Zee Business Exclusive: Curbing fraudulent trades in mutual funds, fast-tracking NCS issues, and other items on SEBI Board meeting agenda today

Capital market regulator SEBI's board is meeting today (Tuesday, April 30, 2024). This is the second board meeting in two months after the previous meeting on March 15.

As per sources, the board meeting has been called to approve the regulator's annual financials report for FY24, but it may take up a few other pending issues, which may include institutional mechanisms in mutual funds to deal with the issue of fraudulent trades like insider trading and front running.

The regulator had floated a discussion paper on the same almost a year ago.

Detect and deter fraudulent trades in MFs

Under the proposed institutional mechanism, mutual funds or Asset Management Companies (AMCs) will have to form a documented policy to deal with wrongdoers.

After seeing many front running cases in recent years, the regulator wants AMCs to have tighter internal control and enhance their surveillance of their staff.

As per the proposal, if laxity is found on the part of AMCs, their top management may be held responsible.

In the paper floated last year, the regulator proposed to make the Chief Executive Officer, Managing Director, Compliance Officer, or other such person of the fund house responsible for ensuring that a well-documented mechanism is put in place to curb such malpractices by its staff, brokers, or connected third-party agencies.

AMCs will have to have a whistleblower policy also so that whistleblowers who report such misconduct are protected.

Easing in fast-tacking of NCS issues

To enhance non-institutional participation and enhance the ease of doing business for listed debt companies, the SEBI board may approve the proposal to fast-track debt issues.

To attract more non-institutional participation on a private placement basis, the face value may be reduced from Rs 1 lakh to Rs 10,000.

This may be helpful in broadening the corp debt market.

The board may also tweak regulation to ease faster issuance of such issues, including embedding the QR code for publicly available financial information, exemption from publication in newspapers, and faster listing on a T+3 basis.

Fast-track public issues may be allowed to be kept open for a minimum of one day and a maximum of 10 days.

Exemption from mandatory sending physical Consolidated Account Statement

On the request of depositories, SEBI may give exemption from mandatory sending physical consolidated account statement, as these days, these statements are sent on emails.

Depositories had requested from exemption so that they can save on costs. But they may have to provide it in case an investor demands.

Approval of financial accounts of the Board, a few other MII committee-related nomenclature issues and exemption to REITs in some cases from publication in newspapers, may also be discussed and approved by the board.