Sebi tightens front-running regulations for AMCs to check market abuse

Posted on:
Key Points

Market regulator Securities and Exchange Board of India (Sebi) on Tuesday approved amendments to SEBI (Mutual Funds) Regulations, 1996, to enhance the existing regulatory framework by requiring asset management companies (AMCs) to put in place a structured institutional mechanism for identification and deterrence of potential market abuse, including front-running and fraudulent transactions in securities...

Under the mechanism, the AMCs will be required to ensure enhanced surveillance systems, internal control procedures and escalation processes to identify, monitor and address specific types of misconduct, including front-running, insider trading and misuse of sensitive information, among other things...

The Sebi board also streamline prudential norms for passive schemes with respect to exposure to securities of group companies of the sponsor to facilitate a level playing field for mutual funds...

Currently, mutual fund schemes are not allowed to invest over 25% of their net asset value (NAV) in group companies of the sponsor, which Sebi said restricts the passive funds to effectively replicate the underlying index, in cases where group companies of sponsor comprise over 25% in the index...

Accordingly, Sebi approved amendment to SEBI (Mutual Funds) Regulations, 1996, to allow equity passive schemes on indices to be specified by SEBI and to take exposure up to the weightage of the constituents in the underlying index..

You might be interested in

Why didnt Sebi get to bottom of issues raised by Hindenburg, asks Rajan

05, Mar, 23

Former RBI governor has asked why Sebi has not yet got to bottom of ownership of the four Mauritiusbased funds who are said to have parked 90 per cent of their USD 69 billion in Adani group stocks