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Sebi pulls up UTI for crossing broker's limit

Savio G Pinto

Sebi has pulled up the mutual fund behemoth Unit Trust of India (UTI) for transacting more than 10 per cent of its total business in the financial year ending March 2001 through its subsidiary UTI Securities Exchange Ltd in violation of Section 25(7) of the Mutual Fund Regulations.

Section 25(7) stipulates that an MF cannot transact through any associate broker in excess of five per cent of the gross business of the fund (inclusive of all schemes). An associate broker refers to an outfit belonging to the same group. UTI Securities is a broking outfit which is a 100 per cent subsidiary of UTI.

When contacted, MM Kapur, executive director, UTI, admitted that the trust had transacted more than the stipulated amount of business through UTI Securities. "Sebi had pointed this out to us. We have taken measures to rectify the situation and bring down the quantum of business," Kapur said. Initially, it was above 10 per cent and despite paring the exposure it is still above the five per cent limit, a source said.

Section 25(7) of the regulation says: "An asset management company shall not through any broker associated with the sponsor, purchase or sell securities, which is an average of five per cent or more of the aggregate purchases and sale of securities made by the mutual fund in all its schemes."

For the purpose of this sub-regulation, aggregate purchase and sale of securities shall exclude sale and distribution of units issued by the mutual fund. The five per cent limit applies to a block of any three months.

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