SEBI proposes institutional mechanism for AMCs for deterrence of possible market abuse, fraudulent transaction
The Hindu
SEBI proposed that asset management companies set up surveillance and internal control systems.
Capital markets regulator SEBI on Saturday proposed that asset management companies (AMCs) set up surveillance and internal control systems for the deterrence of possible market abuse and fraudulent transactions.
It further suggested that senior management of AMCs should be responsible to ensure that an institutional mechanism is put in place to detect and report possible misconduct by its employees, dealers, stock brokers or any other connected entities.
Further, AMCs should have appropriate escalation and reporting mechanism for possible market abuse and fraudulent transactions in securities related to the AMCs' transactions, SEBI said in its consultation paper.
This comes in the wake of SEBI passing orders in two instances of front-running pertaining to Axis AMC and Life Insurance Corporation of India (LIC).
In the Axis AMC case, broker- dealers, certain employees and connected entities were found to have front-run the trades of the AMC and in the case of LIC, an employee of a listed insurance company was observed to be front-running the trades of the company.
The Securities and Exchange Board of India (SEBI) has sought comments from the public by June 3 on the proposals.
In its draft paper, SEBI proposed that AMCs should put in place robust surveillance systems and internal control procedures, to deter possible misconduct by employees or other entities which may have information relating to fund management and/or investments of mutual fund schemes.
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