New guidelines to be effective from March 15
MUMBAI: The Reserve Bank of India (RBI) has issued guidelines to prevent the abuse of price-sensitive information by participants in markets for financial instruments, and the new directives will come into force from Friday (March 15, 2019 (Friday).
RBI said the market participants, either acting independently or in collusion, shall not undertake any action with the intention to manipulate the calculation of a benchmark rate or a reference rate.
The notification also said no market participant would carry out a transaction or initiate any action with the sole or dominant intention of influencing a benchmark rate or a reference rate.
The guidelines underline that market participants in possession of ‘Non-public price-sensitive information’ shall not use it for any material benefit to itself or to others. “Market participants shall not use ‘Price-sensitive customer information’ for transacting on their own account in a manner that adversely affects the outcome for the customer in that (those) transaction(s). They shall maintain confidentiality of price-sensitive customer information,” the RBI statement added.
Market participants shall also not intentionally create or transmit false or inaccurate information, or, withhold timely information that is required to be reported or made public, that influences or is likely to influence the price of any financial instrument. “Transmission of false or inaccurate information shall be deemed to have been done intentionally by a market participant if it had not exercised due diligence as to the veracity of the information before transmitting.”
The RBI notifications warned that the market participants indulging in any such activity are liable to be denied access to markets in one or more instruments for a period that may not exceed one month at a time.
These directions, the RBI added, would exclude transactions executed through the recognised stock exchanges. Further, the directions would not apply to banks and the central government in furtherance of monetary policy, fiscal policy or other public policy objectives.