The Supreme Court slammed the Securities and Exchange Board of India (Sebi) over a move to hear a case afresh regarding mutual fund's self-regulatory organisation. SC says Sebi conduct is improper and is taking law in its own hands.
The Sebi had granted an in-principle nod to Association of Mutual Funds in India (AMFI) backed body called Institution for Mutual Fund Intermediaries (IMFI) to act as a self-regulatory organisation (SRO) for mutual fund (MF) distributors.
Now, this move had subsequently been challenged by the Financial Planning Standards Board (FPSB) backed body called Financial Planning Supervisory Foundation (FPSF). They first challenged it before the Securities Appellate Tribunal (SAT). The SAT had struck down the petition and consequently the FPSF moved the apex court.
Their contention essentially is the IMFI which has received the Sebi nod is not eligible to be given the mandate of acting as an SRO. Sebi, importantly, had just moved in the apex court, it has submitted that it will be open to the idea of giving in a hearing to FPSF afresh. Basically starting the process of giving a nod for the SRO afresh. Now, this was something that the apex court came down severely upon.
The apex court held that this is an issue that has been brought to the notice of the apex court and that Sebi was acting as a parallel to the process that had been enunciated in the apex court. The SC came down very hard saying that the conduct was improper, that Sebi was taking the law in its own hand, that the Sebi despite the Supreme Court matter which is pending here, Sebi was acting in a manner that was in fact not fit.
On the back of this, the matter will be taken up at a later date but for now the Sebi has been reprimanded and the issue continues to be pending. Sebi had sought to defend its position arguing that there is a vacuum as far as SRO is concerned and that there is an urgent need and that it is acting out of public interest. However, none of those arguments managed to cut any ice.
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