MF’s purchase sale comes under insider trading rule, decision after Franklin Templeton case

In the Franklin Templeton case, it is alleged that some officials of the fund house had redeemed their holdings in six debt schemes before they were banned.

MF’s buying and selling within the ambit of insider trading rules

SEBI regulates the sale and purchase of mutual fund units. insider trading That is, the rules have been changed to bring them under the ambit of insider trading rules. At present, the rules of insider trading are applicable in the case of securities of listed companies. Apart from this, these rules are also applicable to such companies which are preparing for listing in the market. Till now mutual fund units were kept out of the definition of security. Sebi’s latest decision comes in the wake of the Franklin Templeton episode, in which some executives of the fund house are alleged to have encashed their holdings in six debt schemes before they were put under moratorium.

What is the decision of SEBI

SEBI said in a notification issued on Thursday that no insider shall transact in units of any scheme of a mutual fund in the event of his becoming aware of any unpublished sensitive information, the net asset value of which may be affected by that information. Under the new rules, asset management companies (AMCs) will have to disclose the shareholding of AMCs, trustees and their close relatives in units of their mutual fund schemes.

Further, the compliance officer of the AMC will determine the closing period during which the designated person cannot deal in units of the mutual fund. To make this effective, SEBI has amended the insider trading rules, which have become effective from 24 November.

What is insider trading

Insider trading means taking advantage of such information of a company from the point of view of trading which has not been declared. Actually every company has some such information whose direct effect is seen on the security of the company. Companies give this information to the stock market, which the market releases in front of everyone at the same time. Due to which important information reaches all investors in a transparent manner without any discrimination, although many times people associated with the company make such deals in security before the information is announced, so that they get full benefit of the change in prices after the release of the news. Is. This is called insider trading, regarding which SEBI is constantly taking a strict stand.