Regulator Strikes: SEBI Penalizes BSE INR 25 Lakh for Norm Violations

For failing to give all stakeholders equitable access to corporate filings and to take action against brokers who make frequent changes during trading, capital markets regulator SEBI fined the BSE INR 25 lakh on 25 June.

Following an inspection that took place between February 2021 and September 2022, the market regulator issued the order. SEBI ruled in a 45-page ruling that BSE had violated standards by allowing its paid clients and internal listing compliance monitoring (LCM) staff to view business announcements before they were posted on its website.

In order to preserve market integrity and avoid unfair information advantages, the regulator also noted that the data dissemination procedure lacked controls to guarantee simultaneous and equal access to all players.

SEBI Notifies Various Shortcomings of BSE

The Securities Contracts (Regulation) SECC (Stock Exchange and Clearing Corporations) Regulations, 2018, which require stock exchanges to provide equitable and transparent access to all users, were broken by BSE, according to SEBI's remark.

 Additionally, it pointed out that the BSE failed to set up a really basic syndication (RSS) feed, which would have reduced the possibility of unequal access to company filings. SEBI held that such corrective action was only done after the examination revealed shortcomings, even if the exchange later created a time gap to remedy the matter.

SEBI also pointed out significant flaws in BSE's oversight of client code changes, which are only allowed when there are actual mistakes.

Concerns regarding potential abuse and a lack of due diligence in trades between unaffiliated institutional clients were raised by the BSE's failure to take disciplinary action against brokers who made frequent adjustments and 'error accounts'.

Comments Made by SEBI's Quasi Judicial Authority Santosh Shukla

In the ruling, Santosh Shukla, SEBI's quasi-judicial authority, stated that stock exchanges play a crucial role as the initial line of supervision when managing materially price-sensitive information concerning listed firms and their securities.

In order to maintain compliance with its responsibilities as a leading, internationally renowned stock exchange, BSE must have internal controls over how to handle and manage such corporate announcements.

Shukla stated that the concept of impartiality, transparency, and fairness in information dissemination from the first-level regulator BSE has been significantly compromised by the availability of information about listed companies to LCM employees of BSE and its paid subscribers prior to its release to general investors through its website.

Additionally, he argued, BSE has demonstrated carelessness and laxity in failing to enforce standards regarding client code modifications.