September 10, 2008
Edward Jones & Co. will pay the state $7.5 million to settle a 4-year-old case involving the firm’s "revenue sharing" agreements with mutual fund companies.
Then-attorney-general Bill Lockyer sued Jones in 2004, alleging that it had failed to tell its customers about fee-splitting arrangements it had with various fund companies. Investors didn’t know about the incentive Jones brokers had to pitch some funds and not others.
For more details
http://latimesblogs.latimes.com/money_co/2008/09/edward-jones-fu.html
Showing posts with label Regulation. Show all posts
Showing posts with label Regulation. Show all posts
Wednesday, December 10, 2008
Wednesday, August 27, 2008
SEBI (Intermediaries) Regulations 2008 - India
The regulations were notified in May 2008.
They can be downloaded from
www.sebi.gov.in/acts/internotification.pdf
SCHEDULE III
of
SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES)
REGULATIONS, 2008
CODE OF CONDUCT
I. INVESTOR PROTECTION
1.1 Investors/Clients
Every intermediary shall make all efforts to protect the interests of investors and shall render the best possible advice to its clients having regard to the client’s needs and the environments and his own professional skills.
1.2 High Standards of Service
An intermediary shall ensure that it and its key management personnel, employees,
contractors and agents, shall in the conduct of their business, observe high standards of integrity, dignity, fairness, ethics and professionalism and all professional dealings shall be affected in a prompt, effective and efficient manner.
An intermediary shall be responsible for the acts or omissions of its employees and
agents in respect to the conduct of its business.
1.3 Exercise of Due Diligence and no Collusion
An intermediary shall at all times render high standards of service, exercise due skill and diligence over persons employed or appointed by it, ensure proper care and
exercise independent professional judgment and shall not at any time act in collusion
with other intermediaries in a manner that is detrimental to the investor(s).
1.4 Fees
An intermediary shall not increase charges/ fees for the services rendered without
proper advance notice to its clients/investors.
II. DISBURSAL OF AMOUNTS
2.1 Disbursal of Amounts
An intermediary shall be prompt in disbursing dividends, interests or any such accrual income received or collected by it on behalf of its clients/investors.
III. DISBURSAL OF INFORMATION
3.1 An intermediary shall ensure that adequate disclosures are made to the
clients/investors in a comprehensible and timely manner so as to enable them to make
a balanced and informed decision.
3.2 An intermediary shall not make any misrepresentation and ensure that the information provided to the clients/investors is not misleading.
3.3 An intermediary shall not make any exaggerated statement whether oral or written to the client/investor, either about its qualification or capability to render certain services or its achievements in regard to services rendered to other clients/investors.
3.4 An intermediary shall not divulge to anybody, either orally or in writing, directly or indirectly, any confidential information about its clients/investors, which has come to its knowledge, without taking prior permission of its clients/investors except where such disclosures are required to be made in compliance with any law for the time being in force.
IV. CONFLICT OF INTEREST
4.1 An intermediary shall avoid conflict of interest and make adequate disclosure of his interest and shall put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, shall take reasonable steps to resolve the same in an equitable manner. An intermediary shall make appropriate disclosure to the client/investor of its possible source or potential areas of conflict of duties and interest while acting as an intermediary which would impair its ability to render fair, objective and unbiased services.
4.2 An Intermediary or any of its directors, or employee having the management of the
whole or substantially the whole of affairs of the business, or an associate of the
intermediary shall not, either through its account or their respective accounts or
through their family members, relatives or friends indulge in any insider trading.
V. COMPLIANCE AND CORPORATE GOVERNANCE
5.1 An Intermediary shall ensure that good corporate policies and corporate governance is in place. It shall not engage in fraudulent and manipulative transactions in the securities listed on any stock exchange in India and shall not indulge in any unfair competition (including resorting to unfair means for inducing another intermediaries’clients) which is likely to harm the interests of other intermediaries or investors or is likely to place such other intermediaries in a disadvantageous position while competing for or executing any assignment.
