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SEBI To Issue Guidelines On The Use of Social Media By Companies

sebiSecurities Exchange Board of India (SEBI) is looking to issue guidelines to companies on the use of Facebook, Twitter and social media for the dissemination of information to client,  reports Economic Times. SEBI plans to soon hire staff to sift through social media for stock market tip offs that could impact the stock prices before official announcements. A SEBI official speaking to Economic Times said that their social media guidelines could be adopted from the broad rules set by the Securities Exchange Commission (SEC), U.S.A which were issued on April 2, 2013.

Social Media Follows Blogs, Message Boards, Chat, E-mail & Phone calls

In 2011, SEBI had similarly warned investors about investing based on SMS tips and also about their employees using blogs, messaging service and forums to offer unsolicited tips.

In a circular issued on March 23rd 2011, SEBI had said that blogs, chat forums,  e-mails and messenger sites (IM)  were being used by brokers and other intermediaries to communicate unauthenticated news about companies and manipulate the markets. It has directed broking houses to institute a code of conduct, not circulate rumors, restrict access to blogs, chat forums, messengers, and log any usage of these platforms. This was apart from asking brokerages to direct employees to run any market related news through their Compliance Officer. 

It is worth noting that SEBI has access to email and call records from providers. In August 2011, SEBI had sent a formal request to the Department of Telecommunications (DoT) to include the board in the list of law enforcement or investigating agencies which can seek e-mail and call records from telecom service providers. This move was made to curb the flow of black money into the stock market. Since messages sent through BBM can now be intercepted, there is a possibility that SEBI may also keep track of stock market tip offs through BBM that may affect the stock prices.

In September 2010, Bombay Stock Exchange had also issued guidelines to enable share market trades through mobile phones. This was following SEBI’s move to allow share trading via mobile phones in August 2010. However, there were several challenges in trading via mobile phones that we had pointed out including identification, interface to understand terms & conditions, ownership of the customers, among others.

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