SEBI to regulate stock-related websites

Several crucial issues relating to surveillance in an internet environment were discussed at a meeting of the Sebi group set up to look into internet surveillance, enforcement and other related regulatory issues. The Sebi group constitutes, among others, representatives from infotech companies, investment banks and consultancy firms.

The members of the group decided there was a need to evolve a set of fair practices and obligations to be followed by websites dealing with capital market related services. A sub-group was, therefore, formed to prepare suggested standards for fair practices for content, community and commerce related activity on capital market related websites.

A Sebi official said the need for such fair practices was because the internet has "no boundaries" and a much wider reach. "But since the internet functions on a realtime basis and there is an element of anonymity about it, there is a need to tighten surveillance when it comes to the net. This is because the Net lends itself to some degree of misuse," he said.

The group also felt that there is a need for investor education in an internet environment, which is critical for investor protection and would be instrumental in making the investors aware of the precautions required to be taken while availing of internet services.

Some members of the group have also been asked to suggest methods for increasing investor awareness about capital market activity on internet using the internet along with other traditional means. On the area of surveillance and monitoring of activity on the Net, the group recommended that there was a need to have appropriate infrastructure, systems and technology support. Modalities in this regard would be worked out by the group.

The Sebi group also felt that there was a need to review some of the existing regulations and bye-laws of the exchanges, which may have become redundant or obsolete with the advent of this new technology. Explaining this, Singhvi said that under the existing set-up brokers could not disclose the terms of their service or their rates, but in an internet environment, they would be expected to disclose these details. "The bye-laws pertaining to such issues would therefore need to be reviewed," he said.

The group also considered the mushrooming activity of providing advisory services on the internet. Although the Sebi Act empowers Sebi to register investment advisors, at present there are no regulations in this area. The group endorsed the need to frame regulations in this area to effectively regulate financial advisory services on internet. A sub-group has, therefore, been set up to suggest a suitable regulatory framework for registering and regulating investment advisors.