SEBI has approved amendments to its mutual fund regulations aimed at establishing an institutional mechanism to curb front-running and fraudulent transactions.

Banking & Finance

SEBI has approved amendments to its mutual fund regulations aimed at establishing an institutional mechanism to curb front-running and fraudulent transactions. SEBI floated a consultation paper in this regard in May 2023 after noticing a significant spike in the number of front-running and insider trading activities. Front-running refers to trading in a stock or any other financial asset while having insider knowledge of a future transaction. The regulator also approved streamlining of prudential rules for passive mutual fund schemes regarding exposure to the securities of group companies. Currently, mutual fund schemes are not allowed to invest more than 25% of their net asset value in a sponsor’s group companies. This restricts passive funds to effectively replicate the underlying index in cases where the group companies of a sponsor comprise more than 25% in an index.


      In February 2023, Sebi restrained the former chief dealer of Axis Mutual Fund, Viresh Joshi, and 20 other individuals from accessing the securities markets in a case of alleged front-running of the trades of Axis Mutual Fund.

     

     

 

     


Securities and Exchange Board of India (SEBI)

HQ- Mumbai
Chairperson- Madhabi Puri Buch
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