Market regulator SEBI on Monday said that a single Self Regulatory Organisation (SRO) would be put in place for the oversight of for all mutual fund distributors.
“the Board (SEBI) may in case of distributors engaged by asset management companies of mutual funds, grant certificate of recognition to only one group or association making an application under this regulation,” the SEBI said in its notification.
The regulator may grant an in-principle approval to the applicant, which shall be valid for a period of 180 days. It can further extend the validity of the in-principle approval for a further period of 90 days.
The applicant should be a fit and proper person based on the criteria specified by SEBI.
The decision to set up an SRO followed concerns about mutual fund distributors not being regulated and complaints against them for mis-selling products. The SRO will assist SEBI and ensure a cordial relationship between mutual fund houses and distributors.
SEBI is expected to select one of three applicants - Institute of Mutual Fund Intermediaries (IMFI), Organisation of Financial Distributors (OFD) and Financial Planning Standards Board India (FPSB) - as the self-regulatory body.
The proposal to set up an SRO to regulate the mutual fund distribution business was mooted in August last year, while a detailed framework in this regard was approved by the SEBI board in June. The deadline for submitting applications for SRO was July 31.
At present, distributors need to register with Association of Mutual Funds in India (AMFI), which can cancel the registration for violation of a prescribed code of conduct or for any other mala fide practice.