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SEBI Watch: Be wary of private equity giants sponsoring domestic MFs

Monday, Sep 7, 2020

 

By Rajesh Gajra

 

The Securities and Exchange Board of India must be wary of allowing private equity firms to become sponsors of domestic mutual funds through the direct or acquisition route. Business continuity of private equity players isn't a given, as the private equity funds they operate carry a fixed tenure of a few years.

 

L&T Group is in talks with global private equity firm Blackstone Group to sell L&T Mutual Fund. The deal, if it fructifies, will hinge on SEBI's approval, which may prove to be a problem, The Economic Times reported today.

 

The 'fit and proper' criteria under SEBI's regulations on intermediaries give the regulator a very wide bandwidth to evaluate any applicant for sponsorship of a mutual fund. Although private equity firms are not specifically barred from applying, SEBI is likely to carefully apply the 'fit and proper' criteria before deciding.

 

Concerns of business continuity of private equity players are real and can't be brushed aside. SEBI must tread with caution, regardless of the large net worth of a private equity firm.

 

Last year, SEBI had cleared the acquisition of 50% stake of Dewan Housing Finance in DHFL Pramerica Mutual Fund by PGIM, the Indian subsidiary of US-based Prudential Financial. PGIM already held 50% at the time of acquisition and after acquiring 100% stake, the mutual fund was renamed PGIM India Mutual Fund.

 

Since Prudential Financial Group is already into global investment management and life insurance business, the market regulator may have found it easy to provide a clearance. But in the case of L&T MF being acquired by Blackstone Group, the dynamics would be different.

 

The Blackstone Group, according to The Economic Times, is hopeful that since SEBI allowed it a toehold in the real estate investment trust arena, it will be given a licence to operate a mutual fund as well. But mutual fund regulations vary from real estate investment trust regulations, and SEBI would be right in applying different yardsticks. 

 

LATEST ANNOUNCEMENTS

* SEBI eases disclosure requirements on shares encumbered for margin obligations (PTI)

* SEBI allows MFs to segregate debt investment hit by COVID-19 (BL)

* SEBI grants exemption to family trust linked to Bharat Forge promoter from open offer obligation (PTI)

* SEBI says guidelines for proxy advisors to come into force from Jan 1

 

ORDERS, ADJUDICATION PROCEEDINGS

* SEBI orders attachment of bank, demat accounts of Mehul Choksi, Gitanjali Gems (PTI)

* SEBI penalises 12 individuals for fraudulent trading (PTI)

* SEBI penalises 1 person for leaking info on HDFC Bank results via WhatsApp (PTI)

* SEBI slaps 7-mln-rupee fine on 14 persons for fraudulent trading activities (PTI)

 

REGULATIONS (Announced in the past three months)

* SEBI's new margin norm may nudge trading towards buy-and-hold investing (BS)

* SEBI extends deadline to process FPI documents for certain entities 

* SEBI issues framework for bourses, listed cos to redress grievances 

* SEBI comes out with guidelines for local proxy advisors (ET)

 

DATA FROM SEBI

 DateUnit LatestPrevious
FII/FPI net equity investmentSep 3US$ mln(-)16.21  168.15
FII/FPI net debt investmentSep 3US$ mln   85.44(-)58.11
DIIs net equity investment#Sep 1bln rupees (-)2.64    8.92
DIIs net debt investment#Sep 1bln rupees

   19.78

   18.74

 

IPO/FPO/NFO

* Kalyan Jewellers files papers for 17.5-bln-rupee offer 

* Happiest Minds Technologies gets SEBI OK for public offer 

* PGIM India MF seeks SEBI nod for balanced advantage fund

* Baroda Mutual Fund seeks SEBI's approval for value fund 

 

SEBI IN NEWS

* SEBI's Manoj Kumar joins GIFT City's regulatory body (BL)

* SEBI rejects brokers' appeal to postpone new margin norms (ET)

* SEBI may ease measures taken to control market volatility (Moneycontrol)

* SEBI, NSE urge banks to source gold from exchange platform for hedging (PTI)

 

Sources – Television, Print, or Web Editions of: PTI–Press Trust of India, BS–Business Standard, ET–The Economic Times, Moneycontrol, CNBC TV-18, Mint, BL–The Hindu Business Line, TH–The Hindu, RTR—Reuters, BT–Business Today, IANS–Indo-Asian News Service, IE— The Indian Express, ToI–The Times of India, BB-Bloomberg Quint

 

# –- Data not available for Sep 2 and Sep 3

 

Internet links: http://www.sebi.gov.in

 

End

 

Compiled by Pooja Sawant

Edited by Avishek Dutta

 

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This copy was first published on the Cogencis WorkStation

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