Need mechanism to tackle fraud, market abuse

Brokerages will get sufficient time, based on their size, to make necessary changes, it added.
Image of SEBI used for representational purpose only.
Image of SEBI used for representational purpose only. (FIle Photo | Reuters)

MUMBAI: Markets watchdog Sebi has asked stockbrokers to put in place an institutional mechanism by August 1, to help prevent and detect frauds or market abuse so that the system can instill confidence in the securities market.

In a new circular amending the extant master circular, invoking the provisions of Chapter IVA of Sebi (stock brokers) (Amendment) Regulations, 2024, the Securities and Exchange Board (Sebi) on Thursday said the new mechanism should be in place by August 1 for qualified stock brokers.

The Sebi circular states that the new provisions will come into force in a risk-based, staggered manner to ensure smooth adoption by stockbrokers. Brokerages will get sufficient time, based on their size, to make necessary changes, it added.

The new circular is an update of the circular issued on May 22, 2024, for stockbrokers, listing a range of issues like registration, supervision and oversight, dealings with their clients, default-related provisions and investor grievance redressal mechanisms.

The latest circular asks stockbrokers to establish an institutional mechanism to prevent and detect fraud or market abuse, and invokes the provisions of Chapter IVA of the stock brokers amendment regulations, 2024.

The other directions in the new mechanisms include putting in place a system for surveillance of trading activities and internal controls; listing out obligations of the brokerages and their employees.

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