The Securities and Exchange Board of India (SEBI) on Friday imposed penalties of Rs 10 lakh each on the State Bank of India (SBI), the Life Insurance Corp of India (LIC) and the Bank of Baroda (BoB) for violation of its mutual fund regulations.

The regulator observed that the SBI had, in June 2018, intimated the SEBI that it holds 18.24 per cent of equity shares of UTI Asset Management Company and sought time of more than three years for exiting the investment.

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Further, as on date of notification of Regulation 7B of MF Regulations, the SBI was a sponsor of the SBI Mutual Fund and was also a sponsor or shareholder of the UTI Mutual Fund, holding more than 10 per cent shares in UTI AMC, which was not in conformity with the requirements of this regulation.

Similarly, the LIC and the Bank of Baroda hold 18.24 per cent stake each in UTI AMC and both had sought time for gradual divestment of shares to comply with the relevant provisions.

As in the case of the SBI, the SEBI noted that both the LIC and the BoB were, respectively, sponsors of LIC Mutual Fund and Baroda Mutual Fund, along with being sponsor or shareholder of UTI Mutual Fund by holding more than 10 per cent shares each in UTI AMC, which was in violation with the norms.

The three state-run financial sector PSU majors had to comply with the regulation by March 12, 2019, within a period of one year from the date of coming into force of Regulation 7B on March 13, 2018.

As per the amendment brought in by the security market regulator in March 2018, a shareholder or a sponsor owning at least 10 per cent stake in an asset management company is not allowed to have 10 per cent or more stake in another mutual fund house operating in the country.

“I hereby impose a penalty of Rs 10,00,000 (Rs ten lakh) on State Bank of India in terms of the provisions of Sections 15HB of the Securities and Exchange Board of India Act, 1992. In the facts and circumstances of the case, I am of the view that the said penalty is commensurate with the default committed by the Noticee,” said the order by Prasant Mahapatra, the adjudicating officer in the matter of non-compliance by the SBI.

Similarly, penalties of the same amount were imposed on the LIC and the BoB, through separate orders.

The SEBI said that the three would have to pay the penalty within 45 days from the date of receipt of the order.