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UTI bared US-64 muddle late: JPC

The joint parliamentary committee inquiring into the recent stock market scam on Wednesday termed Unit Trust of India's apprisal of the US-64 muddle to the finance ministry just prior to its board meeting an 'unusual step'.

Briefing reporters on the marathon meeting held New Delhi, JPC chairman Prakash Mani Tripathi said the finance ministry was quizzed on the UTI-64 muddle that led to fears of large-scale redemption by investors of the flagship scheme and, from the deposition of the ministry officials, it was felt UTI informed about the crisis very late.

Tripathi said it was a very unusual step because no information had ever been sent to the finance ministry before deciding on the (UTI) board meeting to discuss the issue.

The JPC chairman said Finance Minister Yashwant Sinha (who was not present at the JPC meeting) has also given the same information.

Tripathi said two days prior to the July 2 board meeting, the then UTI chairman P S Subramanyan had met joint secretary in the finance ministry, J Bhagwati, and informed about the decision to freeze the sale of US-64 units.

Bhagwati, however, asked the UTI chairman to give all the matter in writing to the finance secretary.

When Subramanyan met the finance minister a few hours before the commencement of the UTI board meeting, it was felt by Sinha that any intervention by the finance ministry at that time would have looked liked superceding the UTI board and the meeting was allowed to proceed in the manner that had been scheduled.

The finance ministry was also quizzed by the members on whether there was regular monitoring of the stock market even when the stock prices were at the peak.

The JPC members were told that warnings were issued on the behaviour of the stock market at that time through the press and other means, though the government officials were cautious of not upsetting the buoyancy at the bourses and being blamed for any downslide.

On the decision to re-induct a government nominee on the UTI board after this exercise was withdrawn in 1997, Tripathi said, following the recent muddle, it was felt that adequate and timely information of the activities of the UTI board was not forthcoming to the government and hence the need to have a government nominee.

On the role of the Securities and Exchange Board of India in UTI, the JPC chairman said, though earlier the UTI did not come under Sebi, it, on its own volition, decided to bring all its schemes barring the US-64 and a few others under the market regulator.

The JPC was also told that the recommendations of the justice Dhanuka committee set up in February 1997 to strengthen Sebi was in the last stages of finalisation and the recommendations of the committee would be sent to the Cabinet for approval.

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