SEBI considers bringing MFs under insider trading ambit

The Securities and Exchange Board of India proposed bringing mutual fund (MF) transactions under the purview of stringent insider-trading regulations to prevent abuse of sensitive information by key personnel in the MF industry.

Currently, MF units are excluded from the definition of ‘securities’ under the Prohibition of Insider Trading (PIT) Regulations, and buying and selling of MF units is excluded from the definition of ‘trading’. The market regulator had sought public comments on whether the PIT Regulations need to be amended to also cover the MF industry.

The proposal comes close on the heels of allegations of front-running at a large fund house. In the discussion paper floated, Sebi has said it has observed that a MF Registrar and Transfer Agent (RTA) had redeemed all its units from a scheme while being privy to certain sensitive information. Similarly, it observed a few key personnel of the MF industry redeemed their holdings in the schemes while in possession of certain sensitive information not communicated to the unit holders of the schemes.