BSE shares down as Sebi slaps penalty for flouting regulatory norms

Shares of BSE declined over 1 per cent on Thursday morning after markets regulator Sebi slapped a Rs 25 lakh penalty on the stock exchange for failing to provide equal access to corporate disclosures to all stakeholders and take action against brokers with frequent modifications during trades.

After a flat beginning to the trade, the stock later dropped by 1.47 per cent to Rs 2,748 on the NSE.

The market regulator passed the order after an inspection conducted between February 2021 and September 2022.

In a 45-page order on Wednesday, Sebi found that BSE's system architecture allowed its paid clients and internal listing compliance monitoring (LCM) team to access corporate announcements before the same were made public through its website, resulting in a breach of norms.

The regulator also observed that the data dissemination process lacked safeguards to ensure simultaneous and equal access to all stakeholders, which is critical to maintaining market integrity and preventing unfair information advantage.

Accordingly, Sebi concluded that BSE failed to comply with Regulation 39(3) of the Securities Contracts (Regulation) SECC (Stock Exchange and Clearing Corporations) Regulations, 2018, which mandates stock exchanges to ensure fair and transparent access to all users.

It also noted that BSE did not establish a really simple syndication feed, which could have mitigated the risk of unequal access to corporate disclosures.

Although the exchange later created a time gap to address the issue, Sebi held that such corrective action was taken only after the inspection highlighted lapses.

Sebi also flagged serious shortcomings in BSE's monitoring of client code modifications, which are permitted only in case of genuine errors.

BSE failed to initiate disciplinary action against brokers with frequent modifications and did not adequately monitor 'error accounts', raising concerns over the possibility of misuse and lack of due diligence in trades between unrelated institutional clients.