5.2 An Intermediary shall take adequate and necessary steps to ensure that continuity in data and record keeping is maintained and that the data or records are not lost or destroyed. It shall also ensure that for electronic records and data, up-to-date back up is always available with it.
5.3 An Intermediary shall not be a party to or instrumental in or indulge in—
a) creation of false market for securities listed or proposed to be listed on any
stock exchange in India;
b) price rigging or manipulation of prices of securities listed or proposed to be
listed on any stock exchange in India; or
c) passing of unpublished price sensitive information in respect of securities
which are listed or proposed to be listed on any stock exchange to any person
or intermediary, or
d) any activity for distorting market equilibrium or which may affect the smooth
functioning of the market or for personal gain.
5.4 An Intermediary shall co-operate with the Board, or any authority designated by the Board, as and when required and shall not make any untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Board or neglect or fail or refuse to submit to the Board or other agencies with which it is registered, such books, documents, correspondence and papers or any part thereof as may be demanded/requested from time to time.
5.5 An Intermediary shall ensure that any change in registration status /any penal action taken by Board or any material change in financials which may adversely affect the interests of clients/investors is promptly informed to the clients/investors and any business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients/investors or as per the instructions of the Board and the provisions of the relevant regulations.
5.6 An Intermediary shall maintain an appropriate level of knowledge and competency
and abide by the provisions of any act, regulations, circulars and guidelines of the
Central Government, the Reserve Bank of India, the Board, the stock exchange or any
other applicable statutory or self regulatory or other body, as the case may be, and as may be applicable to the Intermediary in respect of the business carried on by such Intermediary. An Intermediary shall also comply with the award of the Ombudsman
passed under the Securities and Exchange Board of India (Ombudsman) Regulations,
2003.
5.7 An Intermediary shall ensure that the Board is promptly informed about any action,legal proceedings, etc., initiated against it in respect of any material breach or noncompliance by it, of any law, rules, regulations, and directions of the Board or of any other regulatory body.
VI. INTERMEDIARY INFRASTRUCTURE REQUIREMENTS
6.1 An Intermediary shall have internal control procedures and financial and operational capabilities which can be reasonably expected to protect its operations, its clients,investors and other registered entities from financial loss arising from theft, fraud, and other dishonest acts, professional misconduct or omissions.
6.2 An Intermediary also registered with the Board in any other capacity/ category shall endeavour to ensure that arms length relationship is maintained in terms of both manpower and infrastructure between the activities carried out as an Intermediary and other permitted activities.
6.3 An Intermediary shall establish and maintain adequate infrastructural facility to be able to discharge its services as such intermediary to the satisfaction of
clients/investors, and the operating procedures and systems of the intermediaries shall be well documented and backed by operations manuals.
6.4 An Intermediary shall create and maintain the records of all documents and data in their in custody in such manner that the tracing of such document or data is facilitated in the event of loss of original records or documents for any reason.
They can be downloaded from
www.sebi.gov.in/acts/internotification.pdf
SCHEDULE III
of
SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES)
REGULATIONS, 2008
CODE OF CONDUCT
I. INVESTOR PROTECTION
1.1 Investors/Clients
Every intermediary shall make all efforts to protect the interests of investors and shall render the best possible advice to its clients having regard to the client’s needs and the environments and his own professional skills.
1.2 High Standards of Service
An intermediary shall ensure that it and its key management personnel, employees,
contractors and agents, shall in the conduct of their business, observe high standards of integrity, dignity, fairness, ethics and professionalism and all professional dealings shall be affected in a prompt, effective and efficient manner.
An intermediary shall be responsible for the acts or omissions of its employees and
agents in respect to the conduct of its business.
1.3 Exercise of Due Diligence and no Collusion
An intermediary shall at all times render high standards of service, exercise due skill and diligence over persons employed or appointed by it, ensure proper care and
exercise independent professional judgment and shall not at any time act in collusion
with other intermediaries in a manner that is detrimental to the investor(s).
