If you invest in Mutual Funds, read this story carefully. Market regulator Securities and Exchange Board of India (SEBI) has decided to make fund managers more accountable in a bid to make investments in mutual funds more reliable, for which SEBI will issue code of conduct. In addition, SEBI has further tightened the disclosure rules on forensic scrutiny of accounts of listed companies. SEBI has also strengthened the role of debenture trustee and amended insider trading rules.
Accountability of fund managers, dealers to increase:
SEBI has approved amendments to mutual fund regulations to bring in a code of conduct for the company's chief investment officer and dealers, including fund managers of asset management company (AMCs). It will be the responsibility of the CEO of the company to see whether the code of conduct is being followed. At present, AMC and trustees are to comply with the code of conduct under mutual fund rules.
Forensic audit tightens:
Sebi has also allowed AMC to become a self-clearing member of the Clearing Corporation. Thereafter, it will be able to settle and clear trades in the debt segment of the stock exchange on behalf of the Mutual Funds scheme. Listed companies will also need to provide information on the commencement of forensic audits. Companies will also need to explain which companies are conducting these audits and what is the reason for this. The companies will also have to explain what the final forensic audit report was and if the management has said anything on it.
Changes in insider trading rules:
SEBI has also made major changes to insider trading rules. Under the insider mechanism, SEBI has given three years time to the vulnerability to report any violation of insider trading rules, which means that errors of up to three years can now be reported.
Debenture trusts' rights increased:
The enhancement of the rights of debenture trustees has also been approved by the SEBI board, debenture trustees will also be entitled to participate in the Inter Creditor Agreement and debenture trustees will also be able to convene a meeting of debenture holders if required. Debenture trustees will also monitor the asset cover regularly.
Delisting the subsidiary company:
SEBI has given relief in the subsidies company's delisting rules. If the listed subsidiary is merged with the listed parent company, there will be relief. Companies have been relieved of the reverse book building process. That means they won't need a reverse book building process to fix the price. Share swap will have to be fixed and the parent company's share in return
What will be the impact of SEBI's decision?
Bringing a code of conduct for fund managers is a good step, it will yield good results in the long term, the monitoring of the fund management team will be intensified. Mutual fund investors will increase their confidence in fund managers and processes in the coming time.