A
slew of regulations by Sebi in recent times have not only
instilled confidence in investors, but also facilitated strong
growth for the mutual fund industry in India.
While
the mutual fund industry in India is four decades old, major
developments in improving regulatory framework have taken
place only during the past five years. Many regulatory changes
have been implemented to improve surveillance and protect
the rights of investors.
After
the UTI debacle, the market regulator Sebi has taken several
measures to develop a comprehensive regulatory framework for
mutual funds in association with AMFI. Regulatory guidelines
relating to insider trading, late trading, switching assets,
minimum number of investors for each scheme and marketing
of mutual funds have now been issued to protect small investors.
Sebi has also been closely monitoring investment decisions
in unlisted securities and mergers between schemes and fund
houses.
In
2004, the industry suffered a setback when allegations about
insider trading and front running by fund managers on their
personal accounts by obtaining information about specific
stocks prior to particular mutual fund sells or buys cause
flying in thick and fast. To avoid and prevent such unethical
practices, Sebi has issued regulations that trustees furnish
a certificate to it stating that they have satisfied themselves
and that there have been no instances of insider trading by
any of the trustees, directors or key personnel of the asset
management companies. The compliance officer is also required
to keep track of the transactions of the mutual fund employees
and the mutual fund so as to ensure that there are no conflicts
of interest even if the mutual fund has transacted the same
securities before or after the employee's transactions. Employees
have to furnish the declaration of transactions and monthly
statement of holdings ensuring that no insider trading has
happened. |
