SBI, LIC & BoB fined Rs10 lakh for violating mutual fund norms

MF sponsors can’t hold above 10 pc stake in other funds

MUMBAI: The market regulator, Securities and Exchange Board of India (Sebi), has penalised State Bank of India (SBI), the country’s largest bank, LIC of India, the largest life insurer in the country by far, and Bank of Baroda (BoB), another public sector bank with large operations also outside India, for failing to comply with the mutual fund (MF) regulations in the country.

The penalty was Rs10 lakh on each.  Sebi explained that sponsors of mutual funds are disallowed to hold more than 10 per cent stake in any other mutual funds, and these three financial institutions, despite being sponsors of their own mutual funds in their respective names, hold 18. 24 per cent each in UTI asset management company (UTI AMC) along with Punjab National Bank (PNB) with the same 18.24 per cent stake, and the private equity firm T Rowe Price International holding the largest stake at 26 per cent.

“I am of the view that the said penalty is commensurate with the default committed,” Sebi adjudicating officer had said in the order. LIC, SBI and BoB in their reply to Sebi notice had said they were unable to bring down their shareholding to the required level within the specified time period due to procedural delays.

Sebi said through three separate orders that the stake in UTI AMC is not in conformity with the requirement of mutual fund regulations.

In fact, these three financial institutions were given time until March 2019 to regularise their stake in UTI AMC. Though these institutions did not deny having been served the warning well in time, they  stated that they were waiting for the UTI AMC’s IPO scheduled  for September where they could have made the necessary divestment and thereby comply with the MF regulations on this.

Interestingly, there was an earlier order issued in December 2019 by a Sebi whole time member (WTM) giving the three firms, time until December 2020 to comply with the norms defining ownership in other MFs.

But on this, Sebi made it clear that the order passed by the WTM and the order passed on Friday (August14) were based on two separate proceedings and hence does not have bearing on one another.

 

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