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The Stock Exchange of Mauritius (SEM) has been awarded the “Most Innovative African Stock Exchange of the year Award” at the Institutional Investment Summit and Index Series Awards organised by Africa investor (Ai), a leading international research and communication group, in collaboration with New York Stock Exchange (NYSE) Euronext. The Award was presented to the SEM at the New York Stock Exchange on 26th September 2011.

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The capital markets in India have evolved over more than a century. The seeds of investor protection were sown way back in 1956 at the time of enactment of the Securities Contracts Regulations Act, 1956, wherein several investor protection measures found their place. Since then, investor protection has been evolving. Over the period, investor protection has been receiving increased attention and focus from the market regulator, the Securities Exchange Board of India (SEBI), as well as stock exchanges.

The legal principle of protecting the investor permeates virtually all current regulation governing the operation of stock markets. This has not always been the case. It was after the devastating effects of the 1929 stock market crash that much regulation began to be inspired by this principle. Nevertheless, it has taken many years to develop a legislative framework with detailed legal precepts and provisions that provide effective public oversight of the rights of investors in their relations with the markets. The current financial crisis has highlighted the fact that the investor enjoys little protection outside the area of regulated exchanges.

The recent financial crisis has shown that clear lines must be drawn between protecting investors and allowing market participants to freely express their opinions of securities prices. Short sales directly benefit stock markets by supporting price discovery and enhancing liquidity, and indirectly by facilitating operations for the alternative funds industry. At the same time, outsized short selling during volatile times can unfairly damage stock prices and create systemic economic risks. This note aims to help define the line between investor protection and unfettered short selling, which to date has proven to be a substantial challenge for regulators and markets alike.