Securities and Exchanges Board of India has tightened insider trading rules by including mutual funds units within the purview of SEBI (Prohibition of Insider Trading) Regulations, 2015. Sebi mandates that MF AMCs, their trustees, employees, and directors strictly follow its insider trading prohibition rules and, most importantly, disclose the holdings of designated persons and their immediate relatives quarterly. The rules prevent senior employees or their relatives at fund houses from selling mutual fund holdings if they have privileged information about upcoming issues. For example, in 2023, Franklin Templeton officials redeemed holdings before six debt schemes closed. The recent proposals also aim to expand the definition of 'connected people' related to these rules.
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What Are The New Rules?
1. Effective November 1, 2024, AMCs must disclose the aggregate holdings of designated persons, trustees, and their immediate relatives as of October 31, 2024. This information will be made available on stock exchange platforms by November 15, 2024, and for all subsequent calendar quarters, disclosures must occur within ten days post-each quarter-end.
2. Additionally, AMCs are required to report transactions in the units of their mutual funds exceeding Rs 15 lakh per PAN every quarter. Such transactions must be reported to the AMC compliance officer within two days. Further, Sebi clarified that there are no limitations imposed by the market regulator on the investment and redemption of mutual fund units.
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3. SEBI has also said that employees should refrain from profiting from any securities transaction (purchase or sale) within 30 days of their personal transaction. Violation of this guideline requires an adequate justification provided to the compliance officer.
These regulatory amendments are based on recommendations from a working group involving AMCs, stock exchanges, and depositories and will take effect from November 1, 2024.
