SEBI Amends Mutual Fund Regulations to Combat Market Abuse

Mumbai: The Securities and Exchange Board of India (SEBI) has updated mutual fund regulations, mandating Asset Management Companies (AMCs) to establish robust mechanisms to prevent front-running and insider trading. These changes come after SEBI addressed front-running cases involving Axis AMC and Life Insurance Corporation of India (LIC).

The revised norms require AMCs to implement enhanced surveillance systems, internal controls, and escalation procedures to detect and manage misconduct such as front-running, insider trading, and the misuse of sensitive information. Additionally, AMCs must develop a whistle-blower mechanism to allow employees and stakeholders to report unethical practices confidentially.

AMCs’ management, including the CEO, Managing Director, and Chief Compliance Officer, will be responsible for the efficacy of these mechanisms. AMCs must also create policies for examining and addressing potential market abuse, which need approval from their Board of Directors.

To support these initiatives, stock exchanges and depositories will work with the Association of Mutual Funds in India (AMFI) to develop data-sharing systems with AMCs. The new regulations take effect from November 1.