Home Brokerage Indian regulator Sebi streamlines norms for stock brokers

Indian regulator Sebi streamlines norms for stock brokers

by internationalbanker

By Alexander Jones

The Securities and Exchange Board of India (Sebi) stated that they had streamlined its norms for stockbrokers. They have introduced a regulatory system whereby anyone wanting to act as a stockbroker will have to be registered with Sebi for each stock exchange where they intend to operate and pay a fee. In a statement Sebi stated, “No person shall act as a stockbroker, unless he seeks a certificate of registration from the Board for each stock exchange in which he seeks to operate.”

A separate registration will not be required for a clearing member who is registered with Sebi to operate in the stock exchange. Where the stockbroker operates in segments of a stock exchange approval will be given by the related bourse.

In granting approval of the certificate the regulator may require details of trading, settling and dealing in securities. In addition the regulator will investigate other areas including whether there is the correct infrastructure and manpower in place in order to effectively operate as a stockbroker or a clearing member. Previous experience in business trading and dealing in securities will also be considered.

Sebi have the right to refuse an application upon providing a reasonable hearing opportunity. Sebi have pledged that any refusal will be notified to the applicant within thirty days, with the refusal also being sent to the appropriate stock exchange, along with the reasons for the rejection. The applicant is able to re-apply up to thirty days after notification of the rejection.

Sebi have published a revised fee structure for stockbrokers and clearing members for the various segments. Charges will be specified by the regulator from time to time. In its statement, Sebi states that they may ask the stockbroker to “pay such fees at any time before the expiry of six months from the date such fees become due”.

A fixed quantum of net worth has been fixed by Sebi and is to be maintained by the stockbroker or clearing member for the various segments. Net worth of Rs 50 lakh to Rs 1 crore is required for a stockbroker and up to Rs 10 crore for a clearing member.

In August Sebi made it mandatory for stockbrokers and traders to regularly test and audit their trading systems and software tools. In addition they have requested that stock exchanges introduce deterrent penalties to the stockbroker or trader where they fail to comply. All participants in the market must follow strict testing procedures before introducing any applications or software into the stock exchanges.

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