The Securities and Exchange Board of India (Sebi) has released a consultation paper seeking comments on a proposal to bring the purchase and sale of mutual fund units under the purview of the insider trading rules. The objective 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’).
The capital markets regulator has proposed that any person associated with the fund, who has direct or indirect access to unpublished price-sensitive information (UPSI) or any immediate relative of the connected person, officials or employees be subject to the insider trading rules.
According to the consultation paper, 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. The responses need to be in by July 29.
The watchdog plans to set up an independent platform on which information can be accessed by participants in the plan so as to eliminate any discrimination.
Moreover, Sebi wants that connected persons should disclose their transactions and holdings in mutual funds, or those of their immediate relatives every quarter.
Sebi observed that in the past a registrar and transfer agent of a mutual fund had redeemed all the units from a scheme as 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.