Enforcement Directorate's Probe Adds to Market Carnage; SEBI to Enhance Investor Protection Measures
The recent crackdown by the Enforcement Directorate (ED) on Non-Banking Financial Companies (NBCs) isn't the only factor contributing to the turmoil in the market. The ongoing investigation by the ED to trace proceeds of crime from the Mahadev betting case, possibly routed into the smallcap and SME segments, has further intensified Monday's market decline. Notably, stocks like Suzlon, NCC, Tata Investment Corp, HFCL, and IIFL Finance were among the top five contributors to the slump in the smallcap index.
Enforcement Directorate (ED) has unearthed a scandal involving the manipulation of stock prices in the Indian stock market. The scandal, orchestrated by a partner of a Dubai-based firm operating the Mahadev betting app, has sent shockwaves through the financial world. The ED has taken swift action, freezing shares worth Rs 1,100 crore in demat accounts linked to the firm.
Adding to the investor protection measures, SEBI chairperson Madhabi Puri Buch hinted at the formulation of a common policy by mutual funds (MFs) to safeguard investors from potential risks, including market bubbles. Emphasizing the role of trustees in protecting investors' interests, Buch mentioned that SEBI would ensure suitable public consultation before any regulatory action.
Furthermore, SEBI aims to introduce a mandatory disclosure format on stress testing for small- and mid-cap funds by March 15. This disclosure will inform investors about the time required for funds to liquidate their portfolios during adverse market conditions, thereby enabling informed investment decisions.
The stress tests will assess how MFs would handle significant redemption pressure in illiquid markets, ensuring investor protection. Buch highlighted the need for SMEs planning to go public to disclose risk factors in greater detail, underscoring the importance of transparency and disclosure in mitigating risks associated with SME IPOs.
Meanwhile, the market witnessed losses in Tata Group stocks following reports of Tata Sons proposing to avoid listing by September next year. This move led to declines in Tata Chemicals, Tata Power, Indian Hotels, and Tata Motors, particularly impacting companies with stakes in Tata Sons.
In a bid to enhance trust and compliance culture among stock brokers, SEBI announced the expansion of the qualified stock broker (QSB) framework. This move aims to bring more brokers under enhanced obligations, considering parameters such as proprietary trading volumes, compliance, and grievance redressal scores.
The new provisions will be implemented in a risk-based, staggered manner to ensure effective adoption and implementation, providing sufficient time for brokers to make necessary adjustments based on their size and operations.
[with inputs from MINT]