The Report of the Stock Exchange Enquiry Committee was commissioned by the Finance Department, Government of Bombay, to scrutinize the organizational structure and operational methods of the Native Share and Stock Brokers’ Association of Bombay in 1937. The impetus for this examination stemmed from concerns about the high volume of speculative trading within the market and its implications for the investing public. The committee, responding to a general invitation for reform proposals, received 105 representations and conducted a comprehensive survey through questionnaires and oral evidence. The primary objective was to identify necessary modifications to enhance the efficiency and integrity of the stock exchange, ensuring it serves the public’s interest without succumbing to unchecked speculative activities. The committee was chaired by W. B. Morison, and members included Sir Sohrabji Pochkhanawala and Sir Rahimtoola Chinoy.
The committee highlighted several critical issues within the Bombay Stock Exchange. A significant portion of its business, estimated at 80–90 percent, was considered speculative in nature rather than legitimate investment. Despite some improvements since the Atlay Committee’s report in 1924, fundamental weaknesses persisted in trading practices and market mentality. The committee underscored the necessity of a public declaration of default for any failure to fulfill contractual obligations, thereby upholding market integrity. Furthermore, the role of authorized clerks was scrutinized, with recommendations to impose financial requirements and restrict their number to prevent undue influence and malpractice. The committee also proposed revised contract forms and regular statistical publications to promote transparency and informed decision-making among market participants.
Regulatory measures were proposed to amend the Bombay Securities Contracts Control Act of 1925, specifically addressing its deficiencies and extending its regulatory principles. To curb what it considered unhealthy speculation, the committee recommended implementing a system of margins, and considering fortnightly settlements. The report also recommended abolishing blank transfers—the transfer of shares without including the transferor’s name—and giving the government the power to impose rules on the Bombay Stockbrokers’ Association. Additionally, it advised passing measures to improve membership regulation and limit public access to brokers’ offices to maintain market discipline. These recommendations aimed to strike a balance between enabling legitimate speculative activities and protecting the market from reckless gambling, thus fostering a more robust and reliable stock exchange.
The report addressed excessive speculative trading, weak regulatory oversight, and inadequate transparency in the Bombay Stock Exchange. It recommended stricter controls on trading practices, enhanced regulatory measures under the Bombay Securities Contracts Control Act, and improved transparency through public declarations of defaults and statistical reporting. These measures aimed to promote market integrity and protect the interests of genuine investors over speculators.
