SEBI Imposes Rs25 Lakh Penalty on BSE for Violations in Information Dissemination and Monitoring

Moneylife Digital Team 25 June 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs25 Lakh on the Bombay Stock Exchange (BSE) for serious regulatory lapses uncovered during an inspection covering the period from 1 February 2021 to 30 September 2022. SEBI found that BSE failed to ensure equal and transparent access to market-sensitive corporate announcements, while also neglecting to enforce proper oversight on client code modifications carried out by brokers.

In an order, Santosh Shukla, quasi-judicial authority (QJA) of SEBI, stated that BSE’s system architecture allowed its internal listing compliance monitoring (LCM) team and certain paid clients to receive corporate announcement data before it was made available to the public via the BSE website.

This premature dissemination of unpublished price-sensitive information (UPSI), though not proven to be misused in this case, was found to be in breach of Regulation 39(3) of the SECC Regulations, 2018. The regulation requires market infrastructure institutions to ensure fair, equal, and unrestricted access to data for all participants.

The regulator also pointed out BSE's failure to formulate and implement a policy to identify and discipline brokers who frequently modified client codes. It was observed that BSE conducted inspections on brokers only once every three years.

Even during these inspections, the verification of trades routed through error accounts was based solely on confirmations provided by the brokers themselves. SEBI concluded that this lax supervision created systemic risk and opened avenues for possible misuse, especially in trades between institutional clients which were modified without adequate due diligence.

In its defence, BSE argued that the alleged lapses were technical in nature, caused no harm to investors, and did not result in any market-wide impact. The Exchange claimed that its actions were bona fide and highlighted the immediate corrective steps taken following SEBI’s inspection.

These steps included the redesign of its system architecture to create a deliberate time lag between internal access and public dissemination of information. BSE also emphasised that the purpose of regulatory inspections should be remedial rather than punitive, especially for first-time or minor infractions.

SEBI, however, dismissed these arguments, stating that the violations went beyond technicalities and struck at the core principles of market fairness and transparency. The regulator held that BSE, being a front-line regulator and a critical market infrastructure institution, had a heightened responsibility to prevent even the possibility of information asymmetry. SEBI further clarified that while some issues may be dealt with administratively, the seriousness of the violations in this case warranted penal action.

The Rs25 Lakh penalty has been imposed under Section 23H of the Securities Contracts (Regulation) Act, 1956, and Section 15HB of the SEBI Act, 1992. SEBI also stated that although some circulars and regulations invoked in the show-cause notice may overlap in scope, the violations clearly fell within the domain of these specific provisions.

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