SEBI on Thursday restricted mutual fund employees, Trustees and Board members from transacting in mutual fund schemes that are about to disclose any information to unitholders.
The information, SEBI said, include restrictions on redemptions or winding up of scheme, creation of segregated portfolio, change in investment objective, accounting policy or valuation of assets, conversion of a scheme from close ended to open ended or vice versa. The rule also applies in case of change in liquidity position or default by a security.
Moreover, employees and trustees will have to keep the compliance officer informed about their transactions in mutual funds except for overnight schemes. In case of SIP, they have to intimidate the officer only after the first instalment. These rules are not applicable for transactions under the 'skin in the game' rules.
Investment in shares and bonds
Employees and trustees are allowed to transact in shares and bonds through the primary market. In case of participation in private placement of equity, they have to ensure that there is no conflict of interest with the interests of the unitholders.
For secondary market transactions, employees have to take approval of the compliance officer, who has to make sure they do not allow investment by employees in securities which were traded by the AMC in the last 15 days.
This rule can be relaxed twice for top officials in a financial year only for sale of securities that have been held by them for over one year.
The regulator has put a complete ban on 'Front Running'. This means employees cannot buy or sell securities in which AMCs want to make or redeem investments.
The above rules are also applicable on employees' spouse, parents, siblings and children.
