SEBI new Rules: SEBI investigating market manipulation cases in India

 The Securities and Exchange Board of India (SEBI) has introduced several new rules for stockbroking companies in 2024.

 Some of the key changes include:

Ban on Naked Short Selling:

SEBI has banned naked short selling, which means selling a stock that the seller does not own at the time of trade

Restrictions on Day Trading for Institutional Investors:

No institutional investor shall be allowed to do day trading or square off their transactions intraday.

Tightened Ownership Norms:

SEBI has implemented stringent ownership norms, posing a significant challenge for foreign portfolio investors (FPIs).Disclosure Rules for Short Selling: SEBI has tightened disclosure rules for short selling and introduced a securities lending and borrowing scheme.

Offshore Funds Liquidation:

High-risk offshore funds have been given seven months to liquidate holdings if they fail to disclose data about their investments. These new rules reflect SEBI's efforts to enhance transparency, reduce market risks, and ensure fair practices in the Indian securities market.

In 2024, the Securities and Exchange Board of India (SEBI) has taken or proposed several actions in the Indian stock market. These include giving high-risk offshore funds seven months to liquidate holdings if they fail to disclose data, proposing to relax rules around the cooling-off period between the announcement and implementation of trading plans, cautioning against a round-the-clock trading window, and extending the deadline for listed companies to confirm or deny market rumors. These actions are aimed at ensuring transparency, market stability, and investor protection in the Indian stock market.

What are the implications of SEBI new rules for Indian companies that receive foreign portfolio investment?

SEBI new ownership norms, set to be enforced from February 1, 2024, will have implications for Indian companies that receive foreign portfolio investment (FPI). The tightened ownership norms pose a significant challenge for FPIs, especially those holding more than 50% of their Indian equity assets under management in a single company. However, exemptions from enhanced disclosures have been provided to certain categories of FPIs, such as sovereign wealth funds, listed companies on certain global exchanges, public retail funds, and other regulated pooled investment vehicles with diversified global holdings. These changes reflect SEBI's efforts to enhance transparency and mitigate risks in the Indian securities market.

what are the penalties for violating SEBI regulations in India?

The penalties for violating SEBI regulations in India can be substantial. The statutory range of these penalties is typically between 100,000 rupees and 250 million rupees, depending on the nature and repetition of the violation, and the unfair advantage gained. In addition to fines, SEBI can also initiate criminal prosecution against the accused, with a possible imprisonment for a term extending to one year, or with both fine and imprisonment. Non-cooperation with SEBI's investigation process can lead to a fine of up to 10 million rupees. SEBI is also empowered to recover penalties, and all sums realized by way of penalties under the SEBI Act are credited to the Consolidated Fund of India.

how does SEBI investigate market manipulation cases in India?

SEBI investigates market manipulation cases in India through various measures, including market surveillance, analysis of trading information, and detection of abnormal market activities. The market surveillance division was set up in SEBI to monitor abnormal market activities and detect market manipulation. SEBI employs various surveillance systems and algorithms to monitor trading activities, track unusual price movements, and investigate suspicious trading patterns to detect potential cases of market manipulation. When appropriate, on the basis of reports received from the stock exchanges or specific complaints, preliminary enquiries are conducted to determine whether the trading raises suspicion of market manipulation. If further analysis of these records suggests the possibility of occurrence of market manipulation, investigations are initiated. The most common subject matter areas for investigation by SEBI include insider trading, market manipulation and price rigging, and miscellaneous violations of other securities laws and regulations.