The Securities and Exchange Board of India (Sebi) has published a consultation document in an effort to gather feedback on a plan to include the buying and selling of mutual fund units under the scope of the regulations governing insider trading. With relation to the SEBI (Prohibition of Insider Trading) Regulations, 2015 (the “PIT Regulations”), the goal is to guarantee parity between MF units and other securities.

For MFs, Sebi suggests insider trading regulations

Any person related to the fund who has direct or indirect access to unpublished price-sensitive information (UPSI), or any immediate relative of the connected person, officials, or employees, has been proposed to be subject to the insider trading rules by the capital markets regulator.

The consultation paper states that publicly available price-sensitive information includes, among other things, the likelihood of changes to investment objectives, accounting principles, asset valuations, plan terminations, and redemption restrictions. By July 29, the responses must be received.

To prevent any discrimination, the watchdog intends to create a separate platform where plan participants can access information.

Additionally, Sebi demands that linked persons disclose their holdings and transactions in mutual funds, as well as those of their close family members, once every three months.

Sebi noted that in the past, a mutual fund’s registrar and transfer agent had redeemed all the units from a scheme because they had access to sensitive information about the fund’s scheme that had not yet been shared with the scheme’s unitholders.

Plans on the Table

  • A proposal has been made for a neutral platform where all players can access information.
  • On a quarterly basis, connected persons must report any MF transactions they or their immediate family members have made.
  • Unpublished price-sensitive information includes the propensity for asset value, accounting policies, and investment objectives to change.

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