With the lack of transparency in the operations of the fund -- through disclosure of net asset value and regulation by the SEBI -- taking its toll, there is an urgent need to bring UTI under the regulatory framework.

After the formation of UTI which has a huge investor base of 35 million (more than the number of equity investors in India), over 20 other mutual funds have started operations. While the UTI enjoyed special status under the UTI Act, others followed the SEBI's mutual fund regulations.

While all other mutual funds disclose their NAVs, US-64 has not done it so far. There are two different sets of rules for the mutual funds.

``There should be a comprehensive legislation concerning the entiresecurities industry including the mutual funds,'' said former UTI chairman G S Patel.

Patel says this suggestion was put forward as early as in 1985 but nothing was done. Even after the formation of SEBI, the government has not thought it prudent enough to come out with a comprehensive law in the last ten years.

SEBI, on its own, set up a committee (Chandratre committee) last year. The panel's proposals -- mainly the recommendation for a Securities Act -- are now before the Union Government for consideration. But it is to be seen whether these proposals will be implemented in the near future.

With the government struggling to get the Companies Act and Insurance Bill passed by the parliament, it may take a couple of years for the parliament to consider a Securities Bill.

According to one school of thought, the US-64 problem would not have occurred had the trust introduced transparent measures like periodic declaration of NAV (the worth of the scheme's investments per unit) -- or at least the assetsheld under the scheme -- and market value of its investments. Result: the revelation (that too three months after it happened) that the US-64 scheme had a negative reserves position of Rs 1,098 crore as on June 30, 1998 (following a massive depreciation in its equity investments) stunned investors and the market fraternity alike.

Brokers, who closely monitor the US-64, want stability as any problem in US-64 will hamper UTI's market operations.

While the UTI officials say that it is impossible to disclose the NAV of US-64 due to its investments in real estate and term loans, SEBI is keen that the UTI should disclose the NAV.

``We can't force them as it is governed by the UTI Act,'' said a SEBI official. Others also agree. ``Some attempt could be made towards disclosing the NAV... but it can not be done overnight in view of the hybrid nature of the scheme,'' Patel said.

US-64, a unique scheme floated over 34 years ago, is immensely popular all over India, both among corporates and retail investors. SEBIofficials have expressed inability to monitor the US-64 scheme as, legally, they do not have any regulatory authority over UTI as it has been created under a separate UTI Act. Other mutual funds had also complained about the special status enjoyed by the UTI.

``All mutual funds should be under the supervision, regulation and direction of the SEBI,'' the former UTI chairman said.

Several efforts were made in the past in this direction. When G V Ramakrishna was the chairman of the SEBI, he tried to bring the UTI under the SEBI purview. However, his efforts were stoutly resisted by the then UTI chairman S A Dave -- who incidentally was the chairman of SEBI before Ramakrishna -- by taking cover under the UTI Act. It was another matter that Dave himself had suggested that UTI should come under SEBI when he was the chairman of the regulatory body, but changed his stand when he moved over to the UTI.

After D R Mehta took over as the SEBI chairman, he also tried to bring the trust under the regulator's purview.Mehta managed to prevail upon the UTI to float three asset management companies for its various schemes. For US-64 alone which has a corpus of Rs 22,000 crore, one asset management company was formed two years ago. However, the fact that US-64 had a negative balance of over Rs 1,000 crore for the year ended June 1998 came out only early last week.

If more transparency is injected and uniform rules are brought about, the US-64 scheme would go from strength to strength. Clearly, nobody wants US-64 or any such schemes to take a hit.