SEBI conducts surprise inspections, examines phones of mutual fund executives
What's the story
The Securities and Exchange Board of India (SEBI) has increased its regulatory vigilance, conducting surprise inspections on digital devices such as mobile phones, iPads, and laptops, of top executives of Asset Management Companies (AMCs). This information was disclosed to Moneycontrol by individuals familiar with the matter. In the past year, half of the top 10 mutual funds (MFs) have undergone these inspections, with some executives' mobile phones accessed by the capital market regulator.
Distinct procedures
Inspections differ from search and seizure operations
SEBI's inspections are not to be confused with search and seizure operations, such as the one faced by Quant Mutual Fund on June 28, 2024. Search and seizure operations are surveillance-based procedures initiated when the regulator suspects certain trades or practices. These require prima facie evidence suggestive of alleged wrongdoing, which then leads to court-sanctioned search and seizure operations.
Thematic inspections
'Thematic inspections' to uncover aberrations
SEBI's inspections on top funds are internally referred to as "thematic inspections," reported Moneycontrol. The investigation involves examining records of multiple mutual funds for information on block deals, concurrent trades, and broker communications. The goal of these data seizures is to analyze patterns and identify any aberrations or unusual practices that may require further investigation.
Unannounced checks
Surprise inspections serve as second level of scrutiny
The surprise inspections, carried out without prior notice, serve as a second level of scrutiny beyond automated surveillance. SEBI has automated much of its routine audit procedures as part of their overall surveillance framework. The physical checks add an element of surprise and provide a deeper level of investigation into potential market irregularities, people cited. Amid SEBI's latest move, some AMC chiefs have voiced concerns over this trend of surprise inspections.