1.4 Fees
An intermediary shall not increase charges/ fees for the services rendered without
proper advance notice to its clients/investors.
II. DISBURSAL OF AMOUNTS
2.1 Disbursal of Amounts
An intermediary shall be prompt in disbursing dividends, interests or any such accrual income received or collected by it on behalf of its clients/investors.
III. DISBURSAL OF INFORMATION
3.1 An intermediary shall ensure that adequate disclosures are made to the
clients/investors in a comprehensible and timely manner so as to enable them to make
a balanced and informed decision.
3.2 An intermediary shall not make any misrepresentation and ensure that the information provided to the clients/investors is not misleading.
3.3 An intermediary shall not make any exaggerated statement whether oral or written to the client/investor, either about its qualification or capability to render certain services or its achievements in regard to services rendered to other clients/investors.
3.4 An intermediary shall not divulge to anybody, either orally or in writing, directly or indirectly, any confidential information about its clients/investors, which has come to its knowledge, without taking prior permission of its clients/investors except where such disclosures are required to be made in compliance with any law for the time being in force.
IV. CONFLICT OF INTEREST
4.1 An intermediary shall avoid conflict of interest and make adequate disclosure of his interest and shall put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, shall take reasonable steps to resolve the same in an equitable manner. An intermediary shall make appropriate disclosure to the client/investor of its possible source or potential areas of conflict of duties and interest while acting as an intermediary which would impair its ability to render fair, objective and unbiased services.
4.2 An Intermediary or any of its directors, or employee having the management of the
whole or substantially the whole of affairs of the business, or an associate of the
intermediary shall not, either through its account or their respective accounts or
through their family members, relatives or friends indulge in any insider trading.
V. COMPLIANCE AND CORPORATE GOVERNANCE
5.1 An Intermediary shall ensure that good corporate policies and corporate governance is in place. It shall not engage in fraudulent and manipulative transactions in the securities listed on any stock exchange in India and shall not indulge in any unfair competition (including resorting to unfair means for inducing another intermediaries’clients) which is likely to harm the interests of other intermediaries or investors or is likely to place such other intermediaries in a disadvantageous position while competing for or executing any assignment.
5.2 An Intermediary shall take adequate and necessary steps to ensure that continuity in data and record keeping is maintained and that the data or records are not lost or destroyed. It shall also ensure that for electronic records and data, up-to-date back up is always available with it.
5.3 An Intermediary shall not be a party to or instrumental in or indulge in—
a) creation of false market for securities listed or proposed to be listed on any
stock exchange in India;
b) price rigging or manipulation of prices of securities listed or proposed to be
listed on any stock exchange in India; or
c) passing of unpublished price sensitive information in respect of securities
which are listed or proposed to be listed on any stock exchange to any person
or intermediary, or
d) any activity for distorting market equilibrium or which may affect the smooth
functioning of the market or for personal gain.
5.4 An Intermediary shall co-operate with the Board, or any authority designated by the Board, as and when required and shall not make any untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Board or neglect or fail or refuse to submit to the Board or other agencies with which it is registered, such books, documents, correspondence and papers or any part thereof as may be demanded/requested from time to time.
5.5 An Intermediary shall ensure that any change in registration status /any penal action taken by Board or any material change in financials which may adversely affect the interests of clients/investors is promptly informed to the clients/investors and any business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients/investors or as per the instructions of the Board and the provisions of the relevant regulations.
5.6 An Intermediary shall maintain an appropriate level of knowledge and competency
and abide by the provisions of any act, regulations, circulars and guidelines of the
Central Government, the Reserve Bank of India, the Board, the stock exchange or any
other applicable statutory or self regulatory or other body, as the case may be, and as may be applicable to the Intermediary in respect of the business carried on by such Intermediary. An Intermediary shall also comply with the award of the Ombudsman
passed under the Securities and Exchange Board of India (Ombudsman) Regulations,
2003.
