SEBI tightens Insider Trading Norms for Mutual Funds to enhance Transparency
The Securities and Exchange Board of India (SEBI) has recently toughened the norms pertaining to insider trading in mutual funds bringing more transparency and protection to investors. Pursuant to these new norms, the Asset Management Companies (AMCs) will now have to detail holdings in respect of their Designated Persons, trustees, and those of their immediate relatives. These reports shall be disclosed aggregate and come into effect from November 1, 2024, onward. The reports shall be submitted on a quarterly basis as part of an ongoing process toward compliance.
In addition, all purchases or sales of mutual fund units valued at more than Rs.15 lakh on the date of the transaction itself or together in a calendar quarter must be disclosed. These dealings are made by the Designated Persons of AMCs, trustees, and their close relatives. This disclosure must be made to the Compliance Officer of the AMC within two working days from the date of such transaction.
The threshold is sought as per the PAN for all plans of mutual funds except those schemes exempted from this report. All kinds of conflicts of interest shall be prevented, and fair trading practices in mutual fund units shall be ensured through this enhanced regulatory framework.
Further, SEBI has amended some provisions under the Master Circular for Mutual Funds issued on June 27, 2024. Clause 6.6 is subjected to some changes with an intent to standardize investment and trading restrictions for the employees of the AMCs as well as for the trustees. The notable provisions are that the guidelines would now cover transactions on both sides of the selling and buying side of any securities, including shares, debentures, bonds, warrants, and derivatives.
Clause 6.6.2.3(f) has been added as an amendment to require that all employees of an AMC should not benefit from the buying and selling, or the reverse, of any security within a 30-day period after they consummated their personal transaction. The employees should explain such incidents to the Compliance Officer for reporting purposes before the AMC’s Board and trustees involved in reviewing the case.
This new circular is meant to protect the interest of an investor and bring more transparency in the mutual fund sector. A tightener of inside trading rules meant that a regulatory body committed itself to building up a sound and transparent market atmosphere for investors in mutual funds.
