SEBI conducting ‘surprise’ inspections, getting info on deals, trades, brokers; leading mutual funds under radar: Report

Moneycontrol reported that the Securities and Exchange Board of India (SEBI) is conducting unannounced inspections of top mutual fund executives, examining their digital devices, including mobile phones, iPads, and laptops.

Five leading mutual funds have undergone these inspections over the past 12 months, with SEBI accessing the mobile phones of several top executives. Livemint could not independently verify this news development.

According to sources cited by the publication, these inspections are distinct from the search and seizure operations Quant Mutual Fund experienced on June 28.

Moneycontrol's report highlights that SEBI refers to these actions as “thematic inspections”. These involve reviewing records from multiple mutual funds to gather information on block deals, concurrent trades, and broker communications, among other things. 

The primary goal of seizing this data is to analyse patterns and identify any irregular or questionable practices that warrant further scrutiny.

The inspections are carried out without prior notice, adding an element of surprise. Sources explained that SEBI aims to ensure compliance and detect potential malpractice within the mutual fund industry, as per the report.

An anonymous executive from an affected asset management company told Moneycontrol, "Information spreads fast. People who need to reset their phones have already done so. But even if you have nothing to hide professionally, accessing personal digital devices is disturbing."

SEBI asks for institutional mechanism

Meanwhile, the Capital market regulator ordered stockbrokers on July 4 to set up an institutional mechanism to detect and prevent fraud and market abuse. The initiative aims to instil confidence in the securities market.

The SEBI circular stated that its provisions would come into force in a risk-based, staggered manner to ensure smooth adoption by all stockbrokers. Brokerages will get sufficient time to make necessary changes based on their size.

SEBI, on May 22, released a master circular for stockbrokers, listing a range of topics such as registration, supervision and oversight, dealings with clients, default-related provisions and investor grievance redressal mechanisms.