5.7 An Intermediary shall ensure that the Board is promptly informed about any action,legal proceedings, etc., initiated against it in respect of any material breach or noncompliance by it, of any law, rules, regulations, and directions of the Board or of any other regulatory body.
VI. INTERMEDIARY INFRASTRUCTURE REQUIREMENTS
6.1 An Intermediary shall have internal control procedures and financial and operational capabilities which can be reasonably expected to protect its operations, its clients,investors and other registered entities from financial loss arising from theft, fraud, and other dishonest acts, professional misconduct or omissions.
6.2 An Intermediary also registered with the Board in any other capacity/ category shall endeavour to ensure that arms length relationship is maintained in terms of both manpower and infrastructure between the activities carried out as an Intermediary and other permitted activities.
6.3 An Intermediary shall establish and maintain adequate infrastructural facility to be able to discharge its services as such intermediary to the satisfaction of
clients/investors, and the operating procedures and systems of the intermediaries shall be well documented and backed by operations manuals.
6.4 An Intermediary shall create and maintain the records of all documents and data in their in custody in such manner that the tracing of such document or data is facilitated in the event of loss of original records or documents for any reason.
Wednesday, December 5, 2007
Monday, December 3, 2007
Financial Industry Regulatory Authority (FINRA) - USA
The Financial Industry Regulatory Authority (FINRA), is the largest non-governmental regulator for all securities firms doing business in the United States. All told, FINRA oversees nearly 5,100 brokerage firms, about 174,000 branch offices and more than 675,000 registered securities representatives.
Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.
FINRA touches virtually every aspect of the securities business—from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms. It also performs market regulation under contract for The NASDAQ Stock Market, the American Stock Exchange, the International Securities Exchange and the Chicago Climate Exchange.
FINRA has approximately 3,000 employees and operates from Washington, DC, and New York, NY, with 15 District Offices around the country.
"The creation of FINRA is the most significant modernization of the self-regulatory regime in decades," said Mary L. Schapiro, Chief Executive Officer of FINRA. "With investor protection and market integrity as our overarching objectives, FINRA is an investor-focused and more streamlined regulator that is better suited to the complexity and competitiveness of today's global capital markets."
FINRA believes investor protection begins with education. Using the internet, the media and public forums, we help investors build their financial knowledge and provide them with essential tools to better understand the markets and basic principles of saving and investing. In addition, the FINRA Investor Education Foundation is the largest foundation in the United States dedicated to investor education. As of June 2007, the Foundation had approved $10.4 million in grants and an additional $10.2 million in direct investor education programming.
In today's fast-paced and complex global economy, FINRA is a trusted advocate for investors, dedicated to keeping the markets fair, ensuring investor choice and proactively addressing emerging regulatory issues before they harm investors or the markets.
http://www.finra.org/AboutFINRA/index.htm
Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.
FINRA touches virtually every aspect of the securities business—from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms. It also performs market regulation under contract for The NASDAQ Stock Market, the American Stock Exchange, the International Securities Exchange and the Chicago Climate Exchange.
FINRA has approximately 3,000 employees and operates from Washington, DC, and New York, NY, with 15 District Offices around the country.
"The creation of FINRA is the most significant modernization of the self-regulatory regime in decades," said Mary L. Schapiro, Chief Executive Officer of FINRA. "With investor protection and market integrity as our overarching objectives, FINRA is an investor-focused and more streamlined regulator that is better suited to the complexity and competitiveness of today's global capital markets."
FINRA believes investor protection begins with education. Using the internet, the media and public forums, we help investors build their financial knowledge and provide them with essential tools to better understand the markets and basic principles of saving and investing. In addition, the FINRA Investor Education Foundation is the largest foundation in the United States dedicated to investor education. As of June 2007, the Foundation had approved $10.4 million in grants and an additional $10.2 million in direct investor education programming.
