On August 1, 2024, the Securities and Exchange Board of India (SEBI) issued the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2024. These amendments, which will take effect in phases, modify the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. Notably, new definitions and regulations are introduced, including a broad definition of “market abuse” covering manipulative and fraudulent practices. Asset management companies are required to establish mechanisms to detect and prevent market abuse, such as front-running and fraudulent transactions. Additionally, the Chief Executive Officer, Managing Director, or equivalent, along with the Chief Compliance Officer, will be responsible for these compliance measures. Companies must also implement a whistleblower policy providing confidential reporting channels and protection for whistleblowers. Furthermore, the regulations specify that face-to-face communications need not be recorded. The provisions will be implemented over different timelines: three months, six months, and twelve months from the publication date, depending on the size of the asset management companies.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 1st August 2024
SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) (SECOND AMENDMENT) REGULATIONS, 2024
No. SEBI/LAD-NRO/GN/2024/197 – In exercise of the powers conferred by section 30 read with clause (c) of sub-section (2) of section 11 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, namely—
1. These Regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2024.
2. The provisions of sub-regulations (I) and (II) of Regulation 3 of these regulations shall come into force upon the completion of three months from the date of publication of these regulations in the Official Gazette and the provisions of sub-regulation (III) of Regulation 3 of these regulations shall come into force upon the completion of twelve months from the date of publication of these regulations in the Official Gazette:
Provided that for asset management companies of mutual funds having assets under management less than rupees ten thousand crores; the provisions of sub-regulations (I) and (II) of Regulation 3 of these regulations shall come into force upon the completion of six months from the date of publication of these regulations in the Official Gazette.
3. In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996,—
(I) In regulation 2, in sub-regulation (1), after clause (na), the following clause shall be inserted, namely,—
“(nb) “market abuse” includes manipulative, fraudulent and unfair trade practices which may contravene Section 12A of the Act or any of the provisions of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 or the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;”
(II) In regulation 25, after sub-regulation (26), the following sub-regulations shall be inserted, namely,—
“(27) The asset management company shall put in place an institutional mechanism, as may be specified by the Board, for the identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities.
(28) 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 such an institutional mechanism for deterrence of potential market abuse, including front-running and fraudulent transactions in securities.
(29) The asset management company shall establish, implement and maintain a documented whistle blower policy that shall —
(a) provide for a confidential channel for employees, directors, trustees, and other stakeholders to raise concerns about suspected fraudulent, unfair or unethical practices, violations of regulatory or legal requirements or governance vulnerability, and
(b) establish procedures to ensure adequate protection of the whistle blowers.”
(III) In the Fifth Schedule, in Part B, in clause 2, in sub-clause (b), the following proviso shall be inserted, namely, —
“Provided that face-to-face communication including out-of-office interactions may not be recorded.”
BABITHA RAYUDU, Executive Director
[ADVT. -III/4/Exty./358/2024-25]
Footnote:
1. The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the Principal Regulations, were published in the Gazette of India on December 9, 1996 vide S.O. No. 856 (E).
2. The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 were subsequently amended–
(1) On April 15, 1997 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1997 vide S.O. No.327 (E).
(2) On January 12, 1998 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1998 vide S.O. No.32 (E).
(3) On December 8, 1999 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1999 vide S.O. No.1223 (E).
(4) On March 14, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2000 vide S.O. No.235 (E).
(5) On March 28, 2000 by the Securities and Exchange Board of India (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O. No.278 (E).
(6) On May 22, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2000 vide S.O. No.484 (E).
(7) On January 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2001 vide S.O. No.69 (E).
(8) On May 29, 2001 by the Securities and Exchange Board of India (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide S.O. No.476 (E).
(9) On July 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2001 vide S.O. No.698 (E).
(10) On February 20, 2002 by the Securities and Exchange Board of India (Mutual Funds)(Amendment) Regulations, 2002 vide S.O. No.219 (E).
(11) On June 11, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2002 vide S.O. No.625 (E).
(12) On July 30, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2002 vide S.O. No.809 (E).
(13) On September 9, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2002 vide S.O. No.956 (E).
(14) On September 27, 2002 by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide S.O. No.1045 (E).
(15) On May 29, 2003 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2003 vide S.O. No. 632 (E).
(16) On January 12, 2004 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2004 vide F.No. SEBI/LAD/DOP/4/2004.
