InvestorQ : What are the new standards that SEBI has prescribed for mutual funds to execute trades? Why are mutual fund manages so worried about these standards?
Anamika Sodhani made post

What are the new standards that SEBI has prescribed for mutual funds to execute trades? Why are mutual fund manages so worried about these standards?

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Angel dcosta answered.
2 months ago
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SEBI recently prescribed standards for executing trades by dealers in the mutual fund segment. The new set of guidelines will be applicable from 01-Jan 2021. The notification clearly states that all communication from dealers and fund managers during market hours should only be routed through recorded modes.

This is not new. Currently, all dealer conversations during market hours are recorded as they operate from dealing rooms without mobile phones. Similarly, fund manager conversations on landlines are also recorded. Going ahead, even mobile conversations with partners, brokers, distributors, analysts and company officials have to be recorded.

This has raised some serious privacy concerns among the fund managers. Currently, many of the discussions post market hours are not recorded, but going ahead even that may have to be done. This could result in domestic fund managers and dealers losing out on important market colour and flow colour data, that is normally an edge that institutions have.

The new norms require fund managers to record in writing all decisions to buy or sell stocks along with detailed justifications for the decision. Funds are apprehensive that such a move may not be feasible in the case of large funds and may also risk leakage of confidential trade information. Passive funds and arbitrage funds are likely to be excluded.


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