In today's fast-paced and complex global economy, FINRA is a trusted advocate for investors, dedicated to keeping the markets fair, ensuring investor choice and proactively addressing emerging regulatory issues before they harm investors or the markets.
http://www.finra.org/AboutFINRA/index.htm
Thursday, October 18, 2007
SEBI Stock Broker Regulations Part-4 Code of Conduct
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS & SUB-BROKERS) Regulations, 1992
CODE OF CONDUCT FOR SUB-BROKERS
(Regulation 15)
A. GENERAL
(1) INTEGRITY: A sub-broker, shall maintain high standards of integrity, promptitude
and fairness in the conduct of all investment business.
(2) EXERCISE OF DUE SKILL AND CARE: A sub-broker, shall act with due skill, care
and diligence in the conduct of all investment business.
B. DUTY TO THE INVESTOR
(1) EXECUTION OF ORDERS: A sub-broker, in his dealings with the clients and the
general investing public, shall faithfully execute the orders for buying and selling of
securities at the best available market price. A sub-broker shall promptly inform his client
about the execution or non-execution of an order 61[******]
62 [(2) A sub-broker shall render necessary assistance to his client in obtaining the
contract note from the stock broker]
(3) BREACH OF TRUST: A sub-broker shall not disclose or discuss with any other
person or make improper use of the details of personal investments and other information
of a confidential nature of the client which he comes to know in his business relationship.
(4) BUSINESS AND COMMISSION:
(a) A sub-broker shall not encourage sales or purchases of securities with the sole object
of generating brokerage or commission.
(b)A sub-broker shall not furnish false or misleading quotations or give any other false or
misleading advice or information to the clients with a view of inducing him to do
61 Words ‘and make payment in respect of securities sold and arrange for prompt delivery of securities
purchased by clients” inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. 23-9-2003.
62 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003 for the words, “
(2) A. Issue of purchase or sale notes:
(a) A sub-broker shall issue promptly to his clients purchase or sale notes for all the transactions entered
into by him with his clients.
(b) A sub-broker shall issue promptly to his clients scrip wise split purchase or sale notes and similarly bills
and receipts showing the brokerage separately in respect of all transactions in the specified form.
(c) A sub-broker shall only split the contract notes client-wise and scrip wise originally issued to him by the
affiliated broker into different denominations.
(d) A sub-broker shall not match the purchase and sale orders of his clients and each such order must
invariably be routed through a member-broker of the stock exchange with whom he is affiliated.”
business in particular securities and enabling himself to earn brokerage or commission
thereby.
(c)A sub-broker shall not charge from his clients a commission exceeding one and onehalf
of one percent of the value mentioned in the respective sale or purchase notes.
(5) BUSINESS OF DEFAULTING CLIENTS: A sub-broker shall not deal or transact
business knowingly, directly or indirectly or execute an order for a client who has failed
to carry out his commitments in relation to securities and is in default with another broker
or sub-broker.
(6) FAIRNESS TO CLIENTS: A sub-broker, when dealing with a client, shall disclose
that he is acting as an agent 63[******] ensuring at the same time, that no conflict of
interest arises between him and the client. In the event of a conflict of interest, he shall
inform the client accordingly and shall not seek to gain a direct or indirect personal
advantage from the situation and shall not consider clients' interest inferior to his own.
(7) INVESTMENT ADVICE: A sub-broker shall not make a recommendation to any
client who might be expected to rely thereon to acquire, dispose of, retain any securities
unless he has reasonable grounds for believing that the recommendation is suitable for
such a client upon the basis of the facts, if disclosed by such a client as to his own
security holdings, financial situation and objectives of such investment. The sub-broker
should seek such information from clients, wherever they feel it is appropriate to do so.
