formed, only charter members were supposed to be on the board. Then they decided to have CFP certificants also. So the charter members made a provision to allow those members to be on the board also." The body also said that "a member is as per the definition under section 41 of the companies Act, 1956. FPSB India would always act in accordance with the prevailing laws."
CFPs say that as per the original AoA, both full members and charter members were eligible to vote at AGMs and EGMs. However, at an EGM in May 2007, this clause was modified so that charter members got the right to vote at AGMs and EGMs and full members got the right to attend these meetings. Full members could vote only the second year onwards for the purpose of electing four members on the board and each such member would have one vote.
Initially, FPSB India was formed by charter members as there were no qualified CFPs at the time. Provision was made to induct CFPs as they passed the CFP exam.
The FPSB, on its part, said," All intimations required to be given to members have been given to those who are members under section 41 of the companies Act, 1956."
Once the nomination committee appoints a new 12-member board, it will elect the chairman and the vice chairman. The recent resolution also states that FPSB India should restrict its charter membership to 50, indicating a move towards making the company "closely held" and "private limited". "This was decided in the interest of the financial planning movement. The fact that we are restricting charter membership to 50 is purely incidental," said Mudholkar.
On September 26, the FPSBI board met to approve the changes made in the articles of association. Both Shailesh Haribhakti, the then chairman of FPSB India, as well as Ranjeet Mudholkar, CEO, has stepped down. Haribhakti's term was due to expire on April 2009. In his place, Ajay Bagga, the then vice chairman of FPSB India, has taken over as chairman of the board. Mudholkar will continue as the principal advisor and will continue to attend board meetings as per the recent resolution.
