Why SEBI has failed to check stock market manipulations?


The Securities and Exchange Board of India (SEBI) is the regulatory authority that is responsible for overseeing and regulating the Indian stock markets. While it has made significant progress in enhancing transparency and investor protection, it has been criticized for failing to prevent market manipulation in India. Before we proceed further, let us understand the reasons why SEBI has been unable to check market manipulation and what steps it can take to address this issue.

One of the primary reasons why SEBI has failed to prevent market manipulation in India is its limited resources. SEBI is a relatively small organization, and it is responsible for regulating a large and complex financial market. The sheer size of the Indian stock market makes it challenging for SEBI to monitor and detect any unusual activity or market manipulation. Additionally, SEBI has to depend on the stock exchanges to provide it with market data, which can be both incomplete and delayed. This makes it difficult for SEBI to respond to any market manipulation in real-time.

Another reason why SEBI has failed to prevent market manipulation is due to the lack of a comprehensive legal framework. While SEBI has the power to investigate and penalize market manipulators, the laws governing the Indian securities market are relatively weak. For instance, insider trading laws are not stringent enough to deter individuals from engaging in such activities. Additionally, the penalties for market manipulation are not severe enough to deter manipulators from engaging in such activities. These weaknesses in the legal framework make it challenging for SEBI to take strict action against market manipulators.

Moreover, SEBI has also been criticized for its slow response to market manipulation. While SEBI has the power to take swift action against any market manipulation, it often takes a long time for it to initiate an investigation and take appropriate action. This delay in response time gives market manipulators ample time to cover their tracks and escape punishment.

Additionally, the long-drawn-out legal process in India can result in cases lingering in the courts for years, which can further delay the punishment for manipulators.

Lastly, SEBI has also been criticized for its lack of coordination with other regulatory bodies. In India, multiple regulatory bodies oversee different segments of the financial market, such as the Reserve Bank of India (RBI) for banking, Insurance Regulatory and Development Authority (IRDAI) for insurance, and SEBI for securities. The lack of coordination between these bodies can lead to gaps in regulatory oversight and make it easier for market manipulators to exploit these gaps.

To address these issues, SEBI needs to take several steps. Firstly, it needs to invest more in technology and infrastructure to improve its surveillance capabilities. This will enable SEBI to monitor market activity in real-time and respond swiftly to any market manipulation. Secondly, it needs to work with the government to strengthen the legal framework governing the securities market. This can include increasing penalties for market manipulation and introducing stricter regulations for insider trading. Thirdly, SEBI needs to streamline its investigation and enforcement processes to reduce response times and ensure that cases are resolved quickly. Lastly, SEBI needs to collaborate more closely with other regulatory bodies to ensure that there are no regulatory gaps that market manipulators can exploit.

In conclusion, SEBI has faced several challenges in preventing market manipulation in India. However, with the right steps, it can overcome these challenges and enhance investor protection in the Indian securities market.



Views expressed above are the author’s own.


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