64[7A – Investment Advice in publicly accessible media –
(a) A sub-broker or any of his employees shall not render, directly and indirectly any
investment advice about any security in the publicly accessible media, whether real –
time or non real-time, unless a disclosure of his interest including his long or short
position in the said security has been made, while rendering such advice.
(b) In case, an employee of the sub-broker is rendering such advice, he shall also disclose
the interest of his dependent family members and the employer including their long or
short position in the said security, while rendering such advice.]
(8) COMPETENCE OF SUB-BROKER: A sub-broker should have adequately trained
staff and arrangements to render fair, prompt and competent services to his clients and
continuous compliance with the regulatory system.
63 Words, ‘and shall issue appropriate purchase / sale note” omitted by the SEBI (Stock Brokers and Subbrokers)
(Amendment) Regulations, 2003, w.e.f. 23-9-2003.
64 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 29-5-
2001.
C. SUB-BROKERS VIS-A-VIS STOCK BROKERS
(1) CONDUCT OF DEALINGS: A sub-broker shall co-operate with his broker in
comparing unmatched transactions. Sub-broker shall not knowingly and willfully deliver
documents which constitute bad delivery. A sub-broker shall co-operate with other
contracting party for prompt replacement of documents which are declared as bad
delivery.
(2) PROTECTION OF CLIENTS INTERESTS: A sub-broker shall extend fullest cooperation
to his stock-broker in protecting the interests of their clients regarding their
rights to dividends, right or bonus shares or any other rights relatable to such securities.
(3) TRANSACTIONS WITH BROKERS: A sub-broker shall not fail to carry out his
stock broking transactions with his broker nor shall he fail to meet his business liabilities
or show negligence in completing the settlement of transactions with them.
65[(4) Agreement between sub-broker, client of the sub-broker and main broker: A subbroker
shall enter into a tripartite agreement with his client and with the main stock
broker specifying the scope of rights and obligations of the stock broker, sub-broker and
such client of the sub-broker]
(5) ADVERTISEMENT AND PUBLICITY: A sub-broker shall not advertise his
business publicly unless permitted by the stock exchange.
(6) INDUCEMENT OF CLIENTS: A sub-broker shall not resort to unfair means of
inducing clients from other brokers.
D. SUB-BROKERS VIS-A-VIS REGULATORY AUTHORITIES.
(1) GENERAL CONDUCT: A sub-broker shall not indulge in dishonourable, disgraceful
or disorderly or improper conduct on the stock exchange nor shall he wilfully obstruct the
business of the stock exchange. He shall comply with the rules, bye-laws and regulations
of the stock exchange.
(2) FAILURE TO GIVE INFORMATION: A sub-broker shall not neglect or fail or
refuse to submit to the Board or the stock exchange with which he is registered, such
books, special returns, correspondence, documents, and papers or any part thereof as may
be required.
(3) FALSE OR MISLEADING RETURNS: A sub-broker shall not neglect or fail or
refuse to submit the required returns and not make any false or misleading statement on
any returns required to be submitted to the Board or the stock exchanges.
65 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003.
(4) MANIPULATION: A sub-broker shall not indulge in manipulative, fraudulent or
deceptive transactions or schemes or spread rumours with a view to distorting market
equilibrium or making personal gains.
(5) MALPRACTICES : A sub-broker shall not create false market either singly or in
concert with others or indulge in any act detrimental to the public interest or which leads
to interference with the fair and smooth functions of the market mechanism of the stock
exchanges. A sub-broker shall not involve himself in excessive speculative business in
the market beyond reasonable levels not commensurate with his financial soundness.
