The Securities and Exchange Board of India (SEBI) has proposed measures to bolster governance in the equities market.
In a consultation paper, the regulator recommended that asset management companies (AMCs) establish surveillance and internal control systems, or an “institutional mechanism”.
“AMCs must establish robust surveillance systems and internal control procedures to discourage misconduct by employees or any other entities possessing information related to fund management and/or investments of mutual fund schemes,” it said. “AMCs should tailor their surveillance systems and internal control procedures, including alert types, parameters and thresholds, based on back-testing of historical data.”
The SEBI says the objective is to deter potential market abuse and fraudulent transactions associated with the handling of securities by AMCs. The proposals also call for increased accountability among AMCs and their senior management personnel, who will be held responsible for implementing the institutional mechanism.
As an additional measure, the framework mandates that fund managers and dealers communicate exclusively through recorded modes and channels during market hours.
