Sebi’s latest decision comes after the Franklin Templeton episode, in which some executives of the fund house were accused of encashing their holdings in six debt schemes before they were closed for redemption. file
Capital markets regulator SEBI has amended norms to bring purchase and sale of mutual fund units within the ambit of insider trading regulations.
Currently, insider trading rules apply to dealing in securities of companies listed or proposed to be listed when they are in possession of unpublished price sensitive information (UPSI). Units of mutual funds are specifically excluded from the definition of securities under the Rules.
Sebi’s latest decision comes after the Franklin Templeton episode, in which some executives of the fund house were accused of encashing their holdings in six debt schemes before they were closed for redemption.
“No insider shall trade in units of any scheme of a mutual fund when he is in possession of unpublished price sensitive information, which may have a material effect on the net asset value of a scheme or its interest. Unit holders of,” Sebi said in a notification issued on Thursday.
Under the new rules, asset management companies (AMCs) will have to disclose on the platform of stock exchanges the details of holding in units of their mutual fund schemes held by the AMC, trustees and their close relatives.
“The particulars of all transactions in units of its own mutual fund… executed by the nominees of the asset management company, trustees and their immediate relatives shall be reported by the concerned person to the compliance officer of the asset management company within two business days. Lane- days from the date of grant,” the regulator said.
Also, the Securities and Exchange Board of India (SEBI) has prescribed a minimum standard of code of conduct for designated persons in line with the provisions of the extant Insider Trading Rules.
Further, the compliance officer of the AMC will determine the closure period during which the designated person cannot deal in units of the mutual fund.
Specifying the institutional mechanism for prevention of insider trading, SEBI said, “An adequate and effective system shall be established with the approval of the chief executive officer or managing director of an asset management company, trustee or any intermediary or such other similar person of the fiduciary.” internal controls to ensure compliance with the requirements laid down in these regulations to prevent insider trading.”
These internal controls to prevent insider trading identify all employees with access to UPSI as Designated Persons and require all UPSI to be identified and maintained confidentially.
To give effect to this, SEBI amended the insider trading norms which became effective from 24 November.