Sebi brings mutual funds units buying and selling under the Insider Trading regulations

Tags: Economy/Finance

The Capital market regulator Securities and Exchange Board of India (SEBI) has included the buying and selling of mutual fund units under the SEBI Prohibition of Insider Trading regulations through a notification issued on 24 November 2022. Until now, such rules applied only to securities of listed companies or those proposed to be listed.

The regulations state that any person who is connected with a fund house and comes into possession of unpublished, price-sensitive information shall not be permitted to trade in MF units wherein either the net asset value (NAV) of the scheme could get impacted or the interests of unitholders may be compromised.

Definition of Insider

Insider’s has been defined as a connected person or someone in possession of or having access to unpublished price sensitive information pertaining to a scheme.

SEBI has specified a list of people who will be considered insiders and be covered under the regulations.

Connected persons include the board of directors and key management personnel of the sponsor of the mutual fund, banker of the mutual fund or asset management company, stock exchange officials, employees of fund accountant, registrars and share transfer agents, custodians or valuation agencies of the mutual funds.

What is Insider trading?

It is the use of price sensitive information which can affect the Net Asset Value (NAV) of the units by an insider to buy or sell a mutual fund unit before the news is made public. 

Securities Exchange Board of India (SEBI)

Securities Exchange Board of India (SEBI) was set up on 12 April 1988 and it was given statutory status by the SEBI Act 1992 on 30 January 1992.

• It comes under the Ministry of Finance, Government of India.
• It is the regulator of the Capital market and Commodities market in India.
• The first SEBI chairman was Dr S A Dave (1988-90)
• Madhabi Puri Buch is the current and 10th Chairperson of the SEBI.
• Headquarters : Mumbai