Unfair Trade Practices in Securities Market – Critical Analysis of SEBI (Prevention of Fraud and Unfair Trade Practices) Regulations, 2003


Siddhart Behera*


Published on May 16, 2021 | Manuscript Number: 2021/LLR/16069 | Page Numbers: 69-82

Abstract: The economy of any country largely depends upon its securities or capital market. The securities market is the place wherein various business entities raise funds by selling securities to the general public and other financial institutions. Owing to its dynamic nature, the securities market establishes a link between the demand for and supply of long-term capital funds. During the initial years, markets were ridiculed with instances of unfair practices. The market reforms intensified after 1992 wherein the Securities Exchange Board of India (SEBI) was vested with the powers for monitoring and regulating the securities market. However, despite the establishment of SEBI, every 2-3 years a new scam has emerged. Each scam has led to SEBI being conferred with greater powers. SEBI came up with SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations in the year 2003 which provides for the identification of unfair practices and confers the powers of investigation and prosecution on SEBI. The SEBI (PFUTP) Regulations, 2003 were recently amended to broaden the scope and ambit of the protection measures concerning the various Supreme Court judgements which have dealt with matters related to fraud and unfair trade practices. Based on several judgments and recommendations of the T K Viswanath Committee, the scope and ambit of the PFUTP Regulations were broadened vide the Amendment Regulations in 2019 and 2020. Many legal scholars observed that although surveillance and monitoring have improved, the regulators still need to further tighten up on penalties/punishments. The Apex Court has also recently held that with the growth of the market, market abuse is also becoming prominent and the only way to ensure investors’ protection is by strengthening the means of protection of investors’ interests. The Regulations in place have proved to be helpful to a great extent, however, there’s still room for improvement. Coming up with cybersecurity provisions, spreading awareness, improving the effective implementation of the existing laws, and increasing coordination between the regulatory authorities are some of the suggestions which would build the confidence of investors on the market system.

Keywords: Fraud, Unfair Trade Practices, Securities, Regulations, SEBI, Market.

*Gujarat National Law University, Gandhinagar

Cite as: Siddhart Behera, 'Unfair Trade Practices in Securities Market – Critical Analysis of Sebi (Prevention of Fraud and Unfair Trade Practices) Regulations, 2003' (2021) 1(1) LKO. L. REV. 69