Mutual funds: From November 1, these new rules will apply to MF schemes, debt securities; explanation of key details

Mutual Funds: From November 1, 2024, regulatory changes will impact the mutual fund and debt industry in India. The Securities and Exchange Board of India (SEBI) has introduced new rules that will make mutual funds subject to the prohibition on insider trading (PIT). These amendments are aimed at increasing transparency, protecting investors and optimizing operations in financial markets.

New rules of mutual funds

One of the key changes is the inclusion of mutual fund units in the personal income tax provisions, which was originally notified in November 2022. Following consultation with industry stakeholders, this provision will now be implemented. Asset management companies (AMCs) will be required to disclose the holdings of nominees, trustees and their immediate family members on a quarterly basis under these new rules.

The new regulation prohibits senior staff at asset management companies (AMCs) from selling their investments in mutual funds if they have access to confidential information about possible issues affecting their company or its schemes.

The rule is designed to address concerns about fund managers who could sell units before the market declines, putting investors at risk. SEBI has expanded the definition of insider trading rules to cover a wider range of ‘related persons’.

SEBI aims to prevent insider trading and more effectively protect the interests of investors, including mutual fund officers, board members, sponsors, trustees, auditors, legal advisers, bankers and consultants to its restrictions on trading activities in this group.