SEBI asks AMFI to get ready for self-regulatory body of distributors: Sources

The long-awaited Self-Regulatory Organisation (SRO) for distributors is close to becoming a reality. According to sources, The Securities and Exchange Board of India (SEBI) has started the process of appointing an SRO for mutual fund distributors.

“SEBI has asked the Association of Mutual Funds of India (AMFI) to start preparations for SRO and is likely to appoint an SRO soon,” a source told Moneycontrol on condition of anonymity.

In August, SEBI Chief Ajay Tyagi said the appointment of an SRO for distributors was under process and the market regulator is likely to come out with a policy soon.

The SRO will assist SEBI and AMFI in regulating fund distributors and ensuring a cordial relationship with mutual fund (MF) houses.

The SRO for MF distributors will be responsible for: 1) Micro-regulations of its members; 2) Spread awareness about MF products among people; 3) Educate and train distributors; and 4) Conduct screening test for them.

The decision to set-up a SRO followed concerns about MF distributors not being regulated and complaints against them for mis-selling products. The SRO will assist SEBI and ensure a cordial relationship between fund houses and distributors.

At present, distributors need to register with AMFI, which can cancel the registration for violation of a prescribed code of conduct or for any other mala fide practice.