The Association of Mutual Funds in India (AMFI) believes that SEBI’s circular on mooting institutional mechanism will prevent potential market abuse and safeguard investors interest.
The initiative is designed to reinforce the industry’s commitment to the highest standards of transparency, operational excellence and investor protection, it said in a statement on Wednesday.
“We believe that these standards, to be developed by AMFI in consultation with industry, will not only enhance the integrity of the industry processes but also ensure that investors can make informed and confident investment decisions,” the industry body added.
In a circular issued on Monday, the market regulator pushed for institutional mechanism which consists of enhanced surveillance systems, internal control procedures and escalation processes to deter misuse of sensitive information.
The Chief Executive Officer or Managing Director and Chief Compliance Officer will be responsible and accountable for implementation of the institutional mechanism for deterrence of potential market abuse, it said.
The circular comes at a time when the regulator is investigating an alleged front-running case against Quant Mutual Fund after conducting search and seizure operations in Mumbai and Hyderabad.
In order to ensure uniform implementation of institutional mechanism across the industry, AMFI in consultation with SEBI, will prescribe a detailed implementation standards in 15 days to be mandatorily followed by AMCs.
Front-running occurs when a mutual fund manager or trader executes orders on a security for their own account before executing orders for their clients. This gives the trader an unfair advantage, allowing them to profit from the expected movement in the security’s price, resulting from the larger client orders that follow.
Earlier, SEBI has passed stringent orders against Axis Mutual Fund and Life Insurance Corporation in a front running case.