(17) On March 10, 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398 (E).
(18) On January 12, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2006 vide S.O. No. 38 (E).
(19) On May 22, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2006 vide S.O. No. 783 (E).
(20) On August 3, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2006 vide S.O. No. 1254 (E).
(21) On December 27, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2006 vide F. No. SEBI/LAD/DOP/82534/2006.
(22) On December 27, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Fifth Amendment) Regulations, 2006 vide F. No. SEBI/LAD/DOP/83065/2006.
(23) On May 28, 2007 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2007 vide F. No. 11/LC/GN/2007/2518.
(24) On October 31, 2007 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2007 vide F. No. 11/LC/GN/2007/4646.
(25) On March 31, 2008 by the Securities and Exchange Board of India (Payment of Fees) (Amendment) Regulations, 2008 vide F. No. 11/LC/GN/2008/21669.
(26) On April 16, 2008 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2008 vide F. No. LADNRO/ GN/2008/03/123042.
(27) On May 22, 2008 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2008 vide no. LADNRO/GN/2008/09/126202.
(28) On September 29, 2008 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2008 vide No. LADNRO/ GN/2008/24/139426.
(29) On April 8, 2009 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2009 vide No. LAD-NRO/GN/2009-10/01/159601.
(30) On June 5, 2009 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2009 vide No. LAD- NRO/GN/2009-10/07/165404.
(31) On July 29, 2010 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2010 vide No. LAD-NRO/GN/2010-11/13/13945.
(32) On August 30, 2011 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2011 vide No. LAD-NRO/GN/2011-12/27668.
(33) On February 21, 2012 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2012 vide No. LAD-NRO/GN/2011-12/38/4290.
(34) On September 26, 2012 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2012 vide No. LAD-NRO/GN/2012-13/17/21502.
(35) On April 16, 2013 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2013 vide No. LAD-NRO/GN/2013-14/03/5652.
(36) On June 19, 2013 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2013 vide No. LAD-NRO/GN/2013-14/12/6108.
(37) On August 19, 2013 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2013 vide No. LAD-NRO/GN/2013-14/18/6384.
(38) On May 6, 2014 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2014 vide No. LAD-NRO/GN/2014-15/01/1039.
(39) On May 23, 2014 by the Securities and Exchange Board of India (Payment of Fees) (Amendment) Regulations, 2014 vide No. LAD-NRO/GN/2014-15/03/1089.
(40) On December 30, 2014 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2014 vide No. LAD-NRO/GN/2014-15/19/1973.
(41) On May 15, 2015 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2015 No. NROOIAE/GN/2015-16/005.
(42) On February 12, 2016 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2016 vide No. SEBI/LAD-NRO/GN/2015-16/034.
(43) On February 15, 2017 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2017 vide No. SEBI/LAD/NRO/GN/2016-17/031.
(44) On March 13, 2018 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/2018/02.
(44) On May 30, 2018 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/2018/14.
(45) On December 6, 2018 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/2018/50.
(46) On December 13, 2018 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/2018/51.
(47) On January 1, 2019 by the Securities and Exchange Board of India (Custodian of Securities) (Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/2019/01.
(48) On April 26, 2019 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2019 vide No. SEBI/LAD-NRO/GN/2019/011.
(49) On September 23, 2019 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2019 vide No. SEBI/LAD-NRO/GN/2019/37.
(50) On March 6, 2020 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/07.
(51) On April 17, 2020 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/10.
(52) On October 29, 2020 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/39.
(53) On February 4, 2021 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/08.
(54) On August 3, 2021 by the (Regulatory Sandbox) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/30.
(55) On August 5, 2021 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/36.
(56) On November 9, 2021 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/56.
(57) On January 25, 2022 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/70.
(58) On August 3, 2022 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/92.Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064and Published by the Controller of Publications, Delhi-110054.
(59) On November 16, 2022 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/106.
(60) On February 7, 2023, by the Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/121.
(61) On June 27, 2023 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/134.
(62) On July 3, 2023, by the Securities and Exchange Board of India (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/137.
(63) On August 17, 2023, by the Securities and Exchange Board of India (Facilitation of Grievance Redressal Mechanism) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/146.
(64) On July 2, 2024 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2024 vide No. SEBI/LAD-NRO/GN/2024/188.
