Mutual fund rules changed! SEBI gets tough against those who commit irregularities.

New Delhi. The Securities and Exchange Board of India (SEBI) has amended the mutual fund rules. Under the changes, asset management companies (AMCs) will have to put in place an institutional mechanism to identify and prevent ‘front running’ and insider trading in securities. Additionally, the management of the AMC will be responsible for ensuring the efficiency of institutional mechanisms. SEBI has also directed the AMC to set up a ‘whistleblower’ mechanism.

SEBI’s decision comes after it passed two orders in connection with ‘pending’ cases related to Axis AMC and Life Insurance Corporation of India (LIC). “Asset management companies should put in place institutional mechanisms, as prescribed by the Board, to detect and prevent potential market abuse, including ‘front running’ and securities fraud,” Sebi said in a gazette notification dated August 1. insider trading,” Sebi said in its August 1 gazette notification.

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What is the next step?
‘Front running’ is the trading of shares or any other financial asset by a broker who has inside information about a future transaction that significantly affects the price of that transaction. So is insider trading, in which some influential people make profits and influence investors by leaking inside company information.

Who will be responsible now?
According to the notification issued by SEBI, the Chief Executive Officer (CEO) or Managing Director or any other person of equivalent rank and the Chief Compliance Officer of the asset management company are responsible and accountable for the implementation of such institutional mechanisms. shall be. SEBI said the asset management company will establish and enforce a ‘whistleblower’ policy. It will be a confidential mechanism for employees, directors, trustees and other stakeholders to raise concerns about suspected fraud, unfair or unethical practices, violations of regulatory or legal requirements or business practices. Steps will also be taken to ensure adequate protection of whistleblowers.

When will the new rule come into force?
For all these changes, the Securities and Exchange Board of India has amended the mutual fund rules. These changes will be effective from November 1. After that, like the stock market, the rules regarding mutual funds will also become stricter. This means that the responsibility and accountability of asset management companies will increase further after the new rule comes in.

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