TaxTMI 
TaxTMI 
Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2022.
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.... in sub-regulation (1), a. in clause (i), the words "except units of a mutual fund" shall be omitted. b. in clause (l), after the word and symbol "subscribing," and before the word "buying" the words and symbol "redeeming, switching," shall be inserted and after the word and symbol "subscribe," and before the word "buy", the words and symbol "redeem, switch," shall be inserted. II. in regulation 7A, in clause (d), i. in sub-clause (iv), the word "and" shall be omitted. ii. After sub-clause (iv) and before sub-clause (v), the following sub-clause shall be inserted, namely,- "iv(a) regulations 5A to 5G of these regulations; and" III. after Chapter II and before Chapter III, the following Chapter shall be inserted, namely,- "CHAPTER - II A RESTRICTIONS ON COMMUNICATION IN RELATION TO AND TRADING BY INSIDERS IN THE UNITS OF MUTUAL FUNDS. Applicability 5A. (1) The provisions of this Chapter shall apply only in relation to the units of a mutual fund. (2) All the provisions of Chapter IIIA and V shall also apply in relation to the units of a mutual fund. Definitions. 5B.(1) For the purpose of this Chapter, (a) "associate" shall have the same meaning assigned....
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....se of business operation; or (i) an intermediary as specified in section 12 of the Act or an employee or director thereof who have access or are reasonably expected to have access to unpublished price sensitive information relating to a mutual fund scheme or its units in the course of business operations; or (j) a banker of the mutual fund or asset management company; or (k) a concern, firm, trust, HUF, company or association of persons wherein a director of an asset management company and Trustees or his immediate relative or banker of the company, has more than ten per cent of the holding or interest; (c) "generally available information" means information that is made available to the unitholders or made accessible to the public on a non-discriminatory basis; NOTE: Generally available information is intended to be defined to crystallize and appreciate its meaning. Information published on the website of a stock exchange would ordinarily be considered generally available. Explanation : The asset management companies/trustees shall immediately disseminate all material information on the platform of the stock exchange or in any other manner as may be specified....
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....tion in their possession. (2) No person shall procure from or cause the communication by any insider of unpublished price sensitive information, except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations. NOTE: This provision is intended to impose a prohibition on unlawfully procuring possession of unpublished price sensitive information. Inducement and procurement of unpublished price sensitive information not in furtherance of one's legitimate duties and discharge of obligations would be illegal under this provision. (3) The board of directors of an asset management company with the approval of the Trustees shall make a policy for determination of "legitimate purposes". Explanation - For the purpose of illustration, the term "legitimate purpose" shall include sharing of unpublished price sensitive information in the ordinary course of business by an insider with Trustees, Registrars and Share Transfer Agents, Custodians, Valuation Agencies, Fund Accountants, Association of Mutual funds of India, Credit Rating Agencies, legal advisors, auditors or other advisors or consultants, except where such sharing has been carried out to....
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.... have a material impact on the interest of the unit holders of the scheme: Explanation -The dealings of a person in the units of a mutual fund when in possession of unpublished price sensitive information, shall be presumed to have been motivated by the knowledge and awareness of such information in his possession: Provided that the insider may prove his innocence by demonstrating the circumstances including the following: - (i) the transaction is an off-market inter-se transfer between insiders who were in possession of the same unpublished price sensitive information and both parties had made a conscious and informed trade decision: Provided that such off-market trades shall be reported by the insiders to the asset management company within two working days. Every asset management company shall notify the particulars of such trades to the stock exchange or in any other manner as may be specified by the Board within two trading days from receipt of the disclosure or from becoming aware of such information; (ii) such transaction in question was carried out pursuant to a statutory or regulatory obligation including subscription or investment in mutual fund units pursuant t....
