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SEBI plans to introduce more curbs on trading of mutual fund units by key employees. In a consultation paper released on Friday, the regulator has proposed to expand the scope of 'Prohibition of Insider Trading' (PIT) regulations to include dealings in units of mutual funds as well.
"A need has been felt to harmonise the provisions in PIT Regulations to initiate serious enforcement actions against those who misuse the sensitive non-public information pertaining to scheme of mutual fund, directly or indirectly, which they have access, by virtue of their fiduciary capacity," the regulator said in the paper.
Here are the key highlights from the consultation paper:
- Investments in excess of Rs.10 lakh in mutual funds of key employees of AMCs, trustees and their relatives will be disclosed on independent website (preferably AMFI to decide)
- Key employees of AMCs will have to report details of their MF investments across fund houses to the compliance officer within seven days of executing transaction. For SIPs, such a reporting can be made once at the time of paying the first SIP. Once a SIP becomes 2-months old, no future investments will be considered as an ‘insider trading’
- Key employees will need a clearance from compliance officer to make an investment or start a SIP in any MF scheme offered by their company
- AMCs will have to determine a ‘closure period’ in which employees, trustees and their relatives cannot transact in mutual funds. ‘Closure period’ is the period when employees are in possession of a sensitive information like change in investment objective, material change in valuation of assets, conversion of an open-ended scheme to a closed ended scheme or vice-versa
- The board will have to maintain a database of every price sensitive information and the names of people with whom the information was shared with
These provisions will not be applicable on transactions relating to SEBI's 'skin in the game' regulations.
