Capital markets regulator Sebi has amended mutual fund norms requiring Asset Management Companies (AMCs) to put in place an institutional mechanism to identify and deter front-running and insider trading in securities.
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This mechanism will consist of enhanced surveillance systems, internal control procedures, and escalation processes such that the overall mechanism is able to identify, monitor and address specific types of misconduct, including front-running, insider trading, misuse of sensitive information etc, Sebi said in a circular on Monday.
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Additionally, the management of AMCs will be responsible for ensuring the effectiveness of the institutional mechanism. Also, the regulator has directed AMCs to have a whistle-blower mechanism.
This came in the wake of Sebi passing two orders regarding front-running cases involving Axis AMC and Life Insurance Corporation of India (LIC).
In a separate gazette notification dated August 1, Sebi said, "Asset management companies shall put in place an institutional mechanism, as may be specified by the Board, for the identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities".
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