Market Rumours: Sebi Set to Crack Down on Intermediaries Spreading Fake News on Social Media

Capital market regulator Securities and Exchange Board of India (SEBI) has issued a master circular on securities market supervision.

The September 23 circular, among other things, contains instructions to monitor unverified information disseminated by SEBI-registered market intermediaries through various means of communication such as social media platforms.

The circular emphasized that market rumours can cause significant damage to the normal functioning and behavior of the market and disrupt price setting mechanisms.

SEBI has issued the following instructions to market intermediaries:

1. Verification required:Employees working in brokerage offices will not feed or spread rumours or unconfirmed information obtained from a client, industry, any trade source or any other source without prior verification.

2. Keep the record: Records of any usage of social media platforms/instant messaging services/VoIP/blogs/chat forums/websites/email or any similar media will be treated as records and should be retained in accordance with the relevant laws to which the intermediary is subject.

3. Controlled supervision:Access to social media platforms/instant messaging/VoIP/blogs/chat rooms/forums/websites/email or similar media should be subject to controlled oversight or not permitted.

4. After approval:Employees should be instructed that any market-related communications received by them through work/personal email/blog or otherwise should only be forwarded after being reviewed and approved by the Chief Compliance Officer of the relevant Intermediaries.

5. Responsible for action:If the employee fails to take action in accordance with the instructions given in clause (4), he will be deemed to have contravened various provisions contained in the SEBI Act and the rules/regulations made thereunder and will be liable for taking action.

The Compliance Officer is also liable for any breach of obligations in this regard.

The other instructions contained in the Master Circular relate to the rules for trading and shareholding in demat mode and information reporting under the SEBI (Prohibition of Insider Trading) Regulations, 2015.