Institutional mechanism by Asset Management Companies for identification and deterrence of potential market abuse including front-running
Summary
This circular mandates Asset Management Companies to establish an institutional mechanism for identifying and deterring market abuse, including front-running. It requires AMCs to implement enhanced surveillance, internal controls, and escalation processes overseen by senior management. Additionally, it outlines data sharing requirements with exchanges and reporting obligations to SEBI.
Text
AMCs shall put in place an institutional mechanism for identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities.
The Chief Executive Officer or Managing Director or such other person of equivalent or analogous rank and Chief Compliance Officer of the asset management company shall be responsible and accountable for implementation of the institutional mechanism.
AMCs shall develop and implement systems and procedures to generate and process alerts in a timely manner.
During the processing of alerts, AMCs shall consider and review all recorded communications including chats, emails, access logs of dealing room and CCTV footage (if available).
The AMCs shall formulate written policies and procedures for conducting examination and taking action in case of potential market abuse including front-running and fraudulent transactions in securities by its employees and connected entities.
Such policies/procedures shall be approved by AMCs’ Board of Directors.
AMCs shall take suitable action upon becoming aware of any potential market abuse by its employees or brokers / dealers, including suspension or termination of such persons/entities.
AMCs shall have an escalation process to promptly inform its Board of Directors and Trustees, regarding instances of potential market abuse, if any, and results of the examination conducted by the AMCs.
AMCs shall have a documented whistle blower policy in line with sub-regulation (29) of regulation 25 of the SEBI MF Regulations.
AMCs shall ensure that the procedures and/or systems put in place are reviewed and updated at appropriate periodic intervals.
For effective functioning of the institutional mechanism, the stock exchanges and depositories shall develop systems, in consultation with AMFI, to enable data sharing with AMCs.
AMCs shall report all examined alerts to SEBI along with action taken, in the Compliance Test Report (‘CTR’) and the Half-yearly Trustee Report (‘HYTR’) submitted to SEBI.
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Source: SecMarx — Institutional mechanism by Asset Management Companies for identification and deterrence of potential market abuse including front-running. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.