Market regulator, Securities and Exchange Board of India (SEBI) has come out with consultation papers proposing additional surveillance and internal control systems, at asset management companies (AMCs). The move comes after various whistleblower complaints and front running cases in the mutual fund industry. The consultation paper suggests that senior management at AMCs should be responsible for putting surveillance and an internal mechanism in place to reduce fraudulent transactions and any possible misconduct by employees, traders, dealers etc.
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Recently, SEBI took stringent action against chief dealer and fund manager, Viresh Joshi, in the front running case at Axis Mutual Fund. SEBI noted that there are no specific regulatory provisions that cast responsibility on AMCs or their senior management personnel to put in place systems for deterrence, detection or reporting of market abuse or fraudulent transactions.
SEBI has placed activities that fall under the purview of fraudulent transactions. The market watchdog said that front running, insider trading, misselling of products, misuse of information by AMCs, its employees, distributors, broker-dealers etc, all come under fraudulent transactions.
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