Sebi warns HSBC Mutual on violations

The Securities and Exchange Board of India (Sebi) has asked HSBC Mutual Fund (MF), its chief executive officer and the trustees to comply with the regulatory norms for asset management companies. The warning comes after the regulator found that HSBC MF failed to inform investors before making fundamental changes in HSBC Gilt Fund.

“It was brought to the notice of Sebi that the name and the benchmark index of the scheme were also changed and investors were not informed of the sudden changes,” says the 18-page Sebi order. There were also some media reports that the fund had shifted nearly 80 per cent of its assets from ultra short-term to long-term bonds and the actual portfolio duration exceeded 12 years in January 2009.

Though the fund had cited liquidity crisis and the corresponding volatility of the assets under management as the reasons for increasing the duration, these were very important factors which could have influenced the decision of the investors/unitholders on whether to remain invested in the scheme or to exit, said the order.

By changing the duration as opposed to the original duration mentioned in the offer document, without intimating the unitholders before effecting such changes, the board of trustees and the asset management company had acted in a manner which was not in the interests of its unitholders and thus contravened Clause 6 of the Code of Conduct, it added.

Sebi whole-time member AK Abraham finally noted the chief executive officer had failed to ensure the MF complied with all the provisions of the mutual fund regulations.