Sebi clears proposal to bring buying, selling of mutual fund units under insider trading rules

At present, insider trading rules are applicable to dealing in securities of listed companies or those proposed to be listed, when in possession of Unpublished Price Sensitive Information (UPSI). The units of mutual funds are specifically excluded from the definition of securities under the rules.

Sebi’s latest decision follows the Franklin Templeton episode, in which the fund house’s few executives were accused of redeeming their holdings in the schemes ahead of the six debt schemes shutting for redemptions.

In a release on Friday, Sebi said its board has approved the proposal to amend insider trading rules for inclusion of trading in units of mutual funds.

The regulator, in July, came out with a consultation paper in this regard, whereby it proposed to make Asset Management Companies (AMCs) disclose the details of holdings in the units of the mutual fund schemes held by the designated persons of AMC /Trustees and their immediate relatives on an independent platform.

It was proposed that Sebi should make it mandatory to report all trades of mutual fund units executed by the designated persons of AMC /Trustees, their immediate relatives and by any other person for whom such person takes trading decisions to the compliance officer of the AMC concerned within seven days from the date of transaction

Meanwhile, Sebi board on Friday cleared a proposal for facilitating faster payout of redemption and dividend to unit holders by AMCs. The regulator has proposed as 3 working days and 7 working days, respectively, for redemption and payment of dividend to unitholders as against existing 10 working days and 15 days, respectively.

Also, the board was apprised of the proposed net settlement framework wherein the obligations arising out of cash segment settlement and physical settlement of F&O segment, upon expiry of stock derivatives, should be settled on net basis.

Currently, such obligations are settled such obligations separately.

The benefit of netting should be available to all investors other than those required to mandatorily do delivery based transactions only.

The framework is aimed at strengthening the alignment of cash segment and F&O segment, bringing about netting efficiencies for participants, mitigation of price risk in certain cases and reduction of margin requirements after expiry, Sebi said.