SEBI’s New Mutual Fund Rules (Image Source: iStock)
The Securities and Exchange Board of India (SEBI) will enforce regulatory changes pertaining to the application procedure for debt securities and mutual funds. The objective of these modifications is to safeguard investors, increase transparency, and smoothen the procedures within the financial markets.
SEBI’s Prohibition of Insider Trading (PIT) rules will now oversee mutual funds.
Senior employees of Asset Management Companies (AMCs) will be barred from selling their mutual fund holdings if they have sensitive information about any problems that could impact their company or its schemes.
This step aims to address concerns over fund managers who might have sold units ahead of market falls, risking investors.
SEBI has expanded insider trading rules to cover a wider range of “connected persons.”
Along with mutual fund officials, board members, sponsors, trustees, auditors, legal counsel, bankers, and consultants are also included in this group.
SEBI’s motive is to combat insider trading more effectively and safeguard investor interests by limiting the trading activities of these people.
SEBI has made it compulsory for AMCs to to set up strong mechanisms to detect and discourage insider trading and front-running in securities.
Front-running is the illicit activity of trading on the basis of advanced, confidential knowledge.
The management of AMCs, including the Chief Executive Officer (CEO), Managing Director (MD), and Chief Compliance Officer, are in charge of putting these procedures into place. They have to maintain accountability and make sure their companies follow these new guidelines.
Moreover, SEBI has launched a whistle-blower policy for AMCs, permitting stakeholders and employees to report to discreetly disclose suspected unethical activity.
Consequences For Investors
SEBI aims to create a more secure investment environment by implementing stringent regulations against insider trading and front-running. Investors can feel more safe knowing that their investments are being handled morally and according to the law.
Making Applications For Debt Securities Easier
SEBI is smoothening the application process for public debt securities issues along with its mutual fund rules.
Individual investors applying via intermediaries for up to Rs 5 lakh must use the Unified Payments Interface (UPI) for fund blocking from November 1 onwards.
According to the new rules, investors must include their bank account’s UPI ID on the bid-cum-application form they send to stock brokers or registrars.
These rules will make the transactions easy, which may also draw in more retail investors to the debt sector.
SEBI has lowered the minimum subscription period from three to two working days for debt securities issued to the public. The bidding period can now be extended by just one working day rather than three in the event of price band or yield modifications.
Moreover, the public comment periods on draft offer documents have also been shortened, with one day for stocks that are already listed and five days for others.
