SEBI Catches BSE Red Handed, But Penalty Barely Scratches the Surface

What many investors and a few journalists suspected about delayed corporate disclosures by stock exchanges is now public record. The Securities and Exchange Board of India has confirmed that BSE Ltd failed to ensure “unrestricted, transparent and fair access to information” intended for public access at the same time to all without exception or exclusion. 

In an order dated June 25, the SEBI roared like a lion in documenting BSE's systematic violations, but ultimately purred, even going so far as to “humbly submit” its own enforcement approach.

What did BSE do that violated its obligations as a Market Infrastructure Institution?

Before September 13, 2023, BSE operated an “information apartheid.” The exchange's database architecture created a multi-tiered system for corporate announcements. While ordinary investors had to manually refresh BSE’s website for fresh corporate announcements, paid subscribers and BSE's internal Listing Compliance Monitoring team received this information through direct “push” mechanisms.

SEBI's inspection numbers are devastating. In 98 out of 100 instances, BSE's compliance team received data before it was available to the public. In six out of 100 cases, paid subscribers accessed information before general investors; in 47 instances, they had access before others.

Most tellingly, BSE swiftly implemented corrective measures on September 13, 2023, after SEBI's inspection observations. This proves that fair access was always technically feasible; BSE simply didn’t bother until regulators stepped in. That makes the lapse a deliberate choice, not a technical limitation.

Weak Enforcement
The regulator's order reads like a scathing indictment of BSE's conduct, describing “multiple acts of omission, laxity and negligence with a certain amount of lethargic approach.” It states such violations “cannot be allowed to be exonerated” and warns that allowing such violations “with impunity will be a serious setback to the image and the prestige of the BSE and SEBI both.”

And yet, SEBI imposed a paltry ₹2.5 million penalty—₹1.5 million for delayed disclosures, and the rest for lapses in client code modification.

BSE not only failed to provide fair disclosure access, it also permitted client code modifications between unrelated institutional entities “without any due diligence, verification, or penalties,” according to SEBI. 

For an exchange processing billions of rupees in trades daily, ₹2.5 million is less than what an individual trader could lose in a bad session. The fact that BSE could fix the issues overnight once regulators came knocking underscores how avoidable the misconduct was.

The befuddling phrase in the 45-page order appears in paragraph 84, where the adjudicating officer writes, “I humbly submit that I take this case with that direction, mandate and approach.” This language exposes a regulator more concerned with appearing reasonable than being effective.

Why should a securities regulator “humbly submit” when dealing with systematic violations that undermine market fairness? The language suggests deference where authority should prevail, diplomacy where deterrence is needed. SEBI's own order stresses that the violations struck at “the sanctity of exclusive regulatory duty of BSE.” Yet the regulator responded with humility rather than decisive action.

SEBI acknowledges it deliberately chose not to invoke “other drastic actions” under the Securities Contracts (Regulation) Act, but instead initiated penalty proceedings “even after corrective steps were taken as regulatory mandate.” This curious combination of tough documentation coupled with timid enforcement reveals a regulator uncomfortable with its own authority.

SEBI's enforcement approach sends contradictory signals to Market Infrastructure Institutions and investors. The order simultaneously says these violations are serious enough to warrant 45 pages of detailed documentation and strong condemnation, but not serious enough to warrant meaningful consequences beyond accounting line-item treatment.

Such regulatory fence-sitting may satisfy internal bureaucratic impulses, but it fails the ultimate test of effective market oversight. When first-level regulators like BSE systematically disadvantage ordinary investors, the response should be proportionate to the breach, not calibrated for regulatory comfort.