Reporting Requirements: Inclusion of Mutual Fund Units under the SEBI (Prohibition of Insider Trading) Regulations, 2015
On 22 October 2024 Securities and Exchange Bureau of India (SEBI) released a circular (Circular) to streamline the implementation of the amendment to the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) introduced on 24 November 2022, wherein mutual fund units were included within the ambit of PIT Regulations (Amendment).
In this update, we have discussed the key provisions introduced by the Circular.
Key Obligations:
- Timelines for disclosure requirements (Regulation 5(E)(1)): The PIT Regulations mandate the asset management companies (AMC) to disclose the holding of its designated persons, trustees, and their immediate relatives in the units of their mutual fund on a quarterly basis. The Circular required this disclosure to be made by 15 November 2024, for units held as on 31 October 2024. Further, for all the quarterly disclosures after 15 November 2024, the information shall be provided by the AMCs to the stock exchange within 10 (ten) days of the end of a particular quarter, in the prescribed format.
- Thresholds for reporting transactions (Regulation 5(E)(2)): The Circular mandates the AMCs to disclose the details of transactions in their own mutual fund units executed by its designated persons, trustees, and their immediate relatives, exceeding INR 15 lakh in a single or a series of transaction(s) made in a quarter. This disclosure is required to be made to the compliance officer of the concerned AMC within 2 (two) business days from the date of transaction, in the prescribed format.
- Reporting of violations PIT Regulations (Para 12 of Schedule B1 and para 11A of Schedule C): The Circular provides that in case it is observed by an AMC or intermediary or fiduciary that there has been a violation of the PIT Regulations, it shall promptly inform the same to stock exchange(s), in the prescribed format.
Amendments to a Master Circular (defined herein below):
In relation to streamlining the implementation of the Amendment, the Circular has omitted restrictions on trading in the units of mutual funds by the employees of AMCs and their immediate relatives from the Master Circular for mutual funds dated 27 June 2024 (Master Circular) so as to ensure that the provisions are harmonized and are governed exclusively by the PIT Regulations and not by the Master Circular.
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