SEBI tightens insider trading rules for mutual funds; directs REs to end ties with unregistered advisors

Market regulator SEBI has tightened insider trading rules by including mutual funds units in the SEBI (Prohibition of Insider Trading) Regulations, 2015. The move aims to strengthen the regulatory framework concerning the prohibition of insider trading in units of mutual funds. SEBI says mutual funds units that trustees, AMCs, and their employees and directors must strictly follow its insider trading prohibition rules.

What are the new rules?

1. SEBI says AMCs will disclose the details of the holdings of its designated persons, trustees, and their immediate relatives on an aggregate basis quarterly from November 1, 2024. The holdings as of October 31, 2024, will be disclosed on the stock exchanges' platforms by November 15, 2024. For all subsequent calendar quarters, AMCs will provide the information within 10 days from the end of the quarter.

2. AMCs will share details of all the transactions in the units of their own mutual funds above the threshold amount. Any per PAN across scheme transaction whose value exceeds more than Rs 15 lakh over any calendar quarter -- executed by the designated persons-- must be reported to the AMC compliance officer within two days of the transaction.

The regulator has modified the master circular saying: "These guidelines cover transactions for purchase or sale of any securities such as shares, debentures, bonds, warrants, derivatives."

SEBI says employees will refrain from profiting from the purchase and sale or sale and purchase of any security in 30 calendar days from the date of personal transaction. However, in cases where it is done, the employee will provide a suitable explanation to the compliance officer.

The regulator says after its November 24, 2022, notification, mutual funds units were included under the SEBI (Prohibition of Insider Trading) Regulations, 2015. The amendments notified through the latest notification will be applicable from November 01, 2024. The regulator had formed a working group consisting of representatives from AMCs, AMFI, stock exchanges, RTAs and depositories. Based on their suggestions, the SEBI has introduced these changes to the existing rules.

REs told to end ties with unregistered advisors

SEBI has directed the association of registered entities and their agents to restrict ties with people who make any claim of returns unless the person is permitted by the board. These provisions will not apply in respect of an association via a “specified digital platform”.

The regulator, in its direction, says a person regulated by the board (including recognised stock exchanges, clearing corporations and depositories) must ensure any person associated with it or its agent does not engage in these activities without due permission. These will not include people engaged in investor education, provided that (s)he does not, directly or indirectly, indulge in any said activity.