Mumbai, Oct 4: The Securities and Exchange Board of India (Sebi) finds itself in a bind over the raging controversy surrounding the termination of the Rajlakshmi Unit Scheme 1992 of the Unit Trust of India (UTI). Sebi is actually looking to the finance ministry to take a view on the issue, since under the existing laws, there is precious little it can do in the case.According to sources, the markets regulator has discussed the issue internally and found that there is nothing it can do to ask UTI to reconsider its decision to terminate the scheme, an action which has led to outrage among investors across the country. But UTI has made it clear that under the new falling interest regime, it simply cannot sustain such high interest payouts under RUS 92. Sources in the markets regulator said the finance ministry would have to take a view on the issue since the UTI Act was the binding regulatory structure for UTI and the Sebi Act did not allow any action to be taken against UTI for such moves. Besides, the scheme, having been launched in 1992, did not even come under Sebi then. However, Sebi has now put in place several strict codes for advertisements and the running of mutual funds so that the investors are kept aware of the developments, but the Rajlakshmi scheme is clearly beyond its regulatory purview, officials argue.
"Since the finance ministry had bailed out US-64 when the scheme was in trouble, it can, if it wants, intervene and bail out Rajlakshmi too", an official in Sebi said on Wednesday.
In fact, so much so, that despite the UTI's decision to bring its schemes under Sebi, the regulator finds that action can be difficult to take against irregularities even for such schemes, since UTI's action in bringing the schemes within the Sebi purview is "voluntary".
"This is a situation, where even if the schemes have some problems, little can be done since it is UTI who has on its own brought the schemes under Sebi", an official in the regulatory body told The Financial Express.
This brings the entire debate back to the one key issue: That changes are essential in the UTI Act to enable proper regulatory intervention, the sources said. UTI, on the other hand, has also said it is reviewing its suspended schemes and bringing them in line with existing Sebi mutual fund norms. Some of the schemes which are currently suspended may even be relaunched with new features to bring them in line with Sebi norms, officials in UTI have said.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.