SEBI Imposes ₹25 Lakh Fine on BSE for Selective Data Disclosure

The Securities and Exchange Board of India (SEBI) has imposed a ₹25 lakh fine on the Bombay Stock Exchange (BSE) for violating fair disclosure norms and regulatory standards. The fine stems from BSE's failure to provide equal and timely access to corporate disclosures to all stakeholders and for not taking adequate action against brokers who frequently modified trade details. This action comes after an inspection conducted by SEBI between February 2021 and September 2022.

In its detailed 45-page order, SEBI observed that the BSE’s system architecture allowed selective access to corporate announcements. Specifically, it enabled certain paid clients and members of BSE’s internal Listing Compliance Monitoring (LCM) team to access material information before it was made publicly available on the exchange’s website. SEBI concluded that this selective disclosure gave an unfair advantage to a few participants, violating the principles of transparency and fairness in the market.

This case follows the earlier controversy involving the National Stock Exchange (NSE), where the exchange was accused of offering preferential trading access to select brokers, giving them an edge in high-frequency trading. SEBI’s current action against BSE highlights similar concerns regarding the integrity of market data dissemination.

SEBI's inspection found that BSE lacked an effective mechanism to ensure equal and simultaneous access to corporate disclosures for all users, a key requirement for maintaining market transparency and preventing insider advantages. The regulator also pointed out that BSE had failed to implement a Really Simple Syndication (RSS) feed—an essential tool that would have ensured real-time and uniform access to public disclosures.

Though BSE eventually introduced a time delay to address the issue, SEBI criticized the move as reactive rather than proactive. The delay was seen as an afterthought prompted only by the regulatory inspection, rather than part of a robust internal compliance system.

Further, SEBI uncovered major gaps in BSE’s oversight related to client code modifications. These modifications are allowed under regulations only for correcting genuine errors in trade details. However, SEBI found that BSE did not initiate disciplinary actions against brokers who made frequent modifications. Additionally, the exchange failed to properly monitor 'error accounts,' raising concerns about the potential misuse of these systems and a lack of diligence in ensuring compliance.

SEBI’s order highlighted that stock exchanges like BSE are the “first layer of oversight” in ensuring regulatory compliance in the handling of material and price-sensitive information. As a leading stock exchange, BSE is expected to uphold the highest standards of internal control, impartiality, and fairness in its operations.

The regulator strongly criticized BSE for allowing internal staff and certain paid clients to access disclosures ahead of the general public. This behavior was deemed to undermine the fundamental principles of transparency and equal access that form the bedrock of fair trading practices. SEBI’s findings also emphasized BSE’s negligence in enforcing compliance with norms governing client code modifications, reflecting an overall failure to meet the required compliance and governance standards.