Investment by AIFs' employees in AIF schemes to attract insider trading norms: SEBI

Insider trading regulation will be applicable in case of investment by employees of alternative investment funds (AIFs) or asset management companies (AMCs) in units of AIF schemes, which invest in listed as well as unlisted securities, SEBI has said.

The clarification has been given as part of an informal guidance sought by SBI Funds Management regarding investment by its employees in AIF schemes.

Under AIF regulations, AIF schemes can invest in both the listed and unlisted securities and such securities are amenable for insider trading.

In a three-page interpretative letter, the Securities and Exchange Board of India (SEBI) said the code of conduct under the PIT (prohibition of insider trading) regulation "is applicable to trading/investment by employees of AIFs/AMCs in units of AIF schemes that invest in securities listed or proposed to be listed".

Noting that this position is based on the information furnished, the markets regulator said, "different facts or conditions might lead to a different result".

As per the insider trading regulations, the board of directors of every listed company and market intermediary need to formulate a code of conduct governing trading by their employees and connected entities.

The main idea behind such code of conduct is to set out the minimum standards required to achieve compliance with the provisions of insider trading.

The letter, issued on October 9, was made public by the watchdog on October 23.

"This letter does not express a decision of the board on the question referred," the regulator added.