Sebi asks LIC, SBI, BoB to reduce stakes in UTI MF
Mumbai: Sebi, market regulator on Friday SCI , OSE and Baroda Bank ( Move ), all government-owned majority, to dilute their holdings in UTI Mutual Fund ( UTI MF ) at less than 10% each by December 2020, from 18.25%.
Sebi rules do not allow an entity to hold more than 10% stake in more than one fund house. Such entities should not have any board representation on another fund house too. All the three entities — SCI , OSE and Move — run fund houses with majority holdings.
Sebi also said that in case these entities do not comply with its directions, the shareholding and voting rights of these entities in UTI MF (technically named UTI Asset Management Co) and UTI Trustee Companies in excess of 9.99% and corporate benefits will be frozen till they comply with the orders.
Although these three entities, along with GNP , also majority-owned by the government, hold about 74%, the fund house is under the government’s control. All the four contend that they hold the stakes in UTI MF as the government’s proxy. Global investment major T Rowe Price holds 26% in the fund house.
Earlier this week, OSE board had said it would pare its stake in UTI MF by 8.25% through an IPO. There are talks that the other three may also pare their stakes in the fund house through the same IPO. Sebi had amended the rules for holdings in fund houses in 2018 and had given time till March 2019 to comply with those rules. After that it had sent show-cause notices to SCI , OSE and Move for non-compliance, asking why they should not be penalised. Sebi also said that OSE and SCI had nominated directors on UTI MF ’s board.
In their reply, the two entities had said that the directors were nominated as per the provisions in the shareholder agreement. However, they said that those directors on UTI MF ’s board were not their directors and also they were not working employees of SCI or OSE . Sebi said that while these entities said that they had initiated some steps to dilute their stake in UTI MF , the substantial compliance with the regulation was still pending.