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The Securities and Exchange Board of India (Sebi) has given an in-principle approval to Institution of Mutual Funds Intermediaries (Imfi) to set up country's first distributors' self-regulatory organisation (SRO), according to sources in the know,
IMFI is promoted by industry lobby Association of Mutual Funds in India (Amfi). With this, other contenders - Organisation of Financial Distributors (OFD) and Financial Planning Standards Board (FPSB) are out of the race. OFD was promoted by Financial Intermediaries Association of India (FIAI)
Sebi's approval comes after six months since the 31 July deadline for filing applications for SRO.
Industry had long been demanding for an SRO. It was in August, 2012 that proposal to set up an SRO to regulate mutual fund distribution was mooted. Later in June last year, Sebi approved a detailed framework regarding the same.
Currently, distributors need to register with Amfi, which can cancel the registration for violation of a prescribed code of conduct of for any other malafide practice.
Even, mutual fund houses were not keen to do the KYC of distributors as it was practically not possible for them. With setting up of an SRO, it will help bring new investors by broad-basing the MF industry and create a framework for investors' complaint redressal.
According to industry experts, SRO will lend credibility to the distribution business as it will improve the level of best practices, awareness and education among distributors.
