SEBI (Prohibition Of Fraudulent And Unfair Trade Practices Relating To Securities Market) (Amendment) Regulations, 2024


Quick Summary
The Securities and Exchange Board of India (SEBI) has introduced the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) (Amendment) Regulations, 2024. These new regulations, effective from their publication, aim to strengthen the prohibition of fraudulent and unfair trading practices in the securities market. Key amendments include the explicit inclusion of 'mule accounts' in the definition of fraudulent activities and clarifications on acts that manipulate company assets or financial statements to influence security prices.

SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION

Mumbai, the 27th June, 2024
SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) (AMENDMENT) REGULATIONS, 2024

No. SEBI/LAD-NRO/GN/2024/187.— In exercise of the powers conferred under Section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, namely: –

1. These regulations may be called the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2024.

2. They shall come into force on the date of their publication in the Official Gazette.

3. In the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, 

I. in regulation 2, in sub-regulation (1), -

i. in clause (b), in sub-clause (i), after the words “of the Act” and before the symbol “;”, the symbol and words “, either by themselves or through mule accounts” shall be inserted;

ii. after clause (d), the following clause shall be inserted, namely–
“(da) “mule account” includes a trading account maintained with a stock broker or a dematerialised account or bank account linked with such trading account in the name(s) of a person, where the account is effectively controlled by another person, whether or not the consideration for transactions in the account are paid by such other person;”.

II. in regulation 4, in sub-regulation 1, the existing Explanation shall be substituted by the following Explanation namely, -

“Explanation.– For the removal of doubts, it is clarified that-

(i) any act of diversion, misutilisation or siphoning off of assets or earnings of a company whose securities are listed or any concealment of such act or any device, scheme or artifice to manipulate the books of accounts or financial statement of such a company that would directly or indirectly manipulate the price of securities of that company, or

(ii) transactions through mule accounts for indulging in manipulative, fraudulent and unfair trade practice shall be and shall always be deemed to have been included in sub-regulation (1).”

BABITHA RAYUDU, EXECUTIVE DIRECTOR
[ADVT.-III/4/Exty./220/2024-25]

FAQ :

The new regulations are called the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) (Amendment) Regulations, 2024.

These regulations come into effect on the date of their publication in the Official Gazette.

A 'mule account' is defined as a trading account with a stockbroker, or a dematerialised or bank account linked to it, held in someone's name but effectively controlled by another person, regardless of who provides the funds for transactions.

The amendments clarify that any diversion, misutilisation, or siphoning off of a listed company's assets or earnings, or any concealment of such acts, which manipulates the company's securities price, is deemed included in the prohibition of fraudulent practices.

Yes, transactions through mule accounts for engaging in manipulative, fraudulent, and unfair trade practices are now explicitly included and always deemed to have been included in the regulations.

 

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