SEBI Likely to Offer Relief to Fund Managers on Insider Trading Disclosures: Talks Underway with Mutual Fund Industry

In a major development that could bring relief to the mutual fund industry, the Securities and Exchange Board of India (SEBI) is in talks with asset management companies (AMCs) to ease some of the disclosure requirements under the Insider Trading Regulations.

Fund managers and key personnel in mutual fund houses may soon get some breather from stringent reporting norms, especially when it comes to disclosing their personal transactions in their own AMCs.

Discussions Between SEBI and Mutual Fund Industry

According to sources familiar with the matter, mutual fund companies have requested SEBI for some flexibility in the current insider trading disclosure framework. These discussions aim to address the discomfort that fund managers and key personnel have expressed regarding the level of personal information they are currently required to disclose.

One source revealed, “Mutual funds have requested relaxation in disclosure of transactions in their own AMCs by fund managers, key management people, trustees, etc. The issue is still under deliberation.”

Another insider added a key detail that highlights the direction of the ongoing discussions. “The disclosure will still be mandatory, but personal details like name and identification might be exempted from being made public. For instance, a KMP (Key Managerial Personnel) may report a transaction, but their name may not be mentioned in the exchange filing.”

This would strike a balance between transparency and individual privacy, ensuring that the regulatory intent is upheld while protecting the identity of individuals.

SEBI’s October 2024 Circular Created Industry Concerns

The background to this development traces back to a SEBI circular dated October 22, 2024, which mandated that senior management, trustees, and their immediate relatives must disclose any transactions above ₹15 lakh in a quarter. These disclosures had to be reported within two working days to the compliance officer of the AMC, who would then report them to the stock exchange.

However, investments in overnight funds, index funds, ETFs, and those made under the mandatory ‘skin in the game’ rules were excluded from this regulation.

In addition to this new rule, mutual fund personnel were already required to disclose their quarterly holdings, making this an additional burden. This raised serious privacy concerns, especially when it came to disclosing personal trades in the AMCs where they worked.

As a result, many fund managers started opting to invest in mutual fund units of other AMCs, to avoid these disclosures. This trend was against SEBI’s original intent of promoting confidence in mutual fund products by encouraging insiders to put their own money into the schemes they managed.

Working Group Set Up to Streamline Implementation

To address the complexities and ensure smoother implementation of these amended insider trading rules, SEBI formed a working group. This group includes representatives from AMCs, the Association of Mutual Funds in India (AMFI), stock exchanges, RTAs (registrars and transfer agents), and depositories.

Based on the group’s recommendations, SEBI has defined the timelines for implementation and is expected to introduce certain changes post public consultation.

What’s Next?

While SEBI appears to be receptive to the mutual fund industry’s concerns, any relaxation will only come after a public consultation process, ensuring transparency and broader stakeholder involvement.

If implemented, these changes will provide much-needed clarity and ease of compliance for fund managers, while preserving the broader goals of transparency and accountability under the Insider Trading Regulations.