Sebi brings in mechanism to prevent mkt abuse

New Delhi: Markets regulator Sebi has notified an institutional mechanism that requires stock brokers to put in place systems for detection and prevention of market abuse.

Before this, there were no specific regulatory provisions that cast responsibility on brokers to have a system to prevent market abuse. Under the institutional mechanism, broking firms as well as its senior management will be accountable for detection and prevention of fraud or market abuse, by setting up robust surveillance and control systems, according to a notification. Further, brokers need to frame appropriate escalation and reporting mechanisms.

Sebi has also listed out probable instances of fraud or market abuse which a broker's system needs to be equipped to monitor. The probable instances can include creation of misleading appearance of trading, price manipulation, front running, pump and dump, insider trading and mis-selling and unauthorised trading, including facilitation of 'mule accounts'.