It is earthly impossible to implement SEBI's recent advisory issued to intermediaries on monitoring the spread of unauthenticated information by their employees through various electronic means, said many broking officials.

At the large brokerages a considerable range of checks and balances are already in place. At Motilal Oswal Financial Services, mobile phones are not allowed in the trading room, internet access is restricted to the BSE and NSE web sites, internet chat is not allowed. “Now (in the light of SEBI's advice) we have to see what further restrictions to put in place,” said Mr Ajay Menon, Chief Operations Officer at the brokerage.

Bans unverified contents

What if an employee has two mobile phones, his personal one hidden deep in his clothes and he makes a call or sends an SMS or email through mobile internet while in the restroom? “Frankly, ultimately it depends on the integrity of employees. But we have audits and ad-hoc compliance checks in place.

“Of course nothing can be 100 per cent foolproof. SEBI's requests will take time to implement,” said Mr Menon.

SEBI in a circular on Wednesday said intermediaries (brokerages etc) must have in place an internal code of conduct; ensure that employees, temporary staff and even voluntary workers not circulate unverified information; restrict access to blogs chat forums and messenger sites; and keep logs of such blogs.

Finally it said that any violations will be dealt with under various provisions of SEBI's acts or regulations, and that the intermediary's compliance officer shall also be held responsible.

“How can you say your employees will not engage in rumour mongering? '

“The structure does not lend itself to clear cut effective enforcement because there are lots of loopholes and escape routes,” said a regulatory expert.

Expensive

To a lot of smaller brokerages this appears like a move by SEBI to sweep them out of business because electronic surveillance is costly to implement.

“Many of us cannot afford the systems, to have recording machines attached to every telephone extension, it is just not viable,” said the head of a small broking firm.

“We will be bought out or have to close down.”

SEBI is not going to come to offices and check all the logs, said a broker. The only way logs will be called for is if a client who has made losses preserves his SMS or blogs and complains to SEBI, he said.

“Many blogs are anonymous and can only have that much credibility, people follow blogs knowing that they are of limited credibility.”

Also should access to information sites be restricted for an industry which is highly dependent on information flow, ask officials.

There might be merit in the argument that one must not junk monitoring systems just because nothing can be 100 per cent foolproof. But SEBI is micromanaging, said broking officials. Also the intermediary world is bigger than SEBI envisages, there are financial planners, investment advisors who are not regulated by SEBI, said a regulatory expert.

Finally , SEBI and exchanges have their own surveillance mechanisms for verification of rumours, and why not give the necessary reinforcements to that?

Issuing this advisory tantamount to admission of inadequacy of the mechanism of stock exchanges and SEBI surveillance, he said.

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