Individual unit holders were observed holding more than 25% of the mutual fund scheme’s quarterly average net assets
As many as 33 mutual fund (MF) houses out of the total 45 were found to have violated the ‘20-25 rule’ which requires a minimum of 20 investors and a cap of 25% investment by an individual investor in a particular scheme, the Parliament was informed.
According to Nirmala Sitharaman, minister of state for finance, large-scale violations in several schemes of such fund houses were found by capital market regulator Securities and Exchange Board of India (SEBI).
“Letters were issued to 33 mutual funds, wherein individual unit holders were observed holding more than 25% of the scheme’s quarterly average net assets,” the minister said in a written reply to the Rajya Sabha.
She advised them to comply with the ‘20-25’ norms in “letter as well as in spirit.”
The fund houses were also advised to strengthen its systems and improve its compliance standards to avoid recurrence of such instances, failing which penal actions would be taken in accordance with the provisions of SEBI regulations.
Currently, there are about 45 fund houses in the country, which together manage assets worth about Rs10 lakh crore.
SEBI said these five persons have committed a sophisticated white collar financial fraud with pre-meditated and well thought of plan and deliberate design for personal gains and to the detriment of the company and investors in its securities
Closing five-and-a-half year long probe into the country’s biggest corporate fraud, market regulator Securities and Exchange Board of India (SEBI) has barred erstwhile Satyam Computer’s founder B Ramalinga Raju and four others from markets for 14 years and asked them to refund Rs1,849 crore worth of unlawful gains with interest.
The money needs to be deposited with it within 45 days, while interest would be levied at 12% per annum with effect from 7 January 2009 — the day this mega-scam came to light through a letter written by Raju himself.
The others facing the prohibitory orders include Raju’s brother B Rama Raju (then Managing Director of Satyam), Vadlamani Srinivas (ex-CFO), G Ramakrishna (ex-vice president) and VS Prabhakara Gupta (Ex-Head of Internal Audit).
In its 65-page order, effective immediately, SEBI said these five persons “have committed a sophisticated white collar financial fraud with pre-meditated and well thought of plan and deliberate design for personal gains and to the detriment of the company and investors in its securities“.
The regulator, which has exercised the powers given to it through promulgation of an ordinance for passing disgorgement orders, further said that the “financial frauds as found in this case are inimical to the interests of the investors in securities and endanger the market integrity“.
SEBI’s Whole-Time Member Rajeev Kumar Agarwal said in his order: “I am convinced that this is a case where befitting enforcement action is necessary to send a stern message to the market to create an effective deterrence.”
On 7 January 2009, Raju — the then Chairman of Satyam Computer — had sent an email to the SEBI, wherein he admitted and confessed to inflating the cash and bank balances of the company, besides understating liabilities and other financial mis-statements.
After the fraud came to the light, the government had ordered an auction for sale of the company in the interest of investors and employees of what was known at that time as the country’s fourth largest IT firm.
The company was acquired by Tech Mahindra, then renamed as Mahindra Satyam and eventually it was merged with Tech Mahindra.
Resale price, reputation for after-sales, fuel economy and a few other factors