Sebi streamlines investment norms for employees, MFs trustees

Streamlining guidelines for investments by employees and trustees of mutual funds, Sebi today said parking of funds by them in fixed deposits, life insurance and products like Kisan Vikas Patra would not come under the purview of rules aimed at checking insider trading.
The guidelines aim to ensure that all securities transactions made by employees in their personal capacity are conducted in such manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility.
The guidelines also look to check any undue advantage by the employees and trustees of mutual funds of any price sensitive information that they may have about any company.

Sebi has now decided to amend these guidelines "to remove difficulty in the implementation of the guidelines", the regulator said in a circular.
The regulator said that investments of a non-financial nature such as gold etc, where there is no likely conflict between the mutual fund's interest and the employees' interest would also not come under the purview of rules aimed at checking insider trading.
Investments in government securities, money market instruments, money market mutual fund schemes, liquid schemes and schemes floated by other mutual funds also included in these guidelines.

These guidelines will be applicable from December 1, 2016, the Securities and Exchange Board of India (Sebi) said.

"No employee shall pass on information to anybody inducing him to buy/sell securities which are being bought and/or sold by the Mutual Fund of which the AMC is the investment manager," the regulator said.
The AMC and trustees are free to set more stringent norms for investment and trading in securities by their employees.
"The Board of the AMC and Trustees shall ensure compliance with these Guidelines on a continuous basis and shall report any violations and remedial action taken by them in the periodical reports submitted to the Board, it added.
Sebi has allowed employees to apply to a public issue of shares, debentures, bonds and warrants of any company, as long as the application is made in the normal course of the public issue. Such an application can be made without seeking the clearance from the Compliance Officer.

However, they are prohibited from applying in any reserved quota such as promoters, employees as well as participating in any private placement of equity by a firm.
Regarding secondary market transactions, Sebi said
employees would have to submit written application to that effect to the Compliance Officer. The application would specify the name of the company the securities of which employee wishes to buy or sell as well as their number.
The Compliance Officer can clear employees request of investments through secondary markets provided the securities of the firm specified by the access person are not held by any scheme of the MF of which the AMC is the investment manager. In case these securities are held by investment manager then there should be a 'cooling off' period of 15 days.

"The Compliance Officer shall keep a track of the transactions of the employees and transactions of the Mutual Fund to ensure that there is no conflict of interest between them," Sebi said.
Sebi has barred self-dealing and front running by employees.
"Access persons as well as other employees do not require prior permission of Compliance Officer for purchase or sale of MF units. However, details of each such transaction, excluding transactions in money market MF schemes and liquid schemes shall be reported by them to the Compliance Officer within 7 calendar days from the date of transaction," it added.
In case of investments in Systematic Investment Plan of an MF scheme, employees may report only at the time of making the first instalment of the SIP.

All employees and access persons will have to submit, in the form prescribed by the MF of which the AMC is the investment manager, details of their personal transactions of purchase or sale of securities to the Compliance Office.