SAT asks HSBC MF to compensate 2 unit holders for losses in Gilt plan

MUMBAI: The Securities Appellate Tribunal (SAT) has directed HSBC Mutual Fund to make good the losses incurred by two of its unitholders, who accused the fund house of denying them an opportunity to exit their investments, after it changed the attributes of the scheme. Both unitholders, Subramanian Venkat and Anuradha Venkatasubramanian , had invested Rs 2.52 crore in HSBC Gilt Fund, a short-term plan, with a fiveyear modified duration.

The short-term plan, which was meant for investment in government securities for a period of 5-7 years, was changed to a term investment not exceeding 15 years. Their main grievance was that HSBC Mutual Fund had changed the fundamental attributes of the scheme without informing the unitholders and without giving an opportunity to them to exit the scheme as required under the regulations. They alleged that the value of investments in the scheme had eroded because of abrupt changes in the investment objectives.

Since the net asset value was steeply falling and to avoid further continued losses in their investments, they exited the scheme and filed a complaint with the fund house and Sebi to make good the losses suffered by them. But Sebi let off the board of trustees of HSBC Mutual Fund, HSBC AMC and its chief executive officer with a warning to strictly comply with the law. Aggrieved by the Sebi order, they approached the tribunal as they were denied the right to exit the scheme.

“We are of the considered opinion that if the changes carried out in the scheme affect its fundamental attributes or modify the scheme affecting the interest of unitholders, then every unitholder of the scheme as on the date of the change could feel aggrieved,” SAT’s presiding officer NK Sodhi said. “In that event, we will have to hold that the board (Sebi) erred in not issuing such adirection... If such a direction results in the appellants being compensated, so it be,” the SAT order said.