Introduced a Code of Conduct for Fund Managers and Dealers

(Commercial Representative) Mumbai, Ta. 29 September 2020, Tuesday

The Securities and Exchange Board of India (SEBI), the regulatory body for capital markets, has taken important decisions in its board meeting today, including delisting of mutual funds, subsidiaries and changes in inside trading standards. SEBI has introduced a Code of Conduct for Fund Managers and Dealers of Mutual Fund-Asset Management Companies (AMCs). This has allowed AMCs to become self-clearing members.

Under SEBI Mutual Fund Regulations 12, AMCs-asset management companies and trustees are now required to follow a code of conduct. SEBI has now introduced a code of conduct for fund managers, including AMCs' chief investment officers and dealers, under the norms. It will also be the responsibility of the Chief Executive Officer to ensure that such officers follow the Code of Conduct.

In addition, the SEBI Board has now allowed AMCs to become self-clearing members of recognized clearing corporations and to clear and settle mutual fund schemes in the debt segment of recognized stock exchanges.

SEBI Prohibition of Insider Trading Regulations 2018 has been amended. There is a period of up to three years for reporting a violation under the Inside Trading Act through an information mechanism. SEBI has approved the proposal to set up a limited purpose repo clearing corporation.

SEBI has decided to exempt from reverse book building process for delisting of listed subsidiaries which become a wholly owned subsidiary of a listed parent as per the scheme of arrangement in the changes relating to delisting of equity shares.

To be recognized, the listed holding company and the listed subsidiary must be in the same business. In order to protect the interest of investors in the listed subsidiary, the number of votes in favor of the proposal by the public shareholders of the listed subsidiary should be double the number of votes cast in opposition.

In addition the parent listed company and the listed subsidiary should be listed for three years and should not be suspended at the time of adoption of this route and the subsidiary should be a listed subsidiary of the listed holding company for the last three years.

The role of debenture trustees has been strengthened by SEBI to protect the interests of debenture holders. Debenture trustees will be able to make independent due diligence of assets. Debenture trustees will be able to take the necessary steps to convene a meeting of debenture holders to enforce security.