Sebi mulls new ethics code for brokers
Mumbai: With an aim to check flow of illicit funds and other manipulative activities in the stock market, regulator Sebi is planning more frequent inspection of various market entities and a new code of conduct for brokers.
Besides, the capital market regulator would also ask all the market entities, including brokers and mutual funds, to implement the new common KYC (Know Your Client) norms even for their existing clients in a phased manner.
These are part of the policy initiatives proposed by Sebi for the current fiscal year, 2012-13. These have been approved by its board and would be implemented over the year ending March 31, 2013.
The proposed 'code of conduct' would detail various obligations that the brokers have towards their clients and would be drafted by Sebi in consultation with the stock exchanges.
The Sebi would also look at setting up an alternative trading mechanism for small-cap companies, which witness concentrated shareholding and low trading volumes, thus posing potential risks to the investors.
Among other initiatives, Sebi would also look at establishing and maintaining a more effective information management system, employing latest technology and developing teams of expert officers for benefit of various market segments, especially the derivatives trade.
Regarding various market entities, Sebi is of the view that all of them must maintain high standards of integrity and fairness and also act with due skill, care and diligence in the conduct of their business, with high levels of compliance.
Sebi has said that the number of inspections of intermediaries was enhanced considerably during the last fiscal, and steps are being taken to strengthen and monitor the process of follow-up of the findings of such inspections.
"This process will continue in the year 2012-13 also with further increase in the number of inspections," Sebi said, while adding that it was examining a proposal of carrying out inspections of market entities through chartered accountants.
"We also propose to review the internal audit and inspection process of the stock exchanges and the depositories and their penalty structures with a view to take steps for further improvement," the regulator said.
Besides, Sebi would also consider carrying out "some specific inspections to check the compliance of anti-money laundering rules by the intermediaries".
In this regard, the Sebi also plans to strengthen the concept of beneficial ownership in KYC process in coordination with other financial regulators like RBI and Irda.