The Securities and Exchange Board of India (SEBI), the country’s capital market regulator, has taken a decisive step towards safeguarding the integrity of the securities market. In a new master circular issued on September 23rd, SEBI has laid down strict guidelines for market intermediaries, focusing on the control and verification of information disseminated through various communication channels, particularly social media.
The circular underscores the inherent risk posed by unverified market rumors. These rumors can significantly disrupt the normal functioning of the market, leading to distorted price discovery mechanisms and potentially harming investors. To mitigate this risk, SEBI has mandated the following measures for intermediaries:
1.
Verification is paramount:
Employees of intermediaries are strictly prohibited from spreading rumors or unverified information obtained from clients, industry sources, or any other channels. All information must be thoroughly vetted before dissemination.2.
Maintaining records is essential:
Any usage of social media platforms, instant messaging services, VoIP, blogs, chat forums, websites, email, or similar communication channels by intermediaries must be meticulously documented. These logs will be treated as official records and must be maintained in accordance with relevant regulations.3.
Controlled access is crucial:
Intermediaries are required to implement controlled supervision of access to social media and other communication platforms. This can involve restricted access or strict monitoring mechanisms to prevent unauthorized dissemination of information.4.
Compliance Officer approval is mandatory:
All market-related news received by employees, whether through official or personal channels, must be forwarded only after receiving approval from the Compliance Officer of the respective intermediary. This ensures that information is verified and deemed appropriate before dissemination.5.
Non-compliance carries consequences:
Any employee who fails to adhere to these instructions will be considered in violation of SEBI Act provisions and associated rules and regulations. They will be held accountable for their actions. Furthermore, the Compliance Officer will also be held liable for any breach of duty in this regard.Beyond these specific guidelines, the master circular also addresses other critical aspects of market regulation, including trading rules, shareholding in demat mode, and disclosure reporting under the SEBI (Prohibition of Insider Trading) Regulations 2015. The circular serves as a comprehensive framework for ensuring responsible and ethical conduct within the securities market. It aims to create a more transparent and reliable environment for investors, fostering greater trust and confidence in the financial system.
