Sebi slaps ₹25 lakh fine on BSE for data leak and trading code lapses

The Securities and Exchange Board of India (Sebi) has imposed a penalty of ₹25 lakh on the Bombay Stock Exchange (BSE) for multiple lapses, including granting early access to market-sensitive announcements and failing to enforce adequate surveillance on trading code modifications. The regulator’s June 25 order followed an inspection that covered the period between February 2021 and September 2022.

The Sebi order observed that BSE’s Listing Centre Module (LCM) allowed certain teams and paid subscribers to access corporate announcements ahead of the general public—an act that undermines the principle of equal and fair dissemination of market information. While these announcements were not deemed as Unpublished Price Sensitive Information under insider trading laws, Sebi ruled that the failure to make them simultaneously available to the public breached regulatory norms.

“Being the first-level regulator in the stock market, BSE plays a vital role as the first layer of oversight,” noted the order. “The availability of corporate information to BSE’s LCM employees and paid subscribers before dissemination to the public impaired the very concept of impartiality, transparency, and fairness in information dissemination from the first-level regulator.”

The regulator further criticised BSE for a lax and negligent approach in supervising broker behavior—particularly in matters related to client code modifications and use of ‘error accounts.’ Sebi cited the absence of a coherent disciplinary policy and failure to curb repeated modifications between unrelated institutional clients as significant concerns.

“This case involves multiple acts of omission, laxity, and negligence with a lethargic approach which cannot be exonerated. At stake was the sanctity of BSE’s exclusive regulatory duty,” the order said. The regulator added that such behavior, if left unchecked, could damage the image and credibility of both the BSE and the regulator.

In light of the above, a ₹15 lakh penalty under Section 23H of the Securities Contracts Regulation Act (SCRA) was slapped on the exchange for violating fair dissemination norms, and an additional ₹10 lakh under Section 15HB of the SEBI Act for breaching rules related to client code modifications.

While noting that there was no evidence of disproportionate gains or investor losses due to the lapses, the order emphasised that the violations persisted until corrective actions were taken. “It is for this reason that Sebi has not invoked harsher actions under Section 11 or 12A of the SCRA but has chosen a monetary penalty despite BSE’s subsequent compliance,” the order clarified.