Sebi New Rules against insider trading in Mutual Funds:Securities and Exchange Board of India (SEBI) has issued new rules to prevent insider trading in mutual funds. The objective of this new circular of SEBI is to protect the interests of investors in mutual funds and increase transparency. The rules issued in the new circular will come into effect from November 1 this year. Here we have explained this new circular issued on Tuesday 22 October in 5 points:
1. Mutual fund units covered under insider trading rules
SEBI has included mutual fund units under ‘insider trading’ rules, which will be applicable from November 1, 2024. This means that now the same rules will apply to units of mutual funds as to other securities. This will bring more transparency in mutual funds and strict monitoring will be kept on insider trading.
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2. Reporting of holdings of designated persons i.e. responsible persons
According to the new rules, information about the holdings of ‘designated persons i.e. responsible persons’ of asset management companies (AMCs) and trustees and their close relatives will have to be reported to the stock exchange every quarter. The first report as on 31 October 2024 should be submitted by 15 November 2024. This will ensure that the investment activities of key employees of mutual funds can be closely monitored.
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3. Reporting of transactions above Rs 15 lakh
If a transaction of more than Rs 15 lakh is made in mutual fund units by a designated person i.e. responsible person, then it will be mandatory to report it to the compliance officer of AMC within two working days. This rule has been made to timely register any major investment activity taking place in mutual funds, so that transparency is maintained.
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4. Trading Restrictions for AMCs and Trustees
SEBI has also strengthened the trading restriction rules for employees of AMCs and trustees. It will now be mandatory for these employees to follow the rules of insider trading while investing in mutual funds. This rule will ensure that people with inside information about mutual funds cannot misuse their position.
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5. Reporting on violations of rules
If any designated person i.e. responsible person violates the rules of insider trading, then it will have to be reported in the format prescribed by SEBI. Under this process, information about any violation of rules will be given to SEBI, so that necessary action can be taken. This rule will ensure that strict action is taken against violators.
This new circular of SEBI is an important step towards stopping insider trading in mutual funds. Through this, the interests of investors will be protected and transparency in the operations of mutual funds will increase.