{"id":109,"date":"2019-04-05T09:02:42","date_gmt":"2019-04-05T09:02:42","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=109"},"modified":"2019-04-05T12:43:03","modified_gmt":"2019-04-05T12:43:03","slug":"how-will-a-sro-impact-your-investment-advisory-and-mutual-fund-distribution-business","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/04\/05\/how-will-a-sro-impact-your-investment-advisory-and-mutual-fund-distribution-business\/","title":{"rendered":"How Will A SRO Impact Your Investment Advisory and Mutual Fund Distribution Business"},"content":{"rendered":"\n

It looks like the Securities and Exchange Board of India (SEBI)<\/a> wants to delegate. And for good reasons\u2026 <\/p>\n\n\n\n

Like you might have experienced in your case, as your workload\nincreased, you needed a responsible and accountable helping hands to do justice\nto your job. Similar is the case with the capital market regulator. <\/p>\n\n\n\n

With capital markets booming in India, overseeing all the participants\nunder its purview has become a tough task for the capital market regulator. <\/p>\n\n\n\n

According to SEBI records, there were 1,136 SEBI-registered investment advisors as on  March 19,\n2019. And there were approximately 1.24 lakh mutual fund distributors as on February 28, 2019. It\u2019s noteworthy that in 2004\nthe distributor count was just 18,285. <\/p>\n\n\n\n

Between 2004 and 2019, the Asset Under Management (AUM) of the Indian mutual fund industry<\/a> grew from Rs 1.4 lakh crore to Rs 23.16 lakh crore. <\/p>\n\n\n\n

As Indian households are likely\nto park their savings more in financial assets, and the momentum is only bound\nto pick up pace in the future, the\nregulator is keen on laying a solid regulatory foundation to facilitate future\ngrowth. <\/p>\n\n\n\n

Here\u2019s the capital market regulator\u2019s\nplan\u2026<\/strong><\/p>\n\n\n\n

Self- Regulatory Organizations (SROs) for a different segment of the securities market. <\/p>\n\n\n\n

According to Investopedia<\/a>, A self-regulatory organization (SRO) is a non-governmental organization which has the power to create and enforce stand-alone industry and professional regulations and standards.<\/em><\/p>\n\n\n\n

According to the Consultation Paper released by the capital market regulator, on April 01, 2019<\/a> the role of the SRO would be the first level regulator for intermediaries in the securities market. The SRO will play a development role, regulatory role, grievance redressal & dispute resolution role, and disciplinary role (see table below):<\/p>\n\n\n\n

Table: What will be the SROs role?<\/em><\/strong><\/p>\n\n\n\n

\n
\n Developmental <\/strong>\n <\/td>\n Regulatory<\/strong>\n <\/td>\n Grievance Redressal & Dispute\n Resolution<\/strong>\n <\/td>\n Disciplinary <\/strong>\n <\/td><\/tr>
\n Providing Training and Education to\n its members\n <\/td>\n Granting of membership in SRO\/\n Recommending to SEBI for grant of a certificate\n of registration \/ renewal of certificate of registration of its members\n <\/td>\n Resolution of grievances against\n the members\n <\/td>\n Taking action in the event of\n violation of  code of conduct\n <\/td><\/tr>
\n Creating Investor awareness\n <\/td>\n Setting down a Code of Conduct and\n conducting examination for certification \/\n admission of members\n <\/td>\n Resolution of disputes between\n members and investors\n <\/td>\n Taking action in the event of violation of regulations\n <\/td><\/tr>
\n Proving policy inputs inter alia by\n participating in SEBI committees\n <\/td>\n Supervision and Inspection (offsite\n and onsite) of its members\n <\/td>\n Resolution of disputes between members\n <\/td>\n – \n <\/td><\/tr><\/tbody><\/table><\/div>\n\n\n\n

(Source: Consultation Paper Self Regulatory Organizations in Securities Market<\/a>)<\/p>\n\n\n\n

Furthermore, SROs will have the authority to expel members or suspend\ntheir membership for breach of the code\nof conduct or any other regulation. They can also impose a non-monetary\npenalty. <\/p>\n\n\n\n

Since SROs would be granted recognition under SEBI, their roles and\nresponsibilities would be similar to that of SEBI. <\/p>\n\n\n\n

Who will be the SRO?<\/strong><\/p>\n\n\n\n

An SRO will be\nrequired to have adequate experience (direct or indirect) in regulation,\nsupervision, dispute resolution and investor protection. The SRO Regulations\nprovide certain eligibility criteria which, inter alia, include the following:<\/p>\n\n\n\n