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SEBI Subjects Buying and Selling of Mutual Fund Units to Insider Trading Rules

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Under the new rules, CMAs will have to disclose details of holdings in MF plan units. (Case)

New Delhi:

Capital markets regulator Securities and Exchange Board of India (Sebi) has amended the standards to bring the buying and selling of mutual fund units under insider trading rules.

Currently, insider trading rules apply to trading in securities of listed or offered companies when in possession of sensitive unpublished price information (UPSI). Mutual fund units are specifically excluded from the definition of securities under the rules.

Sebi’s latest move follows the episode of Franklin Templeton, in which the fund house’s few executives were accused of redeeming their holdings in the schemes before the six debt schemes were closed for redemption.

“No insider should trade in an organization’s units of a mutual fund, while in possession of sensitive unpublished price information, which may materially impact an organization’s net asset value. or may materially impact the interest of the unitholders of the program,” Sebi said in a notice released Thursday.

Under the new rules, asset management companies (AMCs) will have to disclose details of the interests in shares of its mutual funds, on an aggregate basis, held by the AMC, the trustees and their close relatives on exchange platform “Details of all transactions in the shares of its own mutual funds … executed by the designated persons of the portfolio management company, the trustees and their relatives are communicated by the person concerned to the compliance officer of the asset management company within two business days from the date of the trade,” the regulator said.

In addition, the Securities and Exchange Board of India (Sebi) has prescribed a minimum standard of code of conduct for designated persons under the provisions of the existing insider trading rules.

In addition, the CMA Compliance Officer would determine the closed period during which a Designated Person may not trade in units of the mutual fund.

Clarifying the institutional mechanism to prevent insider trading, Sebi said: “The managing director or managing director of an asset management company, with the approval of the trustee or other similar person of an intermediary or a fiduciary, must implement an adequate and effective system of internal controls to ensure compliance with the requirements set forth in this Policy to prevent insider trading.” Such internal controls aimed at preventing insider trading include all employees who have access to UPSI are identified as Designated Persons and all UPSI needs must be identified and its confidentiality must be maintained.

To give this effect, Sebi amended the standards on insider trading which went into effect on November 24.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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