Q.1 What are the provisions for prevention of fraudulent and unfair trade practices by SEBI regulations.
Answer : Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities
The SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 authorises SEBI to investigate into cases of market fraudulent and unfair trade practices. The regulations prohibit market manipulation, misleading statements to increase sale or purchase of securities, unfair trade practices relating to securities.
The SEBI can conduct investigation by an investigating officer regarding conduct and affairs of any person dealing, buying, and selling securities. The investigating officer prepares a report based on this information. The SEBI can take action for cancellation or suspension of registration of an intermediary based on this report. Fraud is any act, expression or concealment committed by a person or his agent while dealing with securities in order to prompt the deal in securities. The regulations prohibit the dealing in securities in fraudulent method, it prohibits market manipulation, misleading statements that promote sale of securities and unfair trade practice related to securities. Any dealing in securities shall be considered to be fraudulent or an unfair trade practice if it involves fraud. The following are considered as fraudulent or an unfair trade practice if it:
– Indulges in an act which creates misleading or false impression of trading in securities market.
– Advances or agrees to advance any money to any person to induce other person to buy any security in any issue with an intention of securing the minimum subscription to such issue.
– Pays, offers, or agrees to pay directly or indirectly to any person, any money for inducing such person for dealing in any security with the object of depression or causing fluctuation in the price of such security.
– Acts to manipulate the price of security.
– Publishes reports, dealing in securities which are not true.
– Sells and deals with stolen security whether in physical or dematerialised form.
– Advertises misleading or containing information in a distorted manner which can influence the decision of the investors.
– Spread false or misleading news which induces sale or purchase of securities.
For restricting unethical trading practices, SEBI propagated the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market).
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