SEBI moves to beef up profiling of errant market entities

The Securities & Exchange Board of India (SEBI) is planning to set up a mechanism for 'risk profiling' of listed companies and various market intermediaries, including stockbrokers, to help it strengthen its surveillance system.

The capital market regulator is also working on a formalised risk-based supervisory approach for various market intermediaries, for which it has set up a 'Risk based supervision task force' with the objective of understanding supervision needs.

The task force will help identify and define various risk metrics, both quantitative and qualitative, and also explore and lay down the methodology for assigning rating of various risk metrics, according to a PTI report citing official sources.

After the task force submits its report ''soon'', the implementation of the recommendations would be taken up across various classes of intermediaries.

As part of these plans, SEBI would also adopt a systemic approach to establish a mechanism for risk profiling of companies and stock brokers, among others, to understand the associated risks.

While special focus would be laid on capacity building for effective integrated surveillance, particularly of derivatives markets, the skill sets would be enhanced this year for using analytical and statistical tools to facilitate effective surveillance.

Besides, SEBI is working on profiling of major clients in various segments to better understand the pattern of market participation and their impact with special emphasis on algorithmic and high-frequency trading, among others, the official added.

The ministry has also set up different working groups to carry out risk assessments of every financial sector in India with regard to risks posed by money laundering and terrorist financing, among others.

A group for the securities sector has also been set up comprising of representation from Sebi, stock exchanges, depositories, associations of intermediaries and the Financial Intelligence Unit-India  (FIU-IND).