9911796707
TMI Blog2012 (6) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the learned Single Judge, dismissing WP(C) No. 10390/2009, in which petition the challenge was to a policy circular laying down guidelines; being the circular dated 30-6-2009. 2. Relevant portion of the circular which was challenged reads as under:- "(a)There shall be no entry load for all mutual fund schemes. (b)The scheme application forms shall carry a suitable disclosure to the effect that the upfront commission to distributors will be paid by the investor directly to the distributor, based on his assessment of various factors including the service rendered by the distributor. (c)Of the exit load or CDSC charged to the investor, a maximum of 1 per cent of the redemption proceeds shall be maintained in a separate account which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment advisers and such other intermediaries who may be associated with securities markets in any manner; (ba)registering and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification specify in this behalf;] (c)registering and regulating the working of [venture capital funds, and collective investment schemes, including mutual funds; (d)promoting and regulating self-regulatory organizations; (e)prohibiting fraudulent and unfair trade practices relating to securities markets; (f)promoting investors' education and training of intermediaries of securities markets; (g)prohibiting insider tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o get its securities listed on any recognized stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market" (3) Notwithstanding anything contained in any other law for the time being in force while exercising the powers under clause (i) or clause (ia) of sub-section (2) or sub-section (2A), the Board shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, (5 of 1908), while trying a suit, in respect of the following matters, namely: (i)the discovery and production of books of account and other documents, at such place and such time as may be specified by the Board; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder: Provided that only the bank account or accounts or any transaction entered therein, so far as it relates to the proceeds actually involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder shall be allowed to be attached; (f)direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any transaction which is under investigation: Provided that the Board may, without prejudice to the provisions contained in sub-section (2) or sub-section (2A), take any of the measures specified in clause (d) or clause (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mutual fund managers. While doing so, they are entitled and empowered to issue circulars in respect of entry load in the new mutual fund. The contention of the learned counsel for the petitioner that under section 11(2)(b) distributors of mutual funds cannot be regulated as they are not registered with SEBI, is misconceived. Under section 11(2)(b), SEBI has the power to regulate and control the working of the intermediaries like the distributors. It is difficult to accept that under section 11(2)(b) SEBI can regulate the working of stock brokers, sub-brokers, intermediaries only if they are registered and not unregistered intermediaries like distributors. The power conferred under section 11(2)(b) upon SEBI relates to both registration as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium paid by policy holders and distributors of mutual fund was not urged before us. 10. An argument, not advanced before the learned Single Judge was sought to be urged. It was urged that by prohibiting entry load on mutual funds schemes and permitted negotiated commission to be received by distributors from the purchaser of the fund, small time distributors like petitioners have been prejudiced for the reason institutional service providers are able to render the same service for a very small commission. 11. But, this is a matter of agreement between the service providers and the one who receives the benefit of the service. It would always happen that those who render service to a large number of people would be able to cut down on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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