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....tion/investment in the mutual fund units pursuant to mandatory requirement specified by Board for "Alignment of interest of Key Employees ('Designated Employees') of Asset Management Companies with the Unitholders of the mutual fund Schemes" or otherwise, where separate records are maintained by the Asset management company in this regard. Such transactions may be governed by Circulars/guidelines issued by the Board from time to time; b. Any trading in overnight schemes, Index funds and Exchange Traded Funds. (3) Transactions mentioned in sub-regulation (2), shall be disclosed by the asset management company on Stock Exchange or any other manner as may be specified by the Board within two business days of receipt of the same. (4) The above disclosures shall be made in such form and such manner as may be specified by the Board from time to time. Code of Conduct 5F. (1) The board of directors of every asset management company shall ensure that the chief executive officer or managing director shall formulate a code of conduct with their approval to regulate, monitor and report dealings in mutual fund units by the Designated Persons and immediate relatives of the Desi....
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....y and/or trustees. Explanation :Non-Executive Directors of the asset management company/trustee company or trustees who are in possession of / have access to any "unpublished price sensitive information" , shall also be deemed to be Designated Persons. (2) Every other Intermediary and other persons shall in consultation with the compliance officer specify the Designated Persons to be covered by the code of conduct on the basis of their role and function in the organisation and the access that such role and function would provide to unpublished price sensitive information in addition to seniority and professional designation. Institutional Mechanism for Prevention of Insider trading. 5H. (1) The Chief Executive Officer / Managing Director of an asset management company with the approval of the trustee or such other analogous person of an intermediary or fiduciary, shall put in place adequate and effective system of internal controls to ensure compliance with the requirements given in these regulations to prevent insider trading. These internal controls shall include the following: (a). All employees who have access to unpublished price sensitive information are identi....
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....management company/ trustees in connection with such inquiry conducted by the asset management company/ trustees." IV. After Schedule B, the following Schedule shall be inserted namely,- "SCHEDULE B1 (See Regulation 5F of Chapter - IIA) Minimum Standards of Code of Conduct for Mutual Funds to regulate, monitor and report trading by the Designated Persons in the units of own mutual fund schemes 1. The compliance officer shall report to the board of directors of asset management company and provide reports to the Chairman of the Audit Committee of the asset management company and to the trustees, at such frequency as may be stipulated by the board of directors, but in any case not less than once in a year. 2. The information shall be handled within the organisation on a need-to-know basis and no unpublished price sensitive information shall be communicated to any person except in furtherance of legitimate purpose, performance of duties or discharge of legal obligations. The code of conduct shall contain norms for appropriate Chinese Walls procedures and processes for permitting any designated person to "cross the wall". 3. Designated Persons and immediate relatives of de....
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....ndex funds and Exchange Traded Funds. 7. Prior to approving any trades, the compliance officer shall be entitled to seek a declaration to the effect that the applicant for pre-clearance is not in possession of any unpublished price sensitive information with due regard to whether any such declaration is reasonably capable of being rendered inaccurate. 8. The code of conduct formulated by the chief executive officer or managing director of the asset management company shall specify any reasonable timeframe, which in any event shall not be more than seven business days, within which trades that have been pre-cleared have to be executed by the Designated Person, failing which fresh pre-clearance shall be required for the trades to be executed. 9. The code of conduct shall also specify the period, which in any event shall not be less than two months, within which a Designated Person who is permitted to trade shall not execute a contra trade. The compliance officer may be empowered to grant relaxation from the strict application of such restriction for reasons to be recorded in writing provided that such relaxation does not violate these regulations or other requirements specified....
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.... annual income of such Designated Person but shall exclude relationships in which the payment is based on arm's length transactions. 14. Mutual funds shall have a process that would determine how an individual is brought 'inside' to access sensitive transactions and shall be made aware of the duties and responsibilities attached to the receipt of such Inside Information and the liability that is attached to the misuse or unwarranted use of such information." V. In Schedule C, i. In Clause 8 after the words and symbol "contra trade.", and before the words "The compliance officer" the following words and symbol shall be inserted, namely,- "In case of dealing in the units of mutual funds, the code of conduct shall specify the period, which in any event shall not be less than two months, within which a Designated Person who is a connected person of the mutual fund/asset management company/trustees and is permitted to trade in the units of such mutual fund, shall not execute a contra trade." ii. After clause 11, the following clause shall be inserted, namely,- "11A. In case of dealing in the units of mutual funds, the code of conduct shall specify that in case it ....