SCHEDULE III
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers And Sub-Brokers) Regulations, 1992
(Regulation 10)
I. FEES TO BE PAID BY THE STOCK-BROKER
1. Every stock-broker shall subject to paragraphs 2 and 3 of this Schedule pay registration
fees in the manner set out below:
(a) Where the annual turnover does not exceed rupees one crore during any financial
year, a sum of rupees five thousand for each financial year or;
(b) Where the annual turnover of the stock-broker exceeds rupees one crore during any
financial year, a sum of rupees five thousand plus one hundredth of one percent of the
turnover in excess of rupees one crore for each financial year;
66 [(bb) Notwithstanding anything contained in clause (b) it is clarified that the fee shall
be recoverable as computed as under:
(i) in respect of jobbing transactions that is to say all transactions which are squared off
during the same day which have not been undertaken by the broker on behalf of clients,
the fees shall be computed at the rate of one two hundredth of one percent in respect of
the sale side of such transactions;
(ii) in respect of transactions in Government securities, the bonds issued by any Public
Sector Undertaking and the units traded in a similar manner, the fee payable shall be
computed at the rate of one thousandth of one percent of the turnover;
66 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2002, w.e.f. 20-2-
2002.
(iii) in case of carry forward, renewal or badla transactions the fees shall be computed at
the rate of one hundredth of one percent of the turnover and the reverse off setting
transactions shall not be counted as part of the turnover.
(iv) if brokers are carrying out transactions in securities without reporting them to the
stock exchange, those transactions shall be taken into account for the purpose of turnover
and the fees shall be computed at the rate of one hundredth of one percent of the
turnover;
(v) the trade put through on other stock exchanges shall be included in the turnover of
that exchange if market for that security does not exist on the exchange of which he is a
member and the fees shall be computed at the rate of one hundredth of one percent of the
turnover;
(vi) activity such as underwriting and collection of deposits shall not be taken into
account for the purpose of calculating the turnover’.]
(c) After the expiry of five financial years from the date of initial registration as a stockbroker,
he shall pay a sum of rupees five thousand for 67[every] block of five financial
years commencing from the sixth financial year after the date of grant of initial
registration to keep his registration in force.
2. Fees referred to in clause (a) and (b) of paragraph 1 above shall be paid -
(a) in respect of the financial year 1992-1993 within one month of the commencement of
these regulations;
(b) in respect of the financial year beginning on the 1st day of April, 1993 and the
following financial years, on or before the first day of October of the financial year to
which such payment relates,
and such fees shall be computed with reference to the annual turnover relating to the
preceding financial year.
3. Every remittance of fees referred to in clauses (a) and (b) of paragraph 1, shall be
accompanied by a certificate as to the authenticity of turnover on the basis of which fees
have been computed duly signed by the stock exchange of which the stock-broker is a
member or by a qualified auditor as defined in Section 226 of the Companies Act, 1956.
Explanation - For the purposes of paragraphs 1, 2 and 3 "annual turnover" means the
aggregate of the sale and purchase prices of securities received and receivable by the
67 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2002, w.e.f. 20-2-
2002.
stock broker either on his own account as well as on account of his clients in respect of
sale and purchase or dealing in securities during any financial year.
68[4. Where a corporate entity has been formed by converting the individual or
partnership membership card of the exchange, such corporate entity shall be exempted
from payment of fee for the period for which the erstwhile individual or partnership
member, as the case may be, has already paid the fees subject to the condition that the
erstwhile individual or partner shall be the wholetime Director of the corporate member
so converted and such Director will continue to hold minimum 40% shares of the paid-up
equity capital of the corporate entity for a period of at least three years from the date of
such conversion]
69[“Explanation: It is clarified that the conversion of individual or partnership
membership card of the exchange into corporate entity shall be deemed to be in
continuation of the old entity and no fee shall be collected again from the converted
corporate entity for the period for which the erstwhile entity has paid the fee as per the
regulations”].
70[4A. Where a stock exchange has formed a subsidiary company, which has become a
stock broker of another stock exchange, then the turnover of the stock broker who is
buying, selling or dealing in securities, through the subsidiary company as a sub-broker,
shall be excluded from the turnover of the subsidiary company, only if the stock broker
has paid five years turnover based fees plus fee for a block of five years in accordance
with the regulations, on the concerned stock exchange which has formed the subsidiary
company.]
