MFD/CIR No.4/216/2001
May 08, 2001
All Mutual Funds registered with SEBI /
Unit Trust of India / AMFI
Dear Sirs,
Re: Investment/Trading in Securities by Employees of Asset Management Companies and Mutual Fund Trustee Companies.
Sub-regulation (9) of Regulation 25 of the SEBI (Mutual Funds) Regulations, 1996 stipulates that the asset management company (AMC) shall file with the trustees the details of transactions in securities by the key personnel of the asset management company. Also, clause (b) of Regulation 23 requires the trustees to furnish to SEBI a certificate stating that they have satisfied themselves that there have been no instances of self dealing or front running by any of the trustees, directors and key personnel of the asset management company.
There is a need to lay down the procedures and code of conduct for such transactions so that there is no conflict of interest between the transactions of employees and the mutual fund and interests of unitholders are not affected adversely. Association of Mutual Funds in India (AMFI) and the SEBI Advisory Committee on Mutual Funds made certain recommendations on investment/trading in securities by employees of Asset Management Companies and Mutual Fund Trustee Companies. After examining these recommendations, it has been decided that all mutual funds should take steps to implement the guidelines as enclosed herewith. These guidelines specify the minimum requirements that have to be followed. The asset management companies and mutual fund trustee companies have the option to set more stringent norms for investment/trading in securities by their employees.
These guidelines are being issued in accordance with the provisions of Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996. All mutual funds shall report Implementation of the guidelines to SEBI by May 22, 2001.
Further, the boards of AMCs and trustee companies shall ensure the compliance of the guidelines on a continuous basis and shall report any violations and remedial action taken by them in the periodical reports submitted to SEBI.
Yours faithfully,
P.K. Nagpal
GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT
Encl.: As above.
