The market regulator, SEBI, has updated the rules for mutual funds. Asset Management Companies (AMCs) must now establish a system to identify and prevent front-running and insider trading in securities. The management of AMCs will be responsible for ensuring the effectiveness of this mechanism. Additionally, Sebi has directed AMCs to have a whistle-blower program.
This comes after Sebi’s decisions regarding front-running cases involving Axis AMC and Life Insurance Corporation of India (LIC). Sebi’s recent gazette notification states that AMCs must implement an institutional process, as specified by the Board, to identify and deter potential market manipulation, including front-running and fraudulent securities transactions.
Front-running is an illegal practice where an entity trades based on advance information from a broker or analyst before that information is available to clients. The CEO, Managing Director, or an equivalent officer, along with the Chief Compliance Officer of the asset management company, will be responsible and accountable for implementing this institutional mechanism.
India’s financial regulator has revised the guidelines governing mutual fund investments, with the new rules set to take effect on November 1st. The changes aim to provide greater transparency and enhance investor protection in the mutual fund industry.
