MF biz starts SRO selection to meet Sebi deadline

With the Sebi board on Tuesday allowing a single SRO (self regulatory organisation) for all mutual fund distributors, the actual process of selecting an SRO has begun. But considering the stringent requirements that have to be met, only AMFI has so far shown any interest, reports CNBC-TV18's Manasvi Ghelani.

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On Wednesday, Sebi set the July 31, 2013 as deadline for accepting applications for being recognised as an SRO. Sebi chairman UK Sinha says, "There was a certain amount of discomfort about how many SROs will be available for distributors. So on Tuesday, the board decided that to have one single SRO and also set the deadline as per Sebi executive director Murli’s directive."
But being recognised as an SRO is no cakewalk. To monitor product mis-selling and money inflow through distributors, Sebi has set up a strict regulatory regime to govern SROs.  As per Sebi’s norms, an applicant seeking SRO status will have to be registered under Section 25 of the Companies Act, 1956,  should have adequate infrastructure to enable it to discharge its functions and it should also have a minimum net worth of Rs 1 crore.
Even though currently, the number of mutual fund distributors making over Rs 1 crore in commission stands at 332 (in 2013), so far only India's MF industry lobby, AMFI has applied.
AMFI chief HN Sinor says, "We have applied for a SRO licence and AMFI has set up IMFI — Institute Of Mutual Fund Intermediaries under which it will be registered. AMFI is waiting for a certification of incorporation before submission with Sebi."
While Sebi waits for others to throw their hat into the ring, analysts say this is a step in the right direction as the formation of a single SRO would help remove complexity and duplication and lower costs for the mutual fund industry.