TMI BlogSecurities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2022.X X X X Extracts X X X X X X X X Extracts X X X X ..... ding) Regulations, 2015 ,- I. in regulation 2 , i. in sub-regulation (1), a. in clause (i), the words except units of a mutual fund shall be omitted. b. in clause (l), after the word and symbol subscribing, and before the word buying the words and symbol redeeming, switching, shall be inserted and after the word and symbol subscribe, and before the word buy , the words and symbol redeem, switch, shall be inserted. II. in regulation 7A , in clause (d), i. in sub-clause (iv), the word and shall be omitted. ii. After sub-clause (iv) and before sub-clause (v), the following sub-clause shall be inserted, namely,- iv(a) regulations 5A to 5G of these regulations; and III. after Chapter II and before Chapter III, the following Chapter shall be inserted, namely,- CHAPTER II A RESTRICTIONS ON COMMUNICATION IN RELATION TO AND TRADING BY INSIDERS IN THE UNITS OF MUTUAL FUNDS. Applicability 5A. (1) The provisions of this Chapter shall apply only in relation to the units of a mutual fund. (2) All the provisions of Chapter IIIA and V shall also apply in relation to the units of a mutual fund. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or are reasonably expected to have access to unpublished price sensitive information relating to a mutual fund scheme or its units in the course of business operation; or (i) an intermediary as specified in section 12 of the Act or an employee or director thereof who have access or are reasonably expected to have access to unpublished price sensitive information relating to a mutual fund scheme or its units in the course of business operations; or (j) a banker of the mutual fund or asset management company; or (k) a concern, firm, trust, HUF, company or association of persons wherein a director of an asset management company and Trustees or his immediate relative or banker of the company, has more than ten per cent of the holding or interest; (c) generally available information means information that is made available to the unitholders or made accessible to the public on a non-discriminatory basis; NOTE: Generally available information is intended to be defined to crystallize and appreciate its meaning. Information published on the website of a stock exchange would ordinarily be considered generally available. Explanation : The asset management com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with them when transacting their business strictly on a need to- know basis. It is also intended to lead to organisations developing practices based on need-to-know principles for treatment of information in their possession. (2) No person shall procure from or cause the communication by any insider of unpublished price sensitive information, except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations. NOTE: This provision is intended to impose a prohibition on unlawfully procuring possession of unpublished price sensitive information. Inducement and procurement of unpublished price sensitive information not in furtherance of one's legitimate duties and discharge of obligations would be illegal under this provision. (3) The board of directors of an asset management company with the approval of the Trustees shall make a policy for determination of legitimate purposes . Explanation For the purpose of illustration, the term legitimate purpose shall include sharing of unpublished price sensitive information in the ordinary course of business by an insider with Trustees, Registrars and Share Transfer Agents, Custodi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve information. 5D. (1) No insider shall trade in the units of a scheme of a mutual fund, when in possession of unpublished price sensitive information, which may have a material impact on the net asset value of a scheme or may have a material impact on the interest of the unit holders of the scheme: Explanation The dealings of a person in the units of a mutual fund when in possession of unpublished price sensitive information, shall be presumed to have been motivated by the knowledge and awareness of such information in his possession: Provided that the insider may prove his innocence by demonstrating the circumstances including the following: (i) the transaction is an off-market inter-se transfer between insiders who were in possession of the same unpublished price sensitive information and both parties had made a conscious and informed trade decision: Provided that such off-market trades shall be reported by the insiders to the asset management company within two working days. Every asset management company shall notify the particulars of such trades to the stock exchange or in any other manner as may be specified by the Board within two tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Designated Persons may report the same only at the time of making the first installment of the transaction along with the period of such transaction and on modifications thereof, if any: Provided further that no reporting is required if such transaction was pursuant to a. subscription/investment in the mutual fund units pursuant to mandatory requirement specified by Board for Alignment of interest of Key Employees ('Designated Employees') of Asset Management Companies with the Unitholders of the mutual fund Schemes or otherwise, where separate records are