Lok Sabha Question No. 1072 (UNSTARRED), answered on 2016-07-22
Subject: Irregularities in Mutual Funds
Ministry: FINANCE
Asked by: AJAY NISHAD

## GOVERNMEhIT  OF IhTDIA MNISTRY OF FINA}{CE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED  QUESTION h[0, r&72 TO BE ANSWERED  ON 22ND JUI-,Y,2016

## IRREGUTARITIH,S IN MUTUAL F{.II{DS

## QUESTIO.N

## 1072. SHRI AJAY NISHAD:

## Will the Minister  of FINAFICE be pleased to state:

- (a) whether the Government is aware of irregularities in mutual funds,  if so, the details of the last two years along with the names of companies found guilty in this regard;
- (b) the action taken against those companies; and
- (c) the reasons for not taking action  against  the guilty, if any?

## ANSWER

## MINISTER  OF STATE IN THE MINISTRY OF FINANCE (sHRr ARITIN RAM MEGHWAL)

- (a) & (b): Yes, Madam. The details of the irregularities  and actions taken in the last two years against  Mutual  Funds (MFs) are given as under:

## Financial Year 2014-15

Based on the outcome of enquiry proceeding  initiated on June A9, 2014 against Sahara Mutual  Fund for alleged violation  of 'Fit & Proper' criteria and other provisions  of SEBI (Mutual Funds) Regulations, 1995,an  order was passed by SEBI on July 28,2015 for cancellation of registration of the Mutual Fund. The Mutual Fund has filed an appeal against the aforesaid order before the Securities Appellate Tribunal. Adjudication  proceedings have been initiated against JP Morgan Mutual Fund on February 24,2015  for launching a scheme  after the expiry of the time limit of six months from the date of the issuance  of observations by SEBI in violation of the provisions of SEBI (Mutual  Funds) Regulations, 1996. The details of administrative actions viz. 49 warning letters and 56 deficiency letters issued to Mutual Funds during 2014-15 are placed at Annexure-A.

## Financial Year 2015-16

Adjudication  proceedings were initiated against  Franklin  Templeton  Mutual Fund on March 04, 2016 for violation of SEBI's circular  dated September 30,20A2  and violation of Regulation 25(18) of SEBI (Mutual  Funds) Regulations, 1996.

Adjudication  and enquiry proceedings  were initiated against JP Morgan  Mutual Fund on December 03, 2015 for violation of various SEBI's circulars  and provisions of SEBI (Mutual Funds) Regulations, 1996 in the matter of investrnent  in Amtek Auto debt securities  by the Mutual Fund. Further,  The details  of administrative  actions viz.4l warning  letters and 20 deficiency  letters were issued to Mutual  Funds during 2015-16  me placed at Annexure-B.

HDFC Trustee Company Limited, HDFC Asset Management Company (AMC) Limited  and Mr. Milind Barve, CEO, HDFC AMC, were charged in the matter'of front-running activities of Nilesh Kapadia  and other entities. Consequent  to settlernent of the proceedings  against HDFC AMC, HDFC Trustee Company Limited and Mr. Milind Bar,vq HDFC AMC were advised to compensate the unit holders  for the losses incurred in the instances  of front running.

The total losses caused  to the unit holders  due to the front running matters  of HDFC,  was Rs. 6,9693,914.  HDFC AMC deposited this amount in a segregated  bank account and utilised it to compensate  the unit holders.

- (c): Does not arise in view of reply (a) & (b) above.

