BSE’s Costly Slip: Rs 25 Lakh SEBI Fine for Monitoring Failures

Image Source: Times of India

India’s market regulator, SEBI, has imposed a Rs 25 lakh penalty on the Bombay Stock Exchange (BSE) after uncovering serious violations in information dissemination and monitoring practices.

Key Highlights:

SEBI’s investigation, covering February 2021 to September 2022, revealed BSE’s system allowed its internal Listing Compliance Monitoring (LCM) team and certain paid clients to access corporate announcements before they were made public on the BSE website.
In 98 out of 100 cases reviewed, the LCM team received data before the general public, and in 6 cases, paid subscribers accessed it first. This selective access undermined the principle of fair and equal information for all market participants.
SEBI criticized BSE’s manual “pull” system for public users versus a faster “push” system for internal and paid users, noting that even milliseconds of early access can be exploited for unfair advantage.
The regulator concluded that BSE breached Regulation 39(3) of the SECC Regulations, 2018, which requires stock exchanges to ensure fair and transparent access to all users.

SEBI also found BSE’s oversight of client code modifications (CCMs) lacking. There was no effective policy to identify or discipline brokers who frequently changed client codes, and error account trades were reviewed only once every three years, relying solely on broker confirmations.

The regulator described BSE’s approach as “laxity and negligence,” warning that such failures risk damaging the credibility of both BSE and SEBI.

Although BSE has since introduced measures to address these issues, SEBI emphasized that corrective actions were taken only after the inspection highlighted the lapses.

SEBI ordered BSE to pay the penalty within 45 days, cautioning that further recovery proceedings could follow if the payment is delayed.

Source: NDTV Profit, Business Today, Economic Times