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19 Nov 2024
The Securities and Exchange Board of India (SEBI) has recently amended mutual fund regulations to combat front-running and insider trading. These changes, effective from November 1, 2024, require Asset Management Companies (AMCs) to implement comprehensive surveillance systems and establish institutional mechanisms aimed at identifying and deterring market abuses.
Key aspects of the new regulations include:
- Accountability : The Chief Executive Officer (CEO) or Managing Director (MD) and the Chief Compliance Officer of each AMC will be responsible for enforcing these mechanisms. This places significant accountability on top management to ensure compliance with the new rules.
- Whistle-blower Policies : AMCs are mandated to create documented whistle-blower policies. These policies will provide a confidential channel for employees and stakeholders to report concerns regarding fraudulent or unethical practices, ensuring protection for whistle-blowers.
- Written Policies and Actions : AMCs must develop written policies to address potential market abuses and ensure that these policies are approved by the board. Any violations could lead to serious consequences, including suspension or termination of involved parties.
These amendments come in response to recent front-running cases involving major players like Axis AMC and the Life Insurance Corporation of India (LIC), highlighting the need for stricter oversight in the mutual fund industry.
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