SEBI Current Affairs - 2019
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The Market regulator Securities and Exchange Board of India (SEBI) has barred National Stock Exchange (NSE) from accessing the securities market for six months and also imposed a fine of ₹1,000 crore on NSE in co-location case.
- Co-location refers to system wherein a broker’s server is kept in the exchange premises to reduce latency (as it directly influences the amount of time trader takes to interact with market), or delay in computing terms, while executing trades.
- In 2015, SEBI received complaints against NSE in which it was alleged that the system used by NSE to disseminate data through co-location facilities was partial, as it allowed users to get information before others and thereby created an information asymmetry between users.
SEBI’s verdict in Co-Location Case:
- As inspected under the SEBI ‘Prohibition of Fraudulent and Unfair Trade Practices rules’ (PFUTP) Regulations, NSE was found guilty of committing fraudulent and unfair trade practice and it also did not exercised requisite due diligence while putting in place the TBT (tick-by-tick data feed) architecture, thus affecting market fairness.
- SEBI has barred the NSE from accessing the securities market for six months as its actions.
- It has fined NSE for almost ₹1,000 crore (i.e. ₹89 crore plus 12% interest) from 1 April 2014 for its alleged failure to exercise proper due diligence while offering co-location facility.
- The disgorgement amount is required to deposited in Investor Protection and Education Fund (IPEF).
- It also directed former and current top employees in the management of exchange to not hold any position in a stock exchange for a period of two to three years.
Note: NSE has the largest market share in equity segment and almost a monopoly in equity derivatives.
Insolvency and Bankruptcy Board of India (IBBI) and Securities and Exchange Board of India (SEBI) have signed a Memorandum of Understanding (MoU) to assist and co-operate with each other for the effective implementation of the Insolvency and Bankruptcy Code.
Components of the MoU
- Sharing of information between the two parties.
- Sharing of resources available with each other to the extent feasible and legally permissible.
- Periodic meetings to discuss matters of mutual interest, including regulatory requirements that impact each party’s responsibilities, enforcement cases, research and data analysis, information technology and data sharing, or any other matter that the parties believe would be of interest to each other in fulfilling their respective statutory obligations.
- Cross-training of staff in order to enhance each party’s understanding of the other’s mission for effective utilisation of collective resources.
- Capacity building of insolvency professionals and financial creditors.
- Joint efforts towards enhancing the level of awareness among financial creditors about the importance and necessity of swift insolvency resolution process of various types of borrowers in distress under the provisions of the Code.
Insolvency and Bankruptcy Code
The Insolvency and Bankruptcy Code provides for a time-bound process to resolve insolvency and it creates various institutions to facilitate resolution of insolvency. Insolvency and Bankruptcy Code consolidates and amends the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of the value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders.