Addressing portfolio managers, Buch said the markets regulator wants to stamp out any irregularity at the earliest to prevent any systemic concerns.
“I urge the association to bring forth to the regulator any instances of mischief in the market that are going on, so that the regulator can take early action and not wait until it explodes in the system and then we have to come back with a heavy hand,” she said.
Recalling her own experience as an industry participant, Buch said it is “frustrating” for the law-abiding participant when he or she discovers an industry peer gaining using bad practices.
“Good guys need to win. You guys need to tell us about what mischief is going on so that we can stop it early on. It’s in your own self-interest to come and tell the regulator what some of the bad practices are in the market.”
The Sebi chief said that mischief results in erosion of trust and a strong regulatory response.
The circular on “measures to instil confidence in the market” issued Thursday evening has provided for implementation of the new rules for brokers in three phases starting Jan. Given that there are existing governance and client behaviour surveillance governance structures, qualified stock brokers have to comply with the requirements from next month itself.
In addition to obligations for stock brokers and their employees, the circular mandates the implementation of systems for the surveillance of trading activities and internal controls, introduction of a whistleblower policy and escalation and reporting mechanisms.
The standards will be formulated by the broker’s Industry Standards Forum, in consultation with Sebi.
The regulator also directed stock exchanges to amend their bye-laws, and ensure that brokers notify the obligation/ requirement on the stock brokers to follow the standards adopted by the ISF, and issue a joint notice which indicates the date of applicability of the circular to various stock brokers based on the criteria.
