Mutual Fund Deals Can Be Part Of Insider Trading Rules; SEBI Wants Safer, Transparent MF Transactions

Latest development indicates the Securities and Exchange Board of India (Sebi) proposal to bring the purchase and sale of mutual fund (MF) units under the purview of the insider trading rules. 

Trading Rules For Mutual Fund

The main objective behind this move is to ensure parity between MF units and other securities with regard to insider trading rules under SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations), according to the regulator as mentioned in a consultation paper.

As part of this, any person associated with the fund, who has direct or indirect access to the unpublished price-sensitive information (UPSI) or any immediate relative of the connected person, officials or employees should be subject to the insider trading rules, Sebi proposed.

Further, the consultation paper mentioned that published price-sensitive information includes likelihood of change in investment objectives, accounting policy, valuation of assets, winding up of the plan and restrictions on redemption, among others. 

Independent Platform

Besides  this, Sebi is also planning to set up an independent platform on which information can be accessed by participants in the plan so as to eliminate any discrimination.

As part of this initiative, Sebi further wants connected persons to disclose their transactions and holdings in mutual funds, or those of their immediate relatives every quarter.

It seems that SEBIs decision is influenced by the past happenings when a registrar and transfer agent of a mutual fund had redeemed all the units from a scheme.

They were privy to certain sensitive information pertaining to the scheme of the fund which was not yet communicated to unitholders of that particular scheme.

In another development, Asset management companies added 51 lakh investor accounts in June quarter.

This way taking the total tally to 13.46 crore, on increasing awareness about mutual funds and ease of transactions through digitisation.

Further, the experts hope the ongoing financial year to be promising too.