Acknowledging the dynamic nature of the securities market and the crucial role played by technology, SEBI has recently constituted committees on ‘Fair Market Conduct’ (FMC) and ‘Financial and Regulatory Technologies’ (CFRT).
FMC is formed under the chairmanship of Mr T.K. Vishwanathan and aims to identify the opportunities for improvement in SEBI (Prohibition of Insider Trading) Regulations, 2015 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 2003; especially with respect to trading plans, handling of unpublished price sensitive information during takeover and aligning Insider Trading Regulations with the provisions of Companies Act. The committee will also focus on improving surveillance of the markets and evidentiary issues in anti-fraud enforcement and is expected to submit a report within four months.
The CFRT is formed under the chairmanship of Mr. T.V. Mohandas Pai and is tasked with outlining the challenges and opportunities provided by the rapid growth of technology in the financial markets. The committee will analyse the technological developments around the world and seek technology based solutions for: strengthening the Indian securities market, assessing technological solutions for regulatory functions of SEBI, preparing the market and regulatory framework for adoption of new technology, facilitating such adoption and promote financial innovations.
It is hoped that the Insider Trading Regulations which are new and are poorly worded will be re-looked at. Similarly, the anti-fraud regulations need an overhaul as the current provisions are generic and over-broad. The current definition of fraud under the Regulations requires none of the 5 key ingredients of fraud, making the definition meaningless at best and harmful to honest conduct at worst.