SEBI board approves amendment to MF rules
The Hindu
SEBI mandates AMCs to deter market abuse with enhanced surveillance systems, internal controls, and accountability measures.
The Securities & Exchange Board of India (SEBI) has now made it mandatory for Asset Management Companies (AMCs) to have an institutional mechanism for deterrence of potential market abuse, including front-running.
Considering the recent front-running instances observed by the market regulator, the SEBI Board on Tuesday approved amendments to SEBI (Mutual Funds) Regulations, 1996 to enhance the existing regulatory framework by requiring Asset Management Companies (AMCs) to put in place a structured institutional mechanism for identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities.
“The mechanism shall consist of enhanced surveillance systems, internal control procedures and escalation processes to identify, monitor and address specific types of misconduct including front running, insider trading and misuse of sensitive information,” SEBI announced after the board meeting.
The Board also approved amendments to the regulations to enhance responsibility and accountability of management of AMCs for such an institutional mechanism; and foster transparency by requiring AMCs to have a whistle blower mechanism.
“While SEBI will specify the broad framework of the institutional mechanism, the industry body i.e. Association of Mutual Funds in India (AMFI), in consultation with SEBI, shall specify detailed standards for such an institutional mechanism,” the market regulator said.
With respect to the requirement of recording of all communication by dealers and fund managers, the SEBI Board approved exemption from the requirement of recording face-to- face communication, including out of office interactions, during market hours.
This will be made effective after implementation of the institutional mechanism by the AMCs, SEBI said.