Sebi will 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.
Draft amendments to the SEBI (Self Regulatory Organisations) Regulations are in the process of being vetted and Sebi will appoint the SRO soon after the modified rules are notified, sources said.
The SRO will assist Sebi and ensure a cordial relationship between mutual fund houses and distributors. The decision to set up an SRO followed concerns about mutual fund distributors not being regulated and complaints against them for mis-selling products.
Among the applicants, IMFI is promoted by the Association of Mutual Funds in India (AMFI), a trade body with the responsibility of distributor registrations.
"AMFI-promoted IMFI has applied with Sebi to set up a mutual fund distributor body, SRO," AMFI Chief Executive H N Sinor said.
OFD was set up by Financial Intermediaries Association of India (FIAI), a grouping of 15 large distributors.
"We are one of the three applicants that have applied with Sebi to set up an SRO. FIAI has applied through a separate entity called Organisation of Financial Distributors (OFD)," FIAI Director Rajiv Bajaj said.
"SRO will help in bringing new investors by broad-basing the MF industry and also creating a framework for investors' complaint redressal," he said.
Officials at FPSB, a financial planners' industry body, could not be contacted.
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 AMFI, which can cancel the registration for violation of a prescribed code of conduct or for any other mala fide practice.