Sebi plans 'risk profiling' of listed firms, intermediaries

To help it better regulate the marketplace and strengthen its surveillance system, Sebi plans to set up a mechanism for 'risk profiling' of listed companies and various market intermediaries, including stock brokers.

The capital markets watchdog 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 an objective to understand the supervision needs for each class of entities regulated by it.

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, a senior official said.

The Task Force will be submitting its report soon, and thereafter, the implementation of the recommendations would be taken up across various classes of intermediaries, he added.

As part of its focus areas for the current fiscal, the Securities and Exchange Board of India (Sebi) plans to considerably beef up its market surveillance capabilities.

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, the official said.

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 Finance 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 Financial Intelligence Unit-India (FIU-IND).

Work on the risk assessment by this group would be carried out in 2014-15. Further, India would be evaluated by the global body FATF (Financial Action Task Force) in the financial year 2016-17 on technical compliance and effectiveness analysis with the revised FATF standards, 2012.

Preliminary analysis has already been carried out on the same with regard to the existing AML/CFT framework for the securities sector and information has been submitted by Sebi to the Finance Ministry in this regard.


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