Law and Finance : The UTI Mess

Newspapers for the past few weeks have been full of news about the UTI mess. And it is little wonder given that we have had massive losses in a mammoth mutual fund, high profile arrests, finance ministers pointing fingers at each other and even a prime minister offering to resign. Exactly what happened is still somewhat unclear, but the basics are as follows: The managers of UTI appear to have had their arms twisted (by a combination of ministerial pressures and private sector inducements) into making large investments in some flimsy high-tech stocks. Along with the rest of the high-tech equity market, UTI’s fortunes have suffered in recent times – and the losses with respect to the flimsy high-tech stocks were significant. That reversal of fortunes resulted in the once mighty UTI having to take some drastic steps such as restricting sales and repurchases of its US-64 fund. As was discovered later, however, this was not before some well-connected companies pulled out their money.