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Mutual fund norms violation: Sebi imposes Rs 10 lakh penalty on SBI, LIC, Bank of Baroda

Sebi noted that the three entities have not denied the fact that they have not complied with the provisions of MF regulations.

Markets regulator Sebi on Friday imposed a penalty of Rs 10 lakh each on three public sector financial institutions — SBI, LIC and Bank of Baroda — for not complying with the mutual fund norms. Sebi observed that State Bank of India (SBI), Life Insurance Corporation of India (LIC) and Bank of Baroda (BoB) are the sponsors of SBI Mutual Fund, LIC Mutual Fund and Baroda Mutual Fund, respectively, and they also hold more than 10 per cent stake each in these mutual funds.

In addition, LIC, SBI and BoB are also sponsors of UTI AMC and hold more than 10 per cent stake individually in the asset management company (AMC) and trustee company of UTI MF. This is not in conformity with the requirement of mutual fund regulations, the Securities and Exchange Board of India (Sebi) said in three separate orders.

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The regulator amended the mutual fund regulations in March 2018, wherein a shareholder or a sponsor owning at least 10 per cent stake in an AMC is not allowed to have 10 per cent or more stake in another mutual fund house operating in the country. Entities not in compliance with the requirement was given time up to March 2019 to comply with the requirement.

UTI AMC is promoted by four public sector financial institutions as sponsors — SBI, LIC, BoB and Punjab National Bank (PNB) — with each of them currently holding an 18.24 per cent stake in the fund house, while private equity firm T Rowe Price International holds 26 per cent stake in UTI AMC.

Sebi noted that the three entities have not denied the fact that they have not complied with the provisions of MF regulations although they stated that the IPO (initial public offering) process for divestment of their shareholding in UTI AMC has been initiated and sale of its stake in UTI Trustee company is in the process of finalisation.
They further said the IPO of UTI AMC will be completed by September-end.

Sebi, in the orders, said the entities have violated the provision of mutual fund norms and are liable for penalty. Accordingly, the regulator has imposed a fine of Rs 10 lakh each on them. In December 2019, it directed the three entities to dilute their stake to below 10 per cent in UTI AMC by December 2020. In this regard, the regulator said “the proceedings initiated against the entities wherein order has been passed by Sebi’s whole time member and the present adjudication proceedings are two separate proceedings and does not have bearing on one another.”

It had added that Sebi may initiate action against the entities for the non-compliance with the provisions of mutual fund norms.

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