SEBI/HO/IMD/IMD -PoD -1/P/CIR/2024/107 — THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

CIRCULAR SEBI/HO/IMD/IMD -PoD -1/P/CIR/2024/107 To, All Mutual Funds All Asset Management Companies (AMCs) All Trustee Companies/ Board of Trustees of Mutual Funds Association of Mutual Funds in India (AMFI) All Recognized Stock Exchanges All Recognized Depositories Madam/ Sir, Subject: Institutional mechanism by Asset Management Companies for identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities In order to address instances of market abuse including front running and fraudulent transactions in securities, consultations were held with relevant stakeholders including Mutual Funds ' Advisory Committee ( ' MFAC ' ) on the proposal of putting in place a structured institutional mechanism at the end of AMCs, which can proactively identify and deter instances of such market abuse. Further a public consultation was also carried out on the abovementioned proposal. Accordingly, the SEBI (Mutual Funds) Regulations, 1996 (hereinafter referred to as "MF Regulations") have been amended vide notification no. SEBI/LADNRO/GN/2024/197 dated August 01, 2024 (link), to give effect to the above proposal. In view of the above amendment, AMCs shall put in place an institutional mechanism for identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities . This mechanism shall consist of enhanced surveillance systems, internal control procedures, and escalation processes such that the overall mechanism is able to identify, monitor and address specific types of August 05, 2024 misconduct, including front running, insider trading, misuse of sensitive information etc . The mechanism shall ensure the following – 3.1. Accountability: 3.1.1. The Chief Executive Officer or