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UTI Mutual Fund case | sebi: SAT reverses Sebi penalty on SBI, LIC and BoB in UTI Mutual Fund case

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The Securities Appellate Tribunal (SAT) has reversed the penalty imposed by market regulator the Securities and Exchange Board of India(Sebi) on three public sector entities within the matter of UTI Asset Management Company(AMC). The tribunal hears appeals towards Sebi orders.

Sebi had fined State Bank of India(SBI), Life Insurance Corporation of India(LIC) and Bank of Baroda(BoB) Rs 10 lakh every for not complying with the cross-ownership norms for mutual funds. All the three entities held over 10% stake in UTI MF, which was in violation of Sebi guidelines.

In an order dated January 7, SAT opined that public sector entities operated in ‘constraints’ which should be factored in whereas imposing a penalty on them. It additionally famous that the violation is just not ongoing since all of the three entities have divested their stake in UTI MF subsequently and are at present in compliance with Sebi guidelines.

“Given the above facts and reasons, we do not find any justifiable reason to impose any monetary penalty in the present matters, as every technical violation need not be visited with monetary penalty,” stated SAT within the order. “In these matters a warning is sufficient. Further, SEBI is at liberty to impose penalty for similar violations in future,”

As per the present guidelines, any entity which is a sponsor of a mutual fund can’t maintain greater than 10% stake in another mutual fund. SBI, LIC and BOB already are promoters of their very own mutual funds and therefore their possession amounted to battle of curiosity. UTI MF had launched an preliminary public providing(IPO) in late September via which all of the three entities introduced their possession in UTI in step with Sebi guidelines

SAT nevertheless noticed that Sebi laws needs to be equally relevant on all market entities, regardless of whether or not they’re state owned or not.

“It is necessary that governmental entities, including public sector undertakings, need to develop protocols for coming out from being prisoners of protracted procedures for complying with applicable laws and regulations timely, because as legal entities accountability falls on them,” the three member SAT bench noticed including “This is of paramount importance to entities operating in financial/corporate sectors where changes in the applicable laws and regulations are frequent in order to respond to fast changing, dynamic environment of the domestic and global markets,”

These observations assume significance since a number of state-owned entities are nonetheless not in compliance with numerous securities legal guidelines. For occasion, a number of PSUs nonetheless don’t meet the minimal public shareholding norms and a few of them don’t have a board composition that’s inline with Sebi’s company governance guidelines.

This is the second order of SAT within the matter of presidency sector entities within the current previous. In August, SAT supplied aid to National Highway Authority of India(NHAI) from a penalty imposed by Sebi for disclosure lapses.




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