When asked if Sebi would provide for a special dispensation to MFs to be a part of the inter-creditor agreement in the case of Dewan Housing Finance Corporation (DHFL), Tyagi said Sebi has already laid down the rules for this.
Under the framework, only those MF schemes where side-pocket is enabled can be part of the ICA process. As most schemes had not enabled side-pocket at the time of DHFL’s downgrade to below-investment grade, these schemes can’t be in an ICA unless Sebi makes an exception. On the issue of LIC’s shareholding breach at the National Stock Exchange (NSE), the Sebi chief said the life insurer will have to divest its holdings. Sebi has partially frozen LIC’s voting rights in NSE after it got classified as a ‘trading member’ following its acquisition of IDBI Bank.
Together with IDBI Bank, LIC owns nearly 14 per cent stake in NSE. Under Sebi regulations, a trading member directly or indirectly can only own up to 5 per cent in a stock exchange. To ensure compliance, LIC may have to divest about 9 per cent or IDBI Bank will have to surrender its trading member license of NSE, said experts. A trading member is an entity that facilitates trading on a stock exchange. Tyagi also said that Sebi is examining the ruling passed by the Securities Appellate Tribunal (SAT) in favour of audit firm Price Waterhouse (PW) in the Satyam accounting scandal.
The tribunal had quashed the Sebi order banning PW firms and two of its auditors from providing audit services to listed companies for their alleged involvement in the multi-crore accounting scam.
The SAT’s order had casted doubts on whether Sebi can pass rulings against audit firms. Tyagi said they will obtain legal views before deciding whether to appeal the SAT order in the Supreme Court.