Prevention Of Market Abuse In The Securities Market

BACKGROUND

“Prevention of market abuse and preservation of market integrity is the hallmark of securities law” which was noted by the Honourable Supreme Court of India in its judgment N Narayanan v/s Adjudicating Officer way back in 2013.

SEBI has noted that while the Indian capital market has witnessed tremendous growth and by increased participation of the public, ‘market abuse’ is a common practice in the securities market. In the aforesaid judgement, the court has defined ‘Market abuse’as the use of manipulative and deceptive devices, giving out incorrect or misleading information, so as to encourage investors to jump conclusions, on wrong premises, which is known to be wrong to the abusers. In general parlance, Market abuse is generally understood to include market manipulation and insider trading and such activity erodes investor confidence and impairs economic growth. The SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations 2003 (PFUTP Regulations) deals with market abuse such as manipulative, fraudulent, and unfair trade practices.

The Court also went on to succinctly outline the duties and responsibilities of SEBI in regulating and ensuring market security and protecting investors from fraud and market abuse.