SEBI Tightens Mutual Fund Norms to Curb Insider Trading and Front-running

The Securities and Exchange Board of India (SEBI) has revised mutual fund regulations, mandating Asset Management Companies (AMCs) to establish a robust mechanism to identify and prevent front-running and insider trading. This initiative includes enhanced surveillance, internal controls, and a whistle-blower policy. The changes follow recent front-running cases and will take effect from November 1.

The Securities and Exchange Board of India (SEBI) has introduced significant amendments to mutual fund regulations, requiring Asset Management Companies (AMCs) to implement an institutional mechanism aimed at curbing front-running and insider trading.

The mechanism will incorporate advanced surveillance systems, strict internal controls, and a formal escalation process to detect, monitor, and address unethical practices such as front-running and the misuse of sensitive information. SEBI announced these changes through a circular issued on Monday.

The revised norms also mandate AMCs to establish a whistle-blower policy to report suspected fraudulent or unethical activities. This overhaul follows SEBI's orders in front-running cases involving Axis AMC and Life Insurance Corporation of India (LIC), and it will come into effect from November 1.