Capital markets regulator Sebi has amended the norms to bring the buying and selling of mutual fund units under the ambit of insider trading rules.

At present, insider trading rules apply to dealing in the securities of listed companies or those proposed to be listed, when in possession of Unpublished Price Sensitive Information (UPSI).

The units of mutual funds are specifically excluded from the definition of securities under the rules.

Sebi’s latest decision follows the Franklin Templeton episode, in which the fund house’s few executives were accused of redeeming their holdings in the schemes ahead of the six debt schemes shutting for redemption.

“No insider shall trade in the units of a scheme of a mutual fund, when in possession of unpublished price sensitive information, which may have a material impact on the net asset value of a scheme or may have a material impact on the interest of the unit holders of the scheme,” Sebi said in a notification issued on Thursday.

Under the new rules, asset management companies (AMCs) will have to disclose the details of holdings in the units of its mutual fund schemes, on an aggregated basis, held by the AMC, trustees and their immediate relatives on the platform of stock exchanges.

Also, the Securities and Exchange Board of India (Sebi) has prescribed a minimum standard of code of conduct for designated persons in line with provisions of existing insider trading rules.

The CEO or MD of an asset management company with the approval of the trustee or such other analogous person of an intermediary or fiduciary, shall put in place adequate and effective system of internal controls to ensure compliance.

Quicker payout

Sebi has cut the timelines for the payout of redemption amount and dividend to unitholders.

In a circular, Sebi has reduced the timeline for dividends payout to seven working days from the current 15 days.

The record date would be two working days from the issue of a public notice for the payment of dividends. The timeline for redemptions has been brought down to three days from 10 days.

Rules set

■ AMC trustees and relatives must disclose their holdings in MF schemes

■ Any transaction must be reported within two business days

■ AMC must have its own internal system of control

■ Redemption payment in three days, dividends in three days