SEBI increased strictness to false promises by Share Brokers

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SEBI increased strictness to false promises by Share Brokers


Photo:FILE Sebi

Highlights

  • Guidelines issued for brokers providing services related to algo trading
  • Exercise to stop share sale by claiming ‘high returns’
  • SEBI fixed some responsibility for such stockbrokers

Share Brokers SEBI has increased strictness to rein in the false promises of Capital markets regulator SEBI has issued guidelines for brokers providing services related to algo trading to investors. The objective of this initiative is to curb the sale of shares by claiming ‘high returns’. The Securities and Exchange Board of India (SEBI) has observed that some stockbrokers are facilitating algorithmic based trading to investors through platforms outside the purview of regulation. SEBI said in a circular that these platforms are providing algorithmic trading services or strategies to investors for automated execution of trades.

SEBI’s skewed eye on algorithmic trading

Such services and strategies are being marketed with ‘claims’ of high return on investment. In view of this, SEBI has fixed some responsibility for such stockbrokers. Brokers providing algorithmic trading services are prohibited from making any reference to past or future returns. Also prohibited from being associated with any platform that makes any reference to the past or future benefits of the algorithm.

The rule came into force with immediate effect

“The stockbrokers who directly or indirectly provide information about past or future returns or performance of algorithms or are connected to the platform providing such information shall within seven days from the website.” and dissociate itself from the forum providing such references. The rule has come into force with immediate effect.

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