The Securities and Exchange Board of India (Sebi) in its board meeting on September 30 decided to include mutual fund units in the SEBI (Prohibition of Insider Trading) Regulations, 2015.
- SEBI’s decision stems from some instances it had observed in recent years when senior officials of a mutual fund house or part of the mutual fund industry eco-system had sold their units when they got a whiff of turbulence within the fund house.
- In the Franklin Templeton episode, the fund house’s few executives were accused of redeeming their holdings in the schemes ahead of the six debt schemes shutting for redemptions.
- Although the SEBI (Prohibition of Insider Trading) Regulations, 2015 prohibits fund managers and portfolio managers and senior executives of the fund industry to buy and sell when they have inside information, there was no bar on them to sell mutual fund units.
- At present, insider trading rules are applicable to dealing in securities of listed companies or those proposed to be listed, when in possession of Unpublished Price Sensitive Information (UPSI).
- Insider trading is the malpractice of selling or buying securities such as equity and bonds by the insiders of a company, which includes the employees, directors, executives and promoters.
- To prevent such acts and to promote fair trading in the market for the interest of common investors, the stock market regulator Sebi (the Securities and Exchange Board of India) has prohibited the firms to purchase their own shares from the secondary market.
