Business

Business: SEBI plans to introduce insider trading on mutual funds as well

Under this rule, if a fund manager or an officer associated with mutual funds has any such price sensitive information which affects the Net Asset Value (NAV) of any of the schemes, then he will not be able to sell the mutual fund units.

Markets regulator SEBI has issued a consultation paper under which it has been proposed to bring mutual funds under the purview of rules related to insider trading. This means that if a fund manager or an officer associated with mutual funds has any price sensitive information that affects the Net Asset Value (NAV) of any of the schemes, he/she will not be able to sell the mutual fund units. After cracking down on insider trading in shares, the Securities and Exchange Board of India (SEBI) is now preparing to crack down on insider trading in units of mutual funds. After the fallout of the Franklin Templeton incident in 2020, SEBI has now proposed to cover transactions in mutual fund units as well as insider trading rules.

SEBI is contemplating adding a separate chapter to the Insider Trading Prohibition (PIT) Regulations. SEBI is planning to issue ‘Risk Factor Disclosures’ regularly on market trends. Which will cover transactions in units of particular mutual fund schemes. SEBI has issued a discussion paper in this regard. Mutual fund units are currently kept out of PIT rules. Some key employees associated with a mutual fund had redeemed all their units from the scheme at a time when they had price sensitive information and that information was not made public.

It seems that SEBI has referred to the closure of Franklin Templeton Mutual Fund which came to light in the year 2020. SEBI in its order in the Franklin Templeton case last year had said that Vivek Kudva (director of Franklin Templeton) and his wife Roopa Kudva had withdrawn their investments in 6 schemes of the fund house in violation of norms. This investment was withdrawn at the exact time, when after a few days there was a ban on the withdrawal of investors’ money from it.

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Shivam Bangwal

Shivam Bangwal is an Indian based entrepreneur who is a tech, travel and coding enthusiast with a post graduation degree on Master's of Computer Applications. He is a founder of Youthistaan, People News Chronicle, Hitchhike TV, Branding Panther and many more.
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