SEBI
Set up institutional mechanism to tackle fraud, market abuse: SEBI directs stockbrokers
New Delhi/IBNS: Aiming to instil confidence in the securities market, the regulatory body for securities and commodity market in the country, Securities and Exchange Board of India (SEBI), has directed stockbrokers to establish an institutional mechanism to detect and prevent fraud and market abuse.
The capital market regulator, in its circular released on Thursday (July 4), stated that its provisions will come into force in a risk-based, staggered manner to ensure smooth adoption by all stockbrokers.
The brokerages will get sufficient time, based on their size, to make necessary changes, according to the SEBI circular.
Earlier on May 22, SEBI issued 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, as per reports.
The Indian market regulator, in its latest circular, has asked stockbrokers to set up an institutional mechanism for preventing and detecting fraud or market abuse, invoking the provisions of Chapter IVA of the Securities and Exchange Board of India (Stock Brokers) (Amendment) Regulations, 2024.
According to reports, the institutional mechanisms will include putting systems in place for surveillance of trading activities and internal controls; listing out obligations of the brokerage and its employees; having systems in place for escalation and reporting mechanisms; and making a whistle-blower policy.
As per the circular, these provisions are intended to come into force on January 1, 2025, for brokers with more than 50,000 unique client codes (UCCs), while brokers with UCCs between 2,000 and 50,000 are given a three-month leeway until April 1, 2025, and brokers with fewer than 2,000 UCCs have time till April 1, 2026.
The effective date for implementation of the circular for Qualified Stock Brokers (QSBs) is August 1, 2024 because they are already following enhanced obligations and responsibilities such as governance structure and processes and surveillance of client behaviour, according to reports.
The SEBI circular also stipulates that stock exchanges are supposed to bring the provisions of this circular to the notice of stockbrokers and disseminate the same on their websites, while the exchanges are also directed to make changes to their bylaws and regulations for the implementation of these provisions, reports said.
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