Sebi amends mutual fund rules to curb front-running, insider trading

Front-running refers to an illegal practice, where an entity trades based on advanced information from a stock broker or analyst before the information has been made available to clients.

As per the notification, the Chief Executive Officer (CEO) or Managing Director (MD)or such other person of equivalent or analogous rank and Chief Compliance Officer of the asset management company will be responsible and accountable for the implementation of such an institutional mechanism.

“The asset management company shall establish, implement and maintain a documented whistle-blower policy that shall provide for a confidential channel for employees, directors, trustees, and other stakeholders to raise concerns about suspected fraudulent, unfair or unethical practices, violations of regulatory or legal requirements or governance vulnerability, and establish procedures to ensure adequate protection of the whistleblowers,” Sebi said.

To give these effects, the Securities and Exchange Board of India (Sebi) has amended mutual fund rules, which will come into force from November 1.