Sebi tightens insider trading norms at AMCs

To tighten the investment processes at mutual fund houses and leaving no room for insider trading and front-running cases, the Securities and Exchange Board of India (Sebi) has issued guidelines.

These cover transactions for purchase or sale of any securities floated by asset management companies where the persons concerned are employed.

The regulator says fund houses must have a "cooling off" period of 15 days during which employees can't sell or purchase securities in which the fund house has dealt. Further, for any purchase or sale, employees at AMCs would have to take prior approval from the compliance officer and the required transactions need to be effected within seven days of the approval. After seven days, one must re-apply for approval.

Such guidelines will cover transactions made in the name of the employee either individually or jointly with a spouse, parents, siblings or child, any of whom is either dependent financially on such employees or consults the latter in taking decisions relating to trading in securities.

Many of these guidelines are already followed by fund houses. Now, with a clearer circular from the regulator, effective December 1, the sector will have to comply with the norms more diligently.