Establish a system to stop MF scams; Sebi oversees AMCs
The Sebi board resolved on Tuesday to change the regulatory framework in order to stop front-running and insider trading in mutual funds. This would require Asset Management Companies (AMCs) to build up an institutional system for identifying and discouraging possible market abuse.
Additionally, the Securities and Exchange Board of India made the decision to increase the management of AMCs’ accountability and responsibility for this kind of institutional mechanism. Furthermore, according to a press statement released by Sebi after the end of the board meeting, the regulator wants to promote openness by mandating that AMCs have a whistleblower mechanism.
Following the meeting on March 15, this is the second board meeting in as many months.
The institutional mechanism should include strengthened surveillance systems, internal control procedures, and escalation mechanisms to identify and report any potential misbehavior by AMCs’ employees, dealers, stock brokers, or any other related businesses.
Determine, keep an eye out for, and deal with certain forms of wrongdoing, such as insider trading, front running, and misusing confidential information.
This follows two front-running cases involving Axis AMC and Life Insurance Corporation of India (LIC) that were ordered by Sebi.
An employee of a listed insurance firm was witnessed front-running the business’s transactions in the LIC case, while broker-dealers, specific employees, and related companies were discovered to have front-run the AMC’s trading in the Axis AMC case. — PTI
Promoting openness
Asset Management Companies (AMCs) must now establish an institutional process to detect and prevent any market manipulation by AMC staff members, dealers, stock brokers, or other affiliated organizations.
Improved surveillance systems, internal control protocols, and escalation processes should be part of the mechanism to recognize, track, and deal with certain kinds of wrongdoing, such as insider trading, front-running, and misusing confidential information, among others.
