Mutual Funds: From Nov 1, these new rules will affect MF schemes, debt securities; key details explained

Mutual funds: Effective November 1, 2024, regulatory changes will impact the mutual fund and debt industry in India. The Securities and Exchange Board of India (SEBI) has introduced new rules that will subject mutual funds to the Prohibition of Insider Trading (PIT) regulations. These amendments are designed to increase transparency, safeguard investors, and streamline operations in the financial markets.

New rules for mutual funds

One key change involves the inclusion of mutual fund units under the PIT regulations, a notification for which was originally issued in November 2022. After consultation with industry stakeholders, this provision will now be enforced. Asset management companies (AMCs) will be required to disclose the holdings of designated persons, trustees, and their immediate relatives on a quarterly basis as part of these new rules.

The new regulation prohibits senior personnel at asset management firms (AMCs) from selling their mutual fund investments if they have access to confidential information regarding possible issues impacting their company or its schemes.

This rule aims to tackle worries about fund managers who may have sold units prior to market downturns, jeopardising investors. SEBI has expanded the definition of insider trading regulations to encompass a wider range of “connected persons.”

SEBI aims to prevent insider trading and protect investor interests more effectively by including mutual fund officials, board members, sponsors, trustees, auditors, legal advisors, bankers, and consultants in its restrictions on trading activities within this group.