SEBI diktat to broking houses, intermediaries to get strict with staff on rumours, market manipulation
Moneylife Digital Team 23 March 2011

The Securities and Exchange Board of India has in a circular observed that “unauthenticated news related to various scrips is being circulated” through various online channels by employees of broking houses and other intermediaries, which violates the Code of Conduct for Stock Brokers

Market watchdog, the Securities and Exchange Board of India (SEBI), has decided to clamp down on the staff of various broking houses and financial intermediaries, because these employees have been circulating "unauthenticated news related to various scrips."

SEBI has come down hard on various entities dealing in securities, especially the quality and calibre of staff that these market brokers tend to recruit. In a hard-hitting statement issued today, the watchdog has said: "In various instances, it has been observed that the intermediaries do not have proper internal controls and do not ensure that proper checks and balances are in place to govern the conduct of their employees. Further, due to lack of proper internal controls and poor training, employees of such intermediaries are sometimes not aware of the damage which can be caused by circulation of unauthenticated news or rumours."

SEBI has gone a step further, saying, "It is a well-established fact that market rumours can do considerable damage to the normal functioning and behaviour of the market and distort the price discovery mechanisms," and it has directed market intermediaries to prevent such kind of activities.

The market regulator has also directed market intermediaries to impose a proper internal code of conduct and controls so that employees/temporary staff/voluntary workers, etc, employed/working in the offices of market intermediaries do not encourage or circulate rumours or unverified information obtained from client, industry, any trade or any other sources without verification.

Market intermediaries should impose restrictions on access to blogs, chat forums and messenger sites. Logs for any usage of such blogs, chat forums or messenger sites (called by any nomenclature) shall be treated as records and the same should be maintained as specified by the respective regulations which govern the concerned intermediary, SEBI said in the statement.

Employees should be directed that any market related news received by them, either in their official mail or personal mail/blog, or in any other manner, should be forwarded only after the same has been seen and approved by the concerned intermediary's compliance officer. If an employee fails to do so, he/she shall be deemed to have violated the various provisions contained in SEBI Act/Rules/Regulations, etc, and shall be liable for action, and the compliance officer shall also be held liable for breach of duty in this regard, the market regulator said.

Comments
Narendra Doshi
1 decade ago
Good step. Hope it will be put into practice with a severe punishment / penalty , on a regular basis and in public domain.
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