SEBI on Thursday came out with a framework on “financial disincentives” for market infrastructure institutions that would impose a penalty ranging from ₹1 lakh to ₹1 crore for each instance surveillance lapse during the financial year.
Penalty for first instance of lapse will vary from ₹1 lakh (if annual revenue of MII is less than ₹300 crore) to ₹25 lakh (if annual revenue is greater than ₹1,000 crore). For second instance, this penalty will vary from ₹2 lakh to ₹50 lakh. For third instance onwards the penalty will vary from ₹4 lakh to ₹1 crore.
‘Detering abusive trading’
The new framework will be applicable from July 1. “The general objective of surveillance by MIIs is thus to monitor the market to detect and deter manipulation or abusive trading that affects the integrity of the market and to provide information that supports the regulator’s enforcement actions,” SEBI said in a circular.
Market surveillance by MIIs include monitoring the day-to-day activities in the markets including trading, margining, settlement, demat transactions; the conduct of market intermediaries through generation and processing of alerts, seeking trading rationale, carrying out snap analysis; and reporting of abnormal or suspicious activities.
Surveillance lapse includes any lapse observed in discharge of surveillance activities, inadequate reporting or non-reporting of surveillance related activity as per agreed timelines and partial or delayed implementation of any decision or communication of SEBI relating to surveillance.
Any surveillance lapse on the part of MIIs may have an adverse effect on the investors’ trust and confidence in the securities market, said SEBI.
The framework of financial disincentives would not be applicable in instances wherein it has a market-wide impact or caused losses to a large number of investors or affected the integrity of the market.
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