ANMI. Watch out! Your Gap is Showing

1. A big shout out to the Association of National Exchanges Members of India (ANMI). It has been very very busy recently. What with organizing its annual international convention and
simultaneously readying to raise money to defend some of its members caught with market malpractices.
Here’s a reality check – ANMI – an agency aiming to attain self-regulatory organisation (SRO) status does not behave thus and it ill behoves an SRO to conduct itself thus.
The dope is that Securities and Exchange Board of India (SEBI), Economic Offences Wing (EOW), Mumbai Police and Serious Fraud Investigation Office (SIFO) are investigating few big
brokerage houses for having indulged in serious market violations on NSEL. Transgressions like false assurance with wrongful and misleading statements leading to enticement for
investors; deliberate lapses in clearing and forwarding functions; market capturing practices by large scale client code manipulations; short selling on the exchanges; suspicious transactions
of funding through multiple accounts; illegal funding through NBFCs, etc were found which are now the subject of investigations.
Brokers with reach and influence at ANMI are trying to camouflage the issue as an industry play. They want to hide behind their association, hinder the investigative process and protect
themselves from further inquiry and possible actions. Reading the tea leaves, it appears near certain the action will be strict and severe. Why should the smaller sized brokers be party to a
dispute of limited interest to the association as a whole? Why should the association protect the wrong-doings of some of its select brokers?
A recent circular issued by ANMI in conjunction with BSE Brokers’ Forum clearly violates the stated principles of any SRO. It shows ANMI in bad light – that of a close club of brokers with
interest only to protect the self-interest of some. It comes out as an association keen to protect a few of its members, even when found to have committed gross regulatory breaches.
Instead of looking at ways to step up their self-regulatory prowess, ANMI is being partisan showing absolute lack of commitment towards a dispute resolution process and solving investor
problems. To add to it, ANMI is trying to coerce members to contribute to provide legal assistance for members under investigations by SEBI and other enforcement agencies. It is
considering intervening and judicial process in support | favour of the influential brokers.
An earnest suggestion to ANMI - if it wants to gain the status and respect of an SRO then first and foremost what it needs to do is show concern towards investors interests and
demonstrate a zero-tolerance policy to market abuses even by its members. It needs to illustrate by attitude and action that it is firm and committed to clean up the industry, make it safer
for investors, win the trust and confidence of the regulators and investors and ensure that the market grows stronger and transparent. An integral part of an SRO’s rule making is showing
brokers the mirror when it has abused guidelines. ANMI should turn passionate about its investor education programme, review it and introduce a program for investors to check on their
broker and their track record on market integrity.
Compare and contrast this to how SROs in securities industries globally are organised and conduct their operations (table below). One can find that while the thrust and focus is for the
promotion of growth of intermediaries and development of markets there is no compromise on enforcement of market discipline. For instance, FINRA, USA recently took on mighty
financial institutions like Morgan Stanley with a fine of $10 million for failure to observe the anti-money laundering programme and Merrill Lynch with a sanction of $6 million for mis-
selling of IPOs. It even went to the extent of penalizing a crypto broker for deviance in market conduct.
Is ANMI, either on its intent or aspirations, anywhere close to this? Possibly a pertinent theme for its forthcoming convention
ANMI. Watch out! Your Gap is Showing