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Tuesday, July 10, 2001



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April, May redemptions by corporates, banks -- Full probe into US-64 insider trading: Sinha

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THE Government has decided to launch a full-fledged independent probe into insider trading on US-64 by top corporates and commercial banks which had redeemed units in April and May this year and also on the investment decisions taken by the UTI managemen t over the last few years.

A package for the investors of UTI, marked by the lifting of the ban on sale and repurchase of units will be finalised by the end of this week, the Finance Minister, Mr. Yashwant Sinha, said today.

Also underway is the restoration of the old practice of having a Government nominee on the board of trustees, done away with in 1997 and the appointment of a new Chairman for UTI and also IDBI.

The Ministry was at present in possession of information which hinted at insider trading. Mr. Sinha however, refused to provide details of the information and at what stage of the current fiasco, the Ministry had obtained it.

In passing, he mentioned that the Infrastructure Leasing and Financial Services (IL & FS) an institution which was headed by the then UTI Chairman, Mr. P.S. Subramanyam, also went in for redemptions during this period.

The bulk of the redemptions during April and May of over Rs 4,100 crore were carried out by top corporates and commercial banks, fuelling suspicions of sensitive market information having been passed on to them.

The probe would also cover the role of the other trustees on the board of the UTI. The attempt would be to find out whether they were privy to sensitive information on the decision to freeze sales and repurchase in US-64 units well before the July 2 meet ing and whether this was misused.

The proposed investigation would also focus on whether the investments of UTI were made on non-commercial considerations.

On a possible bail-out for UTI, Mr. Sinha said that budgetary support for the trust was not under consideration immediately. ``It is not a good thing to do,'' he said.

The Government would also make efforts now to bring the US-64 under the regulatory purview of SEBI.

Mr. Sinha who used today's press meet to wash his hands off on the dealings of the UTI over the last few years, said that the there was no direct role for the Government in the management and supervision of the trust.

``The Ministry of Finance was not taken into confidence by the UTI Chairman at any stage on the freeze of the US-64. We were kept in the dark till the very last moment and also vital facts were not shared with the Ministry,'' he said.

The Minister gave a blow-by-blow account of how the UTI top management kept the Ministry in the dark about the real state of affairs in UTI. It was only late on June 30, a Saturday, just two days before the board of trustees meeting that the Finance Secr etary, Mr. Ajit Kumar, was delivered a letter at home by the UTI Chairman informing him of a possible freeze on sales and repurchase.

Subsequently, on Sunday, copies of the letters were delivered at the residences of the Adviser to the Finance Minister, Dr. Rakesh Mohan, and the Joint Secretary, Capital Markets in the Ministry, Dr. J. Bhagwati. It was only on Monday morning (July 2), j ust before the board meeting that Mr. Sinha was told by the Finance Secretary about these developments.

Incidentally, Mr. Subramanyam also dropped in at Mr. Sinha's office for a ``casual meeting'' to inform him about the ten per cent dividend and also about the possible freeze.

``The alternative for me at that point was to order a stop to all that. It would have meant cancellation of the meeting of the board of trustees, meant to declare the results of the trust. The impact of this would then have been very very adverse on the stock markets and on investor confidence,'' according to the Minister.

Mr. Sinha also denied that the Finance Ministry had at any point interfered in the day to day functioning of the trust. ``Never have I pressured any bank chairman or an institution, or the UTI to do something which is not in their commercial interest. We do not micro manage''.

The Finance Minister said that although the buck stops with him for anything which happens in the financial sector, he was not shirking responsibility in any way on the UTI fiasco. ``If my conscience forces me to accept my responsibility, I will then thi nk of quitting,'' he said.

Pic.: The Finance Minister, Mr Yashwant Sinha.

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