SEBI changes norms: Market watchdog brings buying and selling of mutual funds under insider trading

The Securities and Exchange Board of India (SEBI) has amended the rules to bring buying and selling of mutual fund units under the ambit of insider trading rules.

Currently, the insider trading rules apply to trading in the securities of listed companies or those proposed to be listed, when they hold Unpublished Price Sensitive Information (UPSI). Mutual fund units are specifically excluded from the definition of securities under the rules.

The latest decision by the capital markets regulator SEBI comes in the wake of the Franklin Templeton episode, in which few fund managers were accused of redeeming their holdings in the schemes ahead of six debt schemes blocking redemptions.

Also read: SEBI restricts alternative mutual fund schemes with a preferential distribution model from investing in a new investee company

“No insider shall trade in units of a mutual fund scheme, when he possesses unpublished price-sensitive information, which may have a significant effect on the net asset value of the scheme or have a significant effect on the interests of the fund. unit holders of the scheme,” Sebi said in a notification issued on Thursday.

Under the new rules, asset management companies (AMCs) will have to disclose information about the holdings of units in their mutual fund schemes, on an aggregate basis, held by AMCs, trustees and their close relatives on the stock exchange platform.

“Information on all transactions with unit certificates of own mutual funds… Performed by the designated members of the asset management company, trustees and their immediate relatives, the relevant party must notify the compliance officer of the asset management company within two transactions. days from the trading date,” the regulator said.

Also read: Market regulator SEBI extends deadline for settlement mechanism for non-tradable options cases to January 21, 2023

Also, the Securities and Exchange Board of India (Sebi) has prescribed minimum standards of conduct for designated persons in accordance with the provisions of the existing Insider Trading Code.

Further, the AMC’s regulator would fix the lock-out period during which the nominee cannot deal in units of the mutual fund.

Sebi, specifying an institutional mechanism to prevent insider trading, said: “The managing director or managing director of an asset management company with the approval of a trustee or such other analogous body of intermediary or fiduciary shall establish an adequate and effective system of internal control to ensure compliance with requirements set in this regulation to prevent insider trading.”

These internal controls to prevent insider trading include identifying all employees who have access to UPSI as Designated Persons, and all UPSI must be identified and kept confidential.

To this effect, Sebi amended the insider trading norms with effect from November 24.

With PTI inputs

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