SEBI has allowed asset management company to become a proprietary trader and self-clearing member in the debt segment of stock exchanges and clearing corporations to carry out trades and settle trades.
Amending the existing norms, SEBI has directed Chief Executive Officers of mutual funds to ensure that AMCs have adequate systems in place to ensure that fund managers and dealers follow the code of conduct in letter and spirit and any breach is reported to the board of directors. Similarly, fund managers and dealers have to submit quarterly self-certification to the trustees that they have complied with the code of conduct. They have to ensure that investments are made in the interest of the unit holders.
SEBI in a notification said that dealers and fund managers should not indulge in any unethical business activities or professional misconduct involving fraud or deceit or commit any act that could damage the reputation of the organisation or the mutual fund industry.
No conflict of interest
They should avoid conflict of interest and should not carry out any transaction on behalf of a fund with any counter party who is an associate of the sponsor or top officials within the organisation unless it is carried out on arm’s length basis on terms and price consistent with best execution standards and at a commission rate no higher than customary institutional rates.
Fund managers should communicate details on issues in a transparent manner during market hours through recorded modes and channels. They have also been told to provide appropriate inputs to the valuation agencies or the valuation committee of the AMC. Any material deviation in valuation, as defined by the AMC, shall also be highlighted to the valuation committee of the AMC.
Fund managers shall have an appropriate and adequate basis for investment decision and shall be responsible for investment in the funds managed by them. They have to maintain written record on decision of buying or selling securities together with the detailed justifications. They should not indulge any act or practice which results in artificial window dressing of the NAV, said SEBI.
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