In a positive development for LIC, SEBI has resolved the adjudication proceedings against the insurance giant, linked to alleged violations of mutual fund rules. The case pertained to LIC’s stake in IDBI Mutual Fund, held by IDBI Bank, which was at the center of regulatory scrutiny.
SEBI, in its 12-page order, emphasized that LIC’s alleged rule violations should be viewed in the context of its endeavors to finalize the merger of IDBI Mutual Fund with LIC Mutual Fund. Consequently, the regulatory body concluded its ongoing proceedings against India’s largest insurance company.
SEBI Resolves Mutual Fund Violation Allegations Against LIC
The allegations against LIC stemmed from its acquisition of a controlling 51 percent stake in IDBI Bank on January 21, 2019. As part of this acquisition, LIC was allotted preferential shares, giving it over 10 percent ownership in IDBI Bank. This conferred voting rights in both IDBI Mutual Fund’s Asset Management Company (AMC) and the Trustee Company of IDBI MF, which was seen as a breach of mutual fund regulations.
SEBI’s rules stipulate that a sponsor company of one mutual fund cannot hold a 10 percent or greater stake, along with voting rights, in another mutual fund’s AMC. Therefore, LIC’s 51 percent stake in IDBI Bank was considered non-compliant.
SEBI’s Perspective on the IDBI Mutual Fund Merger
The SEBI report also revealed that LIC had requested an extension until December 5, 2019, to adhere to the rules, citing mutual fund regulations. However, due to unobtained regulatory approval, LIC was compelled to explore an alternative option. Ultimately, the decision was made for LIC Mutual Fund to acquire IDBI Mutual Fund’s schemes.
SEBI expressed satisfaction with LIC’s cooperation, highlighting an exchange of letters between the regulatory body and LIC, where LIC had requested additional time for compliance and merger-related reporting. SEBI had granted LIC time until August 14, 2023, to complete the merger process and commended LIC’s transparency in communicating developments related to the IDBI MF merger with LIC MF.