Mutual-Fund Trades, Plans, and Oversight
10. Mutual-fund trades, plans and oversight
Mutual-fund defences include informed off-market transfers between insiders holding identical UPSI and genuine legal or regulatory obligations, including specified mandatory employee investments aligning employee and investor interests. Off-market insiders report to the AMC within two working days; the AMC publishes within two trading days of disclosure or awareness.
Systematic transactions are recurring investor instructions, such as investment, transfer or withdrawal plans. Transactions registered at least two months earlier can qualify for the relevant defence.
Approved, irrevocable fund trading plans must be disclosed at least 60 days before trading, cover at least six months, and not overlap. Plan trades are exempt from pre-clearance, closure-period and contra-trade rules.
During a UPSI closure, the AMC must not process affected requests from designated persons or immediate relatives, subject to exceptions. Qualifying same-information transfers, legal obligations, advance-registered systematic transactions and genuine approved pledges receive particular treatment. Reopening depends on publication and market absorption; this provision sets no 48-hour minimum.
Outside closure, pre-clearance applies above AMC-board thresholds, including when systematic transactions begin. Separate thresholds apply to systematic and lump-sum transactions. Approved trades must execute within the code’s deadline, at most seven business days, or receive fresh approval.
Contra-trade restrictions last at least two months, subject to written compliant relaxations. Breaches require surrender of profits or avoided losses to the Investor Protection and Education Fund, with SEBI informed. Overnight schemes escape contra-trade restrictions. Overnight schemes, index funds and exchange-traded funds, or ETFs, are excluded from designated-person pre-clearance requirements.
Covered own-fund trades above SEBI thresholds by AMC designated persons, trustees and immediate relatives must be reported within two business days, then published by the AMC within two business days of receipt. Their aggregate scheme holdings are disclosed quarterly. Systematic arrangements are reported at the first instalment, including duration, and when modified. Specified mandatory or separately recorded investments, and overnight-scheme, index-fund and ETF trades, have reporting exclusions.
AMC codes follow Schedule B1. Other businesses handling scheme UPSI must follow Schedule C and appoint compliance officers. The AMC compliance officer reports at least annually to the AMC board, audit-committee chair and trustees.
Required designated roles include the AMC head, relevant directors, investment, risk, operations and information-security chiefs, fund managers, dealers, analysts, all fund-operations employees, compliance officers and department heads. Non-executive directors or trustees with UPSI access are also covered.
Management establishes effective controls with required trustee approval. Audit review occurs at least annually. Trustee-approved leak-inquiry and whistle-blower policies are required, with prompt SEBI reporting of leaks, investigations and their outcomes. Relevant intermediaries and fiduciaries must cooperate.