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SEBI eases norms for trustees, MF employees to invest and trade in securities

Suresh P Iyengar Mumbai | Updated on October 29, 2021

From December 1, all provisions of the circular will come into effect.

Market regulator SEBI on Thursday eased the regulations for trustees and mutual fund employees to invest and trade in securities.

Based on the representations received from the industry participants, AMFI and recommendations of Mutual Fund Advisory Committee, it was decided to review the norms for employees of AMCs and Trustees of Mutual Funds to invest in securities, SEBI said in a circular on Thursday.

All the provisions of the circular will come into effect from December 1.

Access persons and other employees do not require prior clearance of the Compliance Officer for purchase or sale of units of Mutual Fund schemes. However, details of each such transaction, excluding transactions in overnight schemes have to be reported to the compliance officer within 7 days of transaction. However, this will not be applicable on units bought as part of the alignment of interest of key employees, it said.

While mutual fund employees are mandated to refrain from profiting within 30 days of investment in securities, they can provide a suitable explanation to the compliance officer if they have done so. Such incidence should be reported to the Board of the AMC and the Trustees at the time of review, said SEBI.

However, it said this will not be applicable in case of the investments and redemptions made in mutual fund units.

The 'cooling off' period for the sale of securities can be relaxed for Access Persons twice in a financial year by Compliance Officer. It will be applicable only for securities held for over one year.

Access Person

Access Person has to apply for relaxation to Compliance Officer who will decide on the application within five days, and sale of securities should be executed in 10 trading days after getting clearance, it said.

Access Person includes the head of AMCs, Chief Investment Officer, Chief Risk Officer, Chief Operation Officer, Chief Information Security Officer, Fund Managers, Dealers, Research Analysts, all employees who have access to any non-public information which could impact the price of the securities, NAV of the schemes or interest of the unitholders.

Access Person has to ensure that he does not have access to classified information. Compliance Officer will not grant clearance for such transaction, where the Asset Management Company has access to any non-public information which could materially impact the price of the concerned securities, it said.

In case of pre-existing pledges prior to becoming an Access Person, the provisions of “cooling off” period will not be applicable for the sale of securities by lenders due to shortfall of margin provided the pledges were made before being employed as access person.

Access persons have to disclose details of ESOPs bought with borrowed funds, along with the agreement with such lender. Any sale of securities by the lender should be promptly intimated to the Compliance Officer by the access person.

The Access Persons have to make self-declaration that they are not engaged directly or indirectly in front-running, self-dealing, trading while possessing classified information that could impact the price of securities, sale of pledged securities and submit the margin notice called for by the lender.

Employees of AMCs, Board members of AMCs and Board members of Trustees can not purchase or sell units of any scheme where any information available to the Mutual Fund is not communicated to the unitholders, said Sebi.

Published on October 28, 2021

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