The Hindu Business Line : SEBI reiterates norms on insider trading for AMCs

IN response to a query raised by HDFC Mutual Fund, SEBI has reiterated the provisions of Regulation 13(3) of SEBI Insider Trading Amendment Regulations, 2002, which state that any person who holds more than five per cent shares or voting rights in any listed company will have to disclose to the company the number of shares or voting rights held.

To be also disclosed are changes in shareholding or voting rights, even if such changes result in shareholding falling below five per cent.

There is no indication to the effect that an individual scheme is a separate legal personality. All provisions in the regulations referring to individual schemes are in the nature of obligations of the AMC in respect of each scheme. Therefore, the threshold limit (for informing the companies) is to be complied with when the sum total of all scheme holdings in a particular company exceeds the limit.

The guidance pertains to HDFC MF's move regarding the interpretation of SEBI's insider trading rules. Holdings of some of the 19 schemes managed by the fund in listed companies are beyond the threshold limit of five per cent, it was pointed out. It was stated that on a given day (in the course of trading by some of these schemes), there may be in changes in their shareholding.

An example was provided: HDFC MF's holding in Company X is 5.93 per cent, while HDFC Equity Fund sells 2,50,000 shares of this company, constituting 1.5 per cent of its capital. HDFC Prudence Fund acquires the same number of shares. The net effect of this transaction to the fund would remain the same, while the individual transactions of sale by HDFC Equity Fund and purchase by HDFC Prudence Fund together totals to 3 per cent.

The MF wanted to know out whether Regulation 13(3) was relevant here. It asked that if (in view of the net effect of this transaction being nil) no disclosure on the change in the shareholding inter se the schemes is required. Also, the five per cent threshold limit is to be complied with when a particular scheme holding exceeds that limit or when the sum total of all scheme holdings in a particular company exceeds that limit or on both?

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