Sebi Revises Unfair Trade Norms

Front-running by individuals,ponzi fund-raising schemes now under FUTP ambit 

Capital markets regulator Sebi has brought front-running by individuals and illegal fund-raising activities by unregistered entities under the ambit of fraudulent and unfair trade practices (FUTP) regulations. Front-running is an illegal activity whereby a person uses confidential information to buy or sell shares in a company ahead of a large order so as to benefit from the subsequent price movement.The regulator was forced to review its FUTP regulations after the Securities Appellate Tribunal late last year set aside its order penalizing three persons for alleged front-running activities on the grounds that there was no specific provision in the regulations that barred front-running by an individual other than an intermediary. Sebi had alleged that these individuals were guilty of violating regulation 3 of FUTP norms but SAT said since regulation 4(2) prohibits only front-running by intermediaries and not individuals,the regulator can't hold them guilty.Regulation 3 basically prohibits any manipulative fraudulent or unfair trade practices irrespective of who the perpetrator of the fraud is. On the other hand,regulation 4 is a sub-set of regulation 3, which gives instances of specific activities prohibited.In order to clarify that the list under regulation 4(2) is not exhaustive and the general provisions of regulation 3 will override, Sebi said in a statement after its board meeting. ET was the first to report about the Sebis move on August 12.

Hindustan Times, New Delhi, 13-08-2013

 

 
     
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