maintained by the Asset management company in this regard. Such transactions may be governed by Circulars/guidelines issued by the Board from time to time; b. Any trading in overnight schemes, Index funds and Exchange Traded Funds. (3) Transactions mentioned in sub-regulation (2), shall be disclosed by the asset management company on Stock Exchange or any other manner as may be specified by the Board within two business days of receipt of the same. (4) The above disclosures shall be made in such form and such manner as may be specified by the Board from time to time. Code of Conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, iii. Chief Investment Officer, Chief Risk Officer, Chief Operation Officer, Chief Information Security Officer, Fund Managers, Dealers, Research Analysts, all employees in the Fund Operations Department, Compliance Officer and Heads of all divisions and/or departments or any other employee as designated by the asset management company and/or trustees. Explanation :Non-Executive Directors of the asset management company/trustee company or trustees who are in possession of / have access to any unpublished price sensitive information , shall also be deemed to be Designated Persons. (2) Every other Intermediary and other persons shall in consultation with the compliance officer specify the Designated Persons to be covered by the code of conduct on the basis of their role and function in the organisation and the access that such role and function would provide to unpublished price sensitive information in addition to seniority and professional designation. Institutional Mechanism for Prevention of Insider trading. 5H. (1) The Chief Executive Officer / Managing Director of an asset management company with the approval of the trustee or such other analogous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees to enable them to report instances of leak of such unpublished price sensitive information . (6) In case an inquiry has been initiated by an asset management company/ trustees in case of leak of unpublished price sensitive information or suspected leak of unpublished price sensitive information, the relevant intermediaries and fiduciaries shall co-operate with the asset management company/ trustees in connection with such inquiry conducted by the asset management company/ trustees. IV. After Schedule B , the following Schedule shall be inserted namely,- SCHEDULE B1 (See Regulation 5F of Chapter - IIA) Minimum Standards of Code of Conduct for Mutual Funds to regulate, monitor and report trading by the Designated Persons in the units of own mutual fund schemes 1. The compliance officer shall report to the board of directors of asset management company and provide reports to the Chairman of the Audit Committee of the asset management company and to the trustees, at such frequency as may be stipulated by the board of directors, but in any case not less than once in a year. 2. The information shall be handled within the organisati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Designated Persons pursuant to the mandatory requirement under 'Alignment of interest of Key Employees ('Designated Employees') of asset management companies with the unit holders of the mutual fund schemes' or otherwise shall be as specified by the Board in this regard: Provided further that the requirement of pre-clearance of trades by Designated Persons shall not apply for trading in Overnight Schemes, Index funds and Exchange Traded Funds. 7. Prior to approving any trades, the compliance officer shall be entitled to seek a declaration to the effect that the applicant for pre-clearance is not in possession of any unpublished price sensitive information with due regard to whether any such declaration is reasonably capable of being rendered inaccurate. 8. The code of conduct formulated by the chief executive officer or managing director of the asset management company shall specify any reasonable timeframe, which in any event shall not be more than seven business days, within which trades that have been pre-cleared have to be executed by the Designated Person, failing which fresh pre-clearance shall be required for the trades to be executed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by them In addition, the names of educational institutions from which Designated Persons have graduated and names of their past employers shall also be disclosed on a one time basis. Explanation The term material financial relationship shall mean a relationship in which one person is a recipient of any kind of payment such as by way of a loan or gift from a Designated Person during the immediately preceding twelve months, equivalent to at least 25% of the annual income of such Designated Person but shall exclude relationships in which the payment is based on arm's length tr ansactions. 14. Mutual funds shall have a process that would determine how an individual is brought 'inside' to access sensitive transactions and shall be made aware of the duties and responsibilities attached to the receipt of such Inside Information and the liability that is attached to the misuse or unwarranted use of such information. V. In Schedule C , i. In Clause 8 after the words and symbol contra trade . , and before the words The compliance officer the following words and symbol shall be inserted, namely,- In case of dealing in the units ..... 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