Sebi slaps Rs 2 lakh fine on United Bank of India

Sebi today imposed Rs 2 lakh penalty on state-run United Bank of India (UBI) for violating norms related to debenture trustees.
An inspection of UBI's books of accounts, for the period 1992-2013, certain deficiencies in its functioning as debenture trustee, Sebi said in an order.
UBI is registered with Sebi as a debenture trustee.
The case pertains to UBI acting as debenture trustee for Power Finance Corp (PFC) wherein some violations of norms have been found.
In his order, Sebi's Adjudicating Officer Prasad P Jagadale imposed a penalty of Rs 2 lakh on UBI.
"From the material available on record, the amount of disproportionate gain or unfair advantage to the noticee (UBI) or loss caused to investors as a result of the violation/s is not quantifiable. Further, there is nothing on record to show that the noticee had a past record of default," he added.

Among others, an entity is not allowed to be a debenture trustee for a company to which it has extended loans.

According to UBI, it started accepting debenture trustee assignments from PFC prior to the period of its credit/lending relationship which started sometime in 2003, after which no new debenture trustee assignment was accepted from PFC.
However, it continued to act as debenture trustee in absence of appropriate relinquishment of the given assignments at that point of time, it said in submissions made to the adjudicating officer.
All the 11 debentures were subsequently duly redeemed by the issuer on their respective due dates. The regulations are silent whether a loan can be sanctioned to a concern during the tenure of its Debenture Trusteeship, UBI submitted.

"In the absence of any specific mention in this respect, it had presumed its eligibility to grant loan to PFC while acting as its debenture trustee... It is requested that non-compliance as cited may kindly be condoned without any penal action," UBI told the adjudicating officer.