Sebi announced that an entity with the substantial holding in one mutual fund can’t do the same with other and such cross holding needs to be corrected within a year.
Board members of the market regulator Securities and Exchange Board of India (Sebi) met on Thursday in their last congregation of 2017, where they discussed various crucial issues. In the meeting held earlier today, Sebi announced that an entity with the substantial holding in one mutual fund can’t do the same with other and such cross holding needs to be corrected within a year. Market regulator Sebi has put a 10 percent cross-shareholding cap in a mutual fund to avoid the potential conflict of interest. With this latest ruling, shareholding pattern of UTI Asset Management Company (AMC) will see an impact. State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) and Life Insurance Corporation (LIC) are having their own mutual funds and at the same time, they hold 18.24 percent stake each in UTI AMC. SBI owns a substantial stake in SBI Funds that runs SBI MF. LIC controls LIC Nomura, a partnership with Japan’s Nomura. BoB and PNB have minority stakes in their MF ventures. BoB owns a stake in fund house Baroda Pioneer, a joint venture with US fund house Pioneer Investments. Punjab National Bank has stake in the Principal PNB Asset management. In wake of this 10 percent cross-shareholding cap introduced by the Sebi, stocks of these public sector banks and life insurer will be under stress in the coming days. The correction in the cross holding pattern needs to be accomplished within one year. Shares of SBI, PNB, BoB, and LIC closed at Rs 308.30, 170.25, 162.60 and 561.20 respectively at NSE today.
In addition, Sebi today allowed stock and commodity exchanges to facilitate trading in stocks and commodities derivatives from October 2018. Sebi has taken a series of reforms at its board meeting held on Thursday. Sebi decided to put a 10% cap cross-shareholding on all the mutual funds and moreover will now up to 10% and all the mutual funds will now have a year to conform to new cross holding terms. With the latest reform of Sebi converge the bourses from October 18, BSE and NSE will be able to provide commodity derivatives trading on their respective platforms. In addition to this, Sebi said the promoters of the companies will now be allowed to sell up to 2% of their equity through secondary markets. Sebi Chief Ajay Tyagi said that the regulator is trying to simplify, rationalise norms for REITs (Real Estate Investment Trusts) and all the firms to face action for WhatsApp leak of financial details investigating more companies in information leak case. The new measure may have an impact on the shareholding pattern of UTI Asset Management Company (AMC), requiring its promoters to lower their stake to 10% or below in next one year. As State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation are having their own mutual funds and at the same time, each of them holds an 18.24% stake in UTI AMC will now be required to limit their shareholding to 10%. Sebi said that all the credit rating agencies can’t hold more than 10% of their rival firms and has allowed QIPs (qualified institutional placement) as one of the routes to achieving minimum 25% public shareholding. Amid the booming domestic equities, Sebi Chairman Ajay Tyagi said the regulator has decided to relax entry norms for FPIs (foreign portfolio investors) who are willing to invest in the Indian markets. Besides this, Sebi would allow listing of security receipts issued by an asset reconstruction company (ARC) on stock exchange platform. In a serious warning to companies for leakage of key financial details, all those responsible, including auditors, would face action and the rules would be strengthened if required, Ajay Tyagi said further.