(NDTV)
Capital markets regulator Sebi on Wednesday slapped a Rs 25 lakh penalty on BSE for failing to provide equal access to corporate disclosures to all stakeholders and take action against brokers with frequent modifications during trades.
The market regulator passed the order after an inspection conducted between February 2021 and September 2022.
In a 45-page order, Sebi found that BSE’s system architecture allowed its paid clients and internal listing compliance monitoring (LCM) team to access corporate announcements before the same were made public through its website, resulting in a breach of norms.
The regulator also observed that the data dissemination process lacked safeguards to ensure simultaneous and equal access to all stakeholders, which is critical to maintaining market integrity and preventing unfair information advantage.
Accordingly, Sebi concluded that BSE failed to comply with Regulation 39(3) of the Securities Contracts (Regulation) SECC (Stock Exchange and Clearing Corporations) Regulations, 2018, which mandates stock exchanges to ensure fair and transparent access to all users.
It also noted that BSE did not establish a really simple syndication (RSS) feed, which could have mitigated the risk of unequal access to corporate disclosures.
Although the exchange later created a time gap to address the issue, Sebi held that such corrective action was taken only after the inspection highlighted lapses.
Sebi also flagged serious shortcomings in BSE’s monitoring of client code modifications, which are permitted only in case of genuine errors.
BSE failed to initiate disciplinary action against brokers with frequent modifications and did not adequately monitor ‘error accounts’, raising concerns over the possibility of misuse and lack of due diligence in trades between unrelated institutional clients.
“…the role of stock exchanges as ‘the first layer of oversight’ is of much significance, while handling material price sensitive information about listed companies and their securities.
“Therefore, as a premier recognised stock exchange, BSE must have internal controls on how to manage and handle such corporate announcements so as to ensure compliance with its obligations,” Sebi’s Quasi Judicial Authority Santosh Shukla said in the order.
The availability of information about listed companies with LCM employees of BSE and its paid subscribers before it is available to general investors through its website has clearly impaired the concept of impartiality, transparency and fairness of information dissemination from the first level regulator BSE, Shukla said.
Further, BSE has also displayed laxity and negligence, with respect to not supervising norms with regard to client code modifications as found, he added.
