Sebi action likely on AMCs that missed March 12 crossholding deadline

Companies that have failed to comply with the Securities and Exchange Board of India’s (Sebi’s) 10 per cent cross-shareholding norm for asset management companies (AMCs) may now face the consequences. Sources said the market regulator might issue strictures against the firms as well as principal shareholders who have missed the March 12 deadline for reducing the stake to 10 per cent.

Under the cross-shareholding norms, a single entity cannot hold more than 10 per cent in more than one AMC. The rules are to prevent potential conflict of interest and strengthen the governance structure of mutual funds.

UTI AMC is among the mutual fund houses in violation of the norms. The four principal Indian sponsors of UTI AMC — Life Insurance Corporation (LIC) and State Bank of India (SBI) Punjab National Bank (PNB) and Bank of Baroda (BoB) — are required to prune their holding from 18.25 per cent to 10 per cent each, to comply with these norms. All the four shareholders operate a separate mutual fund subsidiary. UTI AMC’s foreign shareholder T Rowe Price owns the remaining 26 per cent.

The UTI sponsors are learnt to have sought time for extending the deadline, which has been refused by the regulator. The sponsors also said to have approached the Department of Investment and Public Asset Management (Dipam) to intervene but even then they have not get any further extension. The issue is tricky as it involves state-run firms so the regulator has to take its move accordingly.

Sources say that the lack of clarity over the UTI AMC chief executive officer has irked the Sebi. The AMC though have shortlisted the couple of names but decision has yet to be taken. Besides, the shareholders have not taken the sufficient efforts on several concerns raised by the T Rowe.

Securities and Exchange Board of India ( SEBI )