TaxTMI 
TaxTMI 
TaxTMI 
2009 (7) TMI 769
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....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 can be used by the AMC to pay commissions to the distributor and to take care of other marketing and selling expenses. Any balance shall be credited to the scheme immediately. (d )The distributors should disclose all the commissions (in the form of trail commission or any other mode) payable to them for the different competing schemes of various mutual funds from amongst which the scheme is being recommended to the investor." 3. As per this circular, there cannot be an entry load for all mutual fund schemes. The net effect thereof is that the mutual funds will not pay any commission to the distributors from the entry load. The circular provides that the mutual fund scheme application forms shall carry a suitable disclosure that upfront commission to the distributors will be paid by the investor directly to the distributor and will be subject-matter of a mutual contract between them. Thus the distributors hav....
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.... self-regulatory organizations in the securities market; [(ia)calling for information and record from any bank or any other authority or board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which is under investigation or inquiry by the Board;] (j)performing such functions and exercising such powers under the provisions of 6[18][...]the Securities Contracts (Regulation) Act, 1956 (42 of 1956), as may be delegated to it by the Central Government; (k)levying fees or other charges for carrying out the purposes of this section; (l)conducting research for the above purposes; (la)calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered necessary by it for the efficient discharge of its functions; (m)performing such other functions as may be prescribed. ["(2A) Without prejudice to the provisions contained in sub-section (2), the Board may take measures to undertake inspection of any book, or register, or other document or record of any listed public company or a public company (not being intermediaries referred to in section 12) whi....
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.... 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) or clause (f), in respect of any listed public company or a public company not being intermediaries referred to in section 12 which intends to 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: Provided further that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries or persons concerned.]" 5. Section 11(1) of the Act is....
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....iscriminated. He submits that LIC agents are entitled to commission, which can go upto 40 per cent. He further submits that the new circular will benefit larger and other national level distributors like banks. The said contention has no merit. Life Insurance policies serve a different purpose and object. Life Insurance policies form a separate class and cannot be clubbed with mutual funds. SEBI does not control and regulate life insurance policies. It is well known that rate of return in an LIC policy is substantially lower. The primary object of a life insurance policy is to secure and benefit beneficiaries on death of the insured. The rate of return in mutual funds is market driven. It is not possible to accept the contention of the petitioner that insurance policies and their agents and mutual funds, agents and distributors form the same class and must have same rules of trade and charges. Article 14 does not prevent classification but ensures that there is no discrimination by treating two equals differently. Role of a distributor of a mutual fund is distinct and separate from the role of a life insurance agent. The plea that investors will invariably shift to bigger distribut....
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....n more felicitiously expressed than in Morey v. Doud 354 US 457 where Frankfurter, J. said in his inimitable style : In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to Legislative judgment. The Legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events - self- limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. The court must always remember that 'legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry'; 'that exact wisdom and nice adaptation of remedy are not always possible' and that 'judgment is largely a prophecy based on meagre and uninterrupted experience'. Eve....