*{<***

| Sr lt{o     | Name of Mutual Fund (MF)   | Warning   | Deficiency   |
|-------------|----------------------------|-----------|--------------|
|             | Axis MF                    | 2         | I            |
| "| /-. | Baroda Pioneer M I;        | 0         | I            |
| tl J        | Birla Sunlifb MF           | 2         | 4            |
| 4           | BOI AXA MF                 | 0         | ?            |
| 5           | CanaraRobeco MF            | 1         | 2            |
| 6           | Prarnerica MF              | I         | 1            |
| 7           | DSP BlacliRock MF          | )         | 1            |
| I           | Edelweiss MF               | 0         | 1            |
| I           | Franklin T'empleton        | I         | I            |
| 10          | Goldman Sachs MF           | I         | I            |
| ll          | HDFC MT;                   | tl J      | 'l )         |
| t2          | HSBC MF                    | 1         | 0            |
| l3          | ICICI Prudential MF        | 1         | 2            |
| l4          | IDBI MF                    | 4         | 2            |
| 15          | IDFC MF                    | I         | 2            |
| l6          | IIFCL MF'(tDF)             | 1         | 0            |
| t7          | IIFL MF                    | I         |              |
| 1B          | IL&FS IDF MF               | 0         | 0            |
| l9          | Indiabulls MF              | 1         | 2            |
| 20          | JP Morgarl MF,             | 0         | I            |
| 21          | JM Finanr:ial MF           | 1 J       | 1            |
| 22          | Kotak Mahindra MF          | 1         | 1            |
| LJ          | L&T MF                     | 1         | I            |
| 24          | LIC l*Jomura MF            | 4         | 1            |
| 2s          | Mirae Mutual Fund          | 0         | 1            |
| 26          | Motilaloswal MF            | 0         | 1            |
| 27          | Peerless h4F               | 0         | 2            |
| 28          | Principal MF               | I         | 2            |
| 29          | Quantum MF                 | 0         | 1            |
| 30          | Reliance lvlF              | 1         | I            |
| 31          | Religare Invesco MF        | I         | 1            |
| 32          | Sahara M F                 | 0         | I            |
| 1a JJ       | SBI MF                     | 4         | -l J         |
| 34          | Tata MF'                   | 2         | ^' J         |
| 35          | Taurus MF                  | 2         | 2            |
| 36          | Union KRC MF               | 0         |              |
| 37          | TJTI MF                    | 4         | 2            |
| 38          | Pinebridge                 | 0         | I            |
| 39          | Deutsche                   | I         | 2            |
|             | Total                      | 49        | J/ 5b        |

| Sr. No.   | - 1 ,. - : lTame of the Mutual Fund (MF)   | Warning   | Deficiencv   |
|-----------|--------------------------------------------|-----------|--------------|
| 1         | Axis MI;                                   | 2         | 1            |
| 2         | Baroda Fioneer MF                          | 2         | I            |
| 1 J       | Birla MIF                                  | 2         | I            |
| 4         | BNP Paribas Mr"rtual Fund                  | 2         | I            |
| 5         | BOI AXA MF'                                | I         | 0            |
| 6         | DSP BtackRock MF                           | 2         | ") /-        |
| 7         | Edelweiss MF                               | 0         | I            |
| I         | Escorts MF                                 | 1         | 0            |
| I         | Franklin Templeton                         | .l J      | 0            |
| t0        | HDFC MF                                    | I         | I            |
| ll        | HSBC MF                                    | 1         | 0            |
| t2        | ICICI Prudential MF                        | 1         | 0            |
| 13        | IDFC MF                                    | I         | 0            |
| t4        | IIFL MF                                    | I         | 1            |
| 15        | J P Morgan MF                              | 2         | 0            |
| r6        | JM Financial MF                            | 1         | I            |
| t7        | Kotak Mahindra MF                          | 2         | I            |
| 18        | L&T MF                                     | 2         | 1            |
| 19        | LIC MF'                                    | ,,, J     | 1            |
| 20        | Mirae Mutual Fund                          | 2         |              |
| 2t        | Motilaloswal MF                            | I         | 0            |
| 22        | Principal MF                               | I         | 0            |
| n'! t\    | Quantum MF                                 | 0         | 1            |
| 24        | Reliance Capital MF                        | I         | 2            |
| 25        | SBI MF                                     | I         | I            |
| 26        | Shriram MF                                 | I         | 0            |
| 27        | Sundaram MF                                |           | 1            |
| 28        | Taurus MF                                  | I         | 0            |
| 79        | tjnion KBC MF                              | 1         | I            |
| 30        | UTI MF                                     | I         | 0            |
|           | Total                                      | 4r        | 20           |