Market regulator SEBI (Securities and Exchange Board of India) has ordered state-owned insurer Life Corporation of India, State Bank of India (SBI) and Bank of Baroda (BoB) to cut their stake in UTI Mutual Fund to below 10 per cent from the current 18.25 per cent by December 31, 2020. They have also been asked to remove nominees from the boards of UTI AMC (Asset Management Company) and UTI Trustee companies before December next year.
"It is noted that despite the expiry of over 20 months from the date of amendment of the Regulations, the Noticees (SBI, LIC and BoB) are yet to achieve compliance with these requirements," a Sebi order stated, adding that while the noticees had initiated some steps to dilute stakes, the substantial compliance with Regulation 7B remained pending.
SEBI also said if these entities would fail to comply with the directives, their shareholding and voting rights in UTI AMC and UTI Trustee Companies over 9.99 per cent and corporate benefits would stand frozen till they did so. They have been told to submit a compliance report within a month from such compliance.
SEBI said if they failed to follow the orders, it could initiate adjudication proceedings against the noticees.
Notably, SEBI rules do not permit any entity to hold more than 10 per cent stake in more than one fund house, and all three run fund houses with majority stakes. The market regulator had introduced cross-holding limits in mutual funds in 2018 to curb chances of conflict of interests.
Edited by Manoj Sharma