India’s financial regulator has called on asset managers to be more vigilant over potentially fraudulent trades.
The Securities and Exchange Board of India (SEBI) has updated its mutual fund regulations to include a requirement for asset management companies to install an “institutional mechanism” for detecting and deterring market abuse such as front running or insider trading.
Regulated firms are expected to have enhanced surveillance systems, internal control procedures and escalation processes as well as a whistle-blowing facility to encourage transparency.
All communications with dealers must be recorded by asset managers with exemptions for face-to-face meetings.
The move comes on the back of a significant spike in front-running and insider dealing in recent years, according to Sebi.
This spike was led by the front-running found at Axis Mutual Fund between 2021 and 2022 which resulted in the barring of the firm’s former chief dealer, Viresh Joshi, and 20 other individuals.
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