QUESTION: Discuss the SEBI guidelines governing the brokers and sub-brokers in India?
Answer: BROKER: Stock brokers are the trading experts who buy and sell stocks, shares and securities on behalf of clients over the counter or through a stock exchange.
Such stock brokers are mostly connected with a stock brokerage firm and they charge a commission or fee from the client for stock broking and managing their stocks.
Such stock brokers have a good knowledge of the Indian stock market and keeps tabs on the changeable patterns and trends of the different stocks and shares
SUB-BROKERS: A sub-broker is an agent of the stock broker or a person who helps the investors to deal with a stock broker. A sub-broker is required to submit along with the application for registration, a letter of recommendation from a stock broker of a recognized stock exchange, and two references one of which should be from his banker.
An individual can act as a sub-broker provided:
- He is not less than 21 years of age
- He is not convincted of any offence involving fraud or dishonesty.
- He has passed 12th standard from a recognized institute.
- He is a fit and proper person.
SEBI GUIDELINES:
- The stockbroker and sub broker shall be bound by all the rules, by laws and regulations of the exchange and circulars or notices issued by SEBI and Government of India from time to time.
- The stock broker shall continuously satisfy itself about the genuineness and financial soundness of the client and investment objectives relevant to the services to be provided.
- The stock broker shall take steps to make the client aware of the precise nature of the stock broker’s liabilities for the business to be conducted, including the limitations, the liability and the capacity in which the stock broker acts.
- The sub-broker shall provide necessary assistance and co-operate with the stock broker in all its dealings with the clients.
- The stockbroker and sub broker shall maintain the details of the client as mentioned in the account opening form or any other information pertaining to the client, confidentially and that shall not disclose the same to any person or authority except as required under any legal requirements.
Provided that the sub broker may so disclose information about his client to any person or authority with the express permission of the court.
- The stock broker shall inform the client and make him appraised about trading/settlement cycles, delivery/payment schedules, any changes therein from time to time, and it shall be the responsibility in turn of the client to comply with such schedules/procedures of the relevant stock exchange where the trade is executed.
- The stock broker shall ensure that the money or securities deposited by the client shall be kept in separate account i.e., distinct from its own accounts and shall not be used by the stock broker or sub broker for himself or any other client.
- In case, client becomes incapable of receiving and paying for the delivery of the securities, stock broker may close the transaction and can claim the losses if any.
- The stock broker shall bring in to the notice of the relevant exchange the information about default in payment by the client.
In case defaulting client is a company or firm, then name of its directors or promoters also be communicated by the stock broker to the relevant exchange.
- The stock broker shall provide the client with the relevant contact details of the concerned exchanges and SEBI.
- Stock broker shall cooperate in redressing grievances of the client in respect of all transactions routed through it and in removing objections for bad delivery of shares, rectification of bad delivery etc.
- The stock broker shall ensure faster settlement of any arbitration proceedings arising out of the transactions entered into between him or behalf of client and he shall be liable to implement the arbitration awards made in such proceedings.
- The relationship between the stock broker and client will be terminated, if the stock broker for any reason ceases to be a member of the stock exchange including cessation of membership by any reason of the stock broker’s default, death, resignation or if the certificate is cancelled by the board.
- The stock broker or sub broker shall ensure due protection to the client regarding client’s rights to dividends, rights or bonus shares etc. in respect of transactions routed through it and shall not do anything which is likely to harm the interest of the client with whom and for whom they have had transactions in securities.
- The stock broker and client shall reconcile and settle their accounts from time to time as per the rules of SEBI.
- The stock broker shall issue a contract note to his client for trader executed from time to time containing records of all transactions including details of
- Order number
- Trade number
- Trade time
- Trade price
- Trade quantity
- Details of derivative contracts
- Client code,
- Brokerage and all charges levied etc.
| ALSO STUDY: |
| Depositories act 1996 |