71[5. If a stock broker fails to remit fees in accordance with paragraph 1 and 2, he shall be
liable to pay interest @ 15% per annum for each month of delay or part thereof;
Provided that the liability to pay interest as aforesaid may be addition to any other action
which the Board may take as deem fit against the stock broker under the Act, or the
Regulations;
Provided further that if the liability of the stock broker on account of payment of interest
works out to be Rs. 100 or less the same may be waived off by the Board taking into
consideration the administrative cost involved in recovering the said amount].
68 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Second Amendment) Regulations, 1998, w.e.f.
21-1-1998.
69 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 1998, w.e.f. 20-2-
2002.
70 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 30-8-
2000.
71 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 1998, w.e.f. 16-
12-1998.
72[“II. Fees to be paid by sub-brokers
Every sub-broker shall pay fees in the manner set out below:
(a) Where a sub-broker was granted certificate of registration by the Board before
August 1, 2006 -
(i) he shall pay a sum of ten thousand rupees for the block of five financial
years commencing from April 1, 2007; and
(ii) after the expiry of the said block of five financial years, he shall pay a sum
of five thousand rupees for every subsequent block of five financial years.
(b) Where a sub-broker is granted certificate of registration by the Board on or
after August 1, 2006 -
(i) he shall pay a sum of ten thousand rupees for the block of five financial
years commencing from the financial year in which registration has been
granted; and
(ii) after the expiry of the said block of five financial years, he shall pay a
sum of five thousand rupees for every subsequent block of five financial
years.
(c) Every sub-broker shall pay fees under sub-clause (a) or sub-clause (b), as the
case may be, within such time as may be specified by the Board.”]
III. MANNER OF FEES TO BE PAID
73[The fees indicated above shall be paid on or before the 1st day of October each year
payable by draft in favour of the Securities and Exchange Board of India at Bombay or at
the respective regional office].
74[IV.Non-applicability to stock – brokers governed by Schedule IIIA.
The provisions of this schedule shall not apply to stock brokers to whom Schedule III-A
applies, from the time when it becomes so applicable.]
72 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 1998, w.e.f.
16-12-1998 for the words,
“II. FEES TO BE PAID BY SUB-BROKER:
(a) A Sub-broker shall pay a fee of rupees one thousand for each financial year for an initial
period of five years.
(b) After the expiry of the five years mentioned above, the sub-broker shall pay a fee of rupees
five hundred for each financial year as long as the Certificate remains in force.”
73 Substituted by the SEBI (Payment of Fees) (Amendment) Regulations, 1995, w.e.f. 28-11-1995 for the
words,
“The fees indicated above shall be paid on or before the 1st day of October each year
payable by a cheque or draft in favour of the Securities and Exchange Board of India" at
Bombay”
74 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. 1-
10-2006.
75[“Schedule III-A
PAYMENT OF FEES BY STOCK BROKERS
[Regulation 10(1)]
Part A – Applicability
1. This schedule shall apply to stock brokers from the following points of time:
(a) All stock brokers who are granted registration by the Board on or after the first
day of October, 2006 – upon grant of such registration;
(b) All stock brokers who were granted registration by the Board on or after the first
day of April, 2006, but before the first day of October, 2006 – from the first day
of October, 2006;
(c) All stock brokers who have not completed five financial years from the date of
grant of registration by the Board, as on the thirty first day of March, 2006 – upon
completion of ten financial years from the date of grant of registration by the
Board;
(d) All stock brokers who have completed five financial years from the date of grant
of registration by the Board, as on the thirty first day of March, 2006 – upon
completion of the current block of five financial years, within the meaning of item
I(1)(c) of Schedule III;
(e) All stock brokers falling under sub-clauses (c) or (d), who opt in accordance with
clause 2 to be governed by the provisions of this Schedule – from such date as
may be specified by the Board.
2. Stock brokers falling under sub-clauses (