--- title: "SEBI Strengthens Regulatory Framework For Mutual Funds To Prevent Insider Trading" date: 2024-11-27 author: "King Stubb & Kasiva" url: https://ksandk.com/newsletter/sebi-regulatory-mutual-fund-insider-trading/ --- # SEBI Strengthens Regulatory Framework For Mutual Funds To Prevent Insider Trading Posted On - 27 November, 2024 • By - King Stubb & Kasiva ## Introduction On October 22, 2024, the Securities and Exchange Board of India (“**SEBI**”) issued a circular on the inclusion of Mutual Fund units in the SEBI (Prohibition of Insider Trading) Regulations, 2015.[[1]](#_ftn1) This circular outlines new regulations aimed at strengthening the framework against insider trading in the mutual fund industry. The circular highlights a key change implemented in November 2022, which included mutual fund units under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations).[[2]](#_ftn2) These amendments became effective on November 1, 2024.[[3]](#_ftn3) To ensure smooth implementation, SEBI constituted a working group with representatives from Asset Management Companies (“**AMCs**”), the Association of Mutual Funds in India (“**AMFI**”), Stock Exchanges, Depositories, and Registrars to an Issue and Share Transfer Agent (“**RTAs**”). Their recommendations formed the basis for the decisions outlined in the circular. ## Understanding the Circular ### Disclosure and Reporting Obligations - **Disclosure of Holdings (Regulation 5(E)(1))**: - For subsequent quarters, disclosures must be submitted within 10 calendar days from the end of each quarter, as per the format in Annexure A. - **Transaction Reporting (Regulation 5(E)(2))**: - This applies to transactions in all mutual fund schemes except exempted schemes. - **Disclosure Format for Transactions (Regulations 5(E)(3) & 5(E)(4))**: Transactions reported under Regulation 5(E)(2) must be disclosed in the format prescribed in Annexure B. - **Violation Reporting**: Any observed violations of the PIT Regulations must be disclosed in the format specified in Annexure C. ### Harmonization with Mutual Fund Master Circular - **Modification to Clause 6.6 of the Master Circular**: - Clause 6.6 of the Master Circular, which previously governed such transactions, has been aligned with the PIT Regulations. - **Key Changes to Sub-clauses**: - **Deletion of Clause 6.6.4**: This clause has been removed to avoid overlap with the revised PIT Regulations. ## Conclusion This circular introduces a more stringent regulatory framework for mutual funds. The new disclosure norms for designated persons and stricter reporting requirements for large transactions aim to enhance transparency and deter insider trading. The alignment of the Master Circular with the PIT Regulations further strengthens oversight of employee transactions. However, the effectiveness of these measures depends on rigorous implementation and enforcement. AMCs and trustees must adhere to the guidelines meticulously, while SEBI should actively monitor compliance. Additionally, the regulatory body may consider further refinements to the framework, such as expanding the scope of disclosure or incorporating advanced surveillance techniques. By taking a proactive approach, SEBI can safeguard investor interests and maintain the integrity of the mutual fund industry. --- [[1]](#_ftnref1) [https://www.sebi.gov.in/legal/circulars/oct-2024/inclusion-of-mutual-fund-units-in-the-sebi-prohibition-of-insider-trading-regulations-2015_87833.html](https://www.sebi.gov.in/legal/circulars/oct-2024/inclusion-of-mutual-fund-units-in-the-sebi-prohibition-of-insider-trading-regulations-2015_87833.html). [[2]](#_ftnref2) [https://www.sebi.gov.in/legal/regulations/nov-2022/securities-and-exchange-board-of-india-prohibition-of-insider-trading-amendment-regulations-2022_65437.html](https://www.sebi.gov.in/legal/regulations/nov-2022/securities-and-exchange-board-of-india-prohibition-of-insider-trading-amendment-regulations-2022_65437.html) [[3]](#_ftnref3) [https://www.sebi.gov.in/legal/gazette-notification/jul-2024/commencement-notification-of-the-securities-and-exchange-board-of-india-prohibition-of-insider-trading-amendment-regulations-2022_85228.html](https://www.sebi.gov.in/legal/gazette-notification/jul-2024/commencement-notification-of-the-securities-and-exchange-board-of-india-prohibition-of-insider-trading-amendment-regulations-2022_85228.html). --- ## Office Locations - [New Delhi](https://ksandk.com/locations/top-corporate-law-firm-in-delhi/) (HQ): +91-11-41318190 | info@ksandk.com - [Mumbai](https://ksandk.com/locations/top-corporate-law-firm-in-mumbai/): 3 offices (Nariman Point, Lower Parel, Andheri) | mumbai@ksandk.com - [Bangalore](https://ksandk.com/locations/top-corporate-law-firm-in-bangalore/): bangalore@ksandk.com - [Chennai](https://ksandk.com/locations/chennai/): chennai@ksandk.com - [Hyderabad](https://ksandk.com/locations/hyderabad/): hyderabad@ksandk.com - [Pune](https://ksandk.com/locations/pune/): pune@ksandk.com - [Kochi](https://ksandk.com/locations/kochi/): kochi@ksandk.com ## Contact - [Contact Page](https://ksandk.com/contact-us/) - General: info@ksandk.com | +91-11-41318190 - WhatsApp: +91-7428567444 - [Privacy Statement](https://ksandk.com/privacy-statement/) - [Terms of Use](https://ksandk.com/terms-of-use/)