Investment/Trading in Securities by Employees of Asset Management Companies and Mutual Fund Trustee Companies
Summary
This document outlines SEBI guidelines issued in May 2001 to regulate investment and trading activities by employees of Asset Management Companies and Mutual Fund Trustee Companies. The primary objective is to prevent conflicts of interest, self-dealing, and front-running by ensuring strict compliance with a code of conduct. The guidelines mandate prior approval for transactions by access persons, define covered investments, and specify prohibitions on certain types of securities trading. This section outlines the procedures for access persons to obtain pre-clearance for secondary market transactions and mandates specific cooling-off periods. It prohibits front-running, self-dealing, short sales, and carry-forward purchases while requiring strict reporting of all personal securities transactions. Finally, it establishes periodic disclosure obligations and board-level review mechanisms to ensure ongoing compliance with conflict-of-interest guidelines.
Text
All mutual funds should take steps to implement the guidelines as enclosed herewith... All mutual funds shall report Implementation of the guidelines to SEBI by May 22, 2001.
These guidelines shall be applicable to all employees of Asset Management Companies (AMCs) and Mutual Fund Trustee Companies (TCs) and should form a part of the code of conduct for employees adopted by each AMC/TC.
To ensure that all personal securities transactions are conducted consistent with these guidelines and in such manner as to avoid any actual or potential conflict of interest... Access Person... would mean the Head of the AMC... Fund Managers, Dealers, Research Analysts... Compliance Officer...
The Guidelines shall cover all employees of AMCs and TCs and shall be implemented with immediate effect. New employees shall be bound by these Guidelines from the date of joining the AMC/TC.
These Guidelines cover transactions for purchase or sale of any securities such as shares, debentures, bonds, warrants, derivatives and units of mutual fund schemes... do not apply to... fixed deposits... life insurance policies... government securities, money market instruments and money market mutual fund schemes.
These Guidelines cover transactions for sale or purchase of securities made in the employees’ name... spouse and/or dependent children and transactions as a member of HUF... no employee shall pass on information to anybody inducing him to buy/sell securities which are being bought/sold by the Mutual Fund...
All access persons except Compliance Officer must apply... to the Compliance Officer... for prior approval of transactions... The decision of the Compliance Officer shall be final and shall be binding on the employee.
The approval of Compliance Officer for carrying out a transaction of sale or purchase of a security by the access person shall be valid for not more than 10 calendar days from the date of approval.
If a transaction approved by Compliance Officer has not been effected within the period not exceeding 10 calendar days from the date of its approval, the access person shall be required to obtain prior approval once again...
All employees should refrain from profiting from the purchase and sale or sale and purchase of any security within a period of 60 calendar days from the date of their personal transaction.
An employee including access person is permitted to apply to a public issue... so long as the application is made in the normal course... without seeking the clearance from the Compliance Officer. Employees... are prohibited from applying in any reserved quota... Employees shall not participate in any private placement of equity...
an employee... may apply for shares... in a preferential offer... provided that such a preferential offer is made to all shareholders/debentureholders of such companies. Details of such applications made should be intimated to the Compliance Officer.
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Source: SecMarx — Investment/Trading in Securities by Employees of Asset Management Companies and Mutual Fund Trustee Companies. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.