New Delhi: To tackle front-running and insider trading in securities, Capital markets regulator Securities and Exchange Board of India (Sebi) has amended Mutual Fund norms requiring Asset Management Companies (AMCs) to put in place an institutional mechanism to identify and deter such acts.
The Sebi rules state that the management of AMCs will be accountable for ensuring the effectiveness of the institutional mechanism. The AMCs are also required to have a whistle-blower mechanism.
The latest guidelines were issued came in the wake of Sebi’s passing two orders regarding front-running cases involving Axis AMC and Life Insurance Corporation of India (LIC).
“Asset management companies shall put in place an institutional mechanism, as may be specified by the Board, for the identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities,” Sebi stated In a gazette notification dated August 1, 2024.
Mutual Fund: What is Front-running?
Front-running is considered an illegal practice as the entity engages in trades based on advanced information from a stock broker or analyst before the information has been made available to clients.
The Sebi has categorically mentioned that the Chief Executive Officer (CEO) or Managing Director (MD) or such other person of equivalent or analogous rank and Chief Compliance Officer of the asset management company will be responsible and accountable for the implementation of such an institutional mechanism.
“The asset management company shall establish, implement and maintain a documented whistle-blower policy that shall provide for a confidential channel for employees, directors, trustees, and other stakeholders to raise concerns about suspected fraudulent, unfair or unethical practices, violations of regulatory or legal requirements or governance vulnerability, and establish procedures to ensure adequate protection of the whistleblowers,” Sebi said.
The rules will come into effect from November 1, 2024.
The Securities and Exchange Board of India (Sebi) has amended mutual fund rules to curb front-running, insider trading. The rules will come into force from November 1, 2024. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
