SEBI announced Code of Conduct for Broking Houses & Market Intermediaries

The Securities and Exchange Board of India (Sebi) in March 2011 announced a new set of code of conduct for staff of broking houses and other market intermediaries. The initiative was adopted by SEBI to check circulation of unsubstantiated news which could distort normal functioning and prices of stock. SEBI directed registered market intermediaries to put in place proper internal code of conduct and controls.

SEBI ordered that the staff of broking houses and other intermediaries should be discouraged from circulating information obtained from clients or others without proper verification. SEBI warned against any kind of unsubstantiated news, which could distort normal functioning of the prices of stocks after having observed that unauthenticated news related to various scrips are circulated in blogs, chat forums or e-mails by employees of broking houses and other intermediaries in violation of rules.

Logs for any usage of such blogs/chat forums/messenger sites will be treated as records and the same should be maintained as specified by the respective regulations which govern the concerned intermediary. Any market related news can be forwarded only with approval of concerned personnel.

The stock exchanges were also directed to make necessary amendments to the relevant rules and regulations for implementation of decision.

SEBI is in process of putting in place new software tools that would analyse discussions on social networking platforms such as Facebook and Twitter. The regulator has already implemented a new tool, Data Ware Housing and Business Intelligence System for speedy analysis of data and identification of possible violations like insider trading and front running. The new tool is expected to enhance SEBI’s surveillance functions.