MC EXCLUSIVE Some breather to fund managers likely in insider trading regulations, SEBI in talks with MF industry: Sources

Exclusive: Some breather to fund managers likely in insider trading regulations, SEBI in talks with MF industry, say sources

Fund managers of mutual funds may get some disclosure-related relief under Insider Trading Regulations. Market regulator Securities and Exchange Board of India (SEBI) is in discussion with mutual fund industry to understand how some of the issues can be eased out. As per one source part of the ongoing discussions, “Mutual funds have requested for relaxation in disclosure of transactions in own AMCs by fund managers, key management people, trustees etc.  the issue is under deliberation." Mutual fund companies are also called asset management companies (AMCs).

Another source added, “The disclosure will have to be made by the key people but name and personal details may be exempt from public disclosure, like a KMP did a transaction but his name etc. may not be required to be disclosed in exchange filing. So, that regulatory intent is not diluted and privacy of the individual is also protected.” The said source further added, “SEBI is in agreement with proposal of MF industry, tweaks may be allowed but after public consultation."

SEBI had issued a circular on October 22, 2024 which mandated all the senior management of the AMCs, trustees and their immediate relatives to report the transactions above Rs 15 lakh aggregating in a quarter, to compliance officer of the AMC, within 2 days of the transaction, who in turn will report to exchange within 2 working days from the date of receipt of the information from key persons who have transacted in the units of the AMC.

Though, investment in overnight schemes, Index funds, Exchange Traded Funds and the mandatory requirement as part of skin in the game was excluded. This disclosure was over and above the mandatory quarterly holding, required to be reported by the key persons of mutual funds and their trustees.

SEBI's directive had created unrest among the mutual fund industry as the industry executives were not comfortable in disclosing their transactions in own mutual fund company, citing privacy issues. Because of this additional transaction disclosure burden, fund managers preferred in buying and selling in MF units of other AMCs, as a normal investor, where such disclosure were not required. Which was in a way not aligned with the broader skin in the game intent of SEBI.

Mutual funds have to already disclose the remuneration of top people on the website of their mutual fund company, if the annual salary is above Rs 1.02 Cr or monthly salary is 8.5 lakh par month or above, if the person has joined mid-way during the financial year.

After major incidents of insider trading in mutual fund industry, SEBI amended the prohibition of insider trading regulations in 2022 and included mutual fund units under insider trading ambit. Earlier, mutual fund units were out of insider trading regulations. But, other preventive checks and balances were prescribed.

And in order to streamline the implementation of the amended insider trading regulations, a working group consisting of representatives from AMCs, mutual fund association AMFI, stock exchanges, RTAs (registrars and transfer agents) and depositories was constituted, after the working group’s recommendations the timeline for implementation was announced.