On 5th August 2024, the Securities and Exchange Board of India (SEBI) announced that it has amended mutual fund norms through a circular issued in exercise of its powers given under Section 11 (1) of the SEBI Act, 1992, read with Regulation 25(27) and Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.
- As per new norms, the Asset Management Companies (AMCs) are now required to adopt an institutional mechanism to identify and prevent front-running and insider trading in securities.
- SEBI has directed Association of Mutual Funds in India (AMFI), to prescribe the detailed implementation standards within 15 days from the date of this circular
- It will be mandatory for all AMCs to follow the detailed implementation standards issued by AMFI.
Key Features:
i.Accountability: As per new norms, the management of AMCs i.e. Chief Executive Officer (CEO) and Managing Director (MD) of concerned AMCs will be responsible and accountable for ensuring the effectiveness of the institutional mechanism for deterrence of potential market abuse.
ii.Alert-based mechanism: AMCs will be required to develop and implement mechanisms and procedures to automatically generate and process alerts in a time-bound manner.
iii.Processing of alerts: AMCs are now required to record a list of alerts which also include chats, emails, access logs of the dealing , their observations and access logs of the dealing room and Closed circuit television (CCTV) footage (if available),
- Also, AMCs will be required to compile all examined alerts along with what action they have taken on such alerts in the form of Compliance Test Report (CTR) and the Half-yearly Trustee Report (HYTR) and have to submit these reports to SEBI.
iv.Standard Operating Porcedures: The AMCs will be required to frame and adopt written policies and procedures for conducting examination and taking action in case of fraudulent transactions in securities by its employees and connected entities.
- These policies will be required to be approved by the board of AMCs.
v.Action on suspicious alerts: AMCs on getting alert on potential market abuse, will be required to suspend or terminate persons or entities indulging in market manipulation and inform such instances of market abuse to its board of directors and trustees.
vi.Whistle Blower Policy: The amended norms has mandated AMCs to document or frame a whistle blower policy.
- The introduction of a whistle-blower policy also serves as an added layer of security for investors.
vii.Periodic review: AMCs are required to ensure that the procedures or systems put in place should be reviewed and updated at regular interval of time.
viii.Data sharing with AMCs: As per new norms, stock exchanges and depositories are required to develop systems or mechanisms in consultation with AMFI, to allow data sharing with AMCs.
Recent Related News:
- On 3rd June 2024, The Securities Exchange Board of India (SEBI) launched “Saa₹thi” (SAARTHI) 2.0” mobile application on personal finance for investors. The app introduced a user-friendly interface with comprehensive tools which aims to simplify complex financial concepts.
About Association of Mutual Funds in India (AMFI):
Chief Executive Officer(CEO) -N.S.Venkatesh
Headquarters – Mumbai, Maharashtra
Founded – 1995
