On 02-08-2024, the Securities and Exchange Board of India (‘SEBI’) notified the SEBI (Mutual Funds) (Second Amendment) Regulations, 2024 to amend the SEBI (Mutual funds) Regulations, 1996.
The provisions of sub-regulations I and II of Regulation 3 of these regulations (mentioned in points 1 and 2) will come into force on 02-11-2024 and sub-regulation III of Regulation 3 (mentioned in point 3) will come into force on 02-08-2025. However, the provisions of sub-regulations I and II of Regulation 3 shall come into force on 02-02-2025 for asset management companies of mutual funds that have assets under management less than rupees ten thousand crores.
Key Points:
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By way of amendment, a new clause has been added to Regulation 2(1) for defining ‘market abuse’.
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The 2024 Regulations have added the following three sub-regulations after sub-regulation (26) of Regulation 25 which lays down provisions for asset management company and its obligations:
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The asset management company must set up an institutional mechanism for identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities.
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The CEO/Managing Director/such person having equivalent or analogous rank and the Chief Compliance Officer have been made responsible and accountable for the implementation of the institutional mechanism.
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The asset management company must establish, implement, and maintain a documented whistle-blower policy.
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By way of amendment in Clause 2 in Part B of the Fifth Schedule which provides for the channels, disclosures, and transparency of the communication of fund managers and dealers, a proviso has been added to sub-clause (b) which says that face to face communication including interactions which take place out of office may not be recorded.
