Securities market regulator SEBI has standardised the rules governing employees of mutual funds and asset management companies regarding investments in securities they can make, to prevent market abuse and insider trading.

No to investment advice

SEBI has decided not to regulate investments by employees of the fund industry in fixed deposits, life insurance policies, provident funds, savings schemes such as National Savings Certificates, Kisan Vikas Patra, in non-financial products such as gold and investments in government securities, and money market instruments, among others. However, no employee will pass on information to anybody inducing him to buy/sell securities which are being bought and/or sold by the MF of which the AMC is the investment manager and all personal security transactions must get prior approval of the in-house compliance officer.

Public issues

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. Employees are allowed to apply to public issue of shares, debentures, bonds and/or warrants of any company, as long as it is not part of a reserved quota.

However, for investments in the secondary market, an access person shall submit a written application to that effect to the Compliance Officer.

If the security is held by a fund of the AMC, the compliance officer must make sure there is a cooling period of 15 days between the date of the application and the date of the last transaction on that security by the fund or scheme. Access persons are also required to make periodic disclosures of their investments.

These rules will come into force on December 1.

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