The Securities and Exchange Board of India has proposed bringing Mutual Fund units under stringent regulations to prevent acts of insider trading that is the abuse of sensitive information by the key personnel of a mutual funding unit. The Mutual Fund units are currently excluded from the 'securities' as defined under Prohibition of Insider Trading Regulations. Buying and selling of Mutual Fund units is excluded from the definition of 'trading'.
There were allegations of front-running at a large fund house and hence the proposal to introduce regulations to bring under control such actions. SEBI has said it has observed that a key personnel that were in possession of certain sensitive information which was not communicated to the unit used that information for their benefit.
SEBI has mulled applying ideas like connected persons, designated persons, closure period, and pre-clearance for Mutual Fund transactions. It has also considered placing a code of conduct for designated personnel and this would be applicable to every person who is required unpublished and price sensitive information (UPSI) relating to a Mutual Fund scheme or its units in the course of business operations.
Major global financial regulators are considering AI to regulate securities law violators and bring them under control and so is India. The AI technology that has helped Las Vegas casinos to keep away tricky gamblers may soon come down to help the Securities and Exchange Board of India to tackle down insider trading activities. SEBI is in talks with a US based AI provider and the company has already given a demonstration. The casino AIs come with superior risk management systems compared to traditional data analytics that regulators use. Market regulators mostly rely on tips and information to investigate white-collar crimes, but they have been found wanting to build better cases against insider-trading violations.
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