Sebi's New Circular: Safeguarding Investors with Enhanced Fraud Prevention Measures

Sebi has issued a new circular mandating stock brokers to establish mechanisms to prevent and detect fraud, aiming to protect investor interests in the securities market. The measures include surveillance systems, internal controls, and a whistle-blower policy, with phased compliance deadlines based on broker size.

Sebi on Thursday unveiled a comprehensive circular aimed at enhancing investor protection in the securities market. The regulations require stock brokers to implement fraud detection and prevention mechanisms.

The circular stipulates the deployment of trading activity surveillance systems, internal controls, and a whistle-blower policy, all part of the Sebi (Stock Brokers) (Amendment) Regulations, 2024.

Operational modalities and standards for enforcement will be crafted by the Industry Standards Forum (ISF) in collaboration with Sebi. Brokers must comply in stages based on their size, ranging from January 1, 2025, for the largest brokers to April 1, 2026, for the smallest. Stock exchanges must inform brokers of these new requirements and update their by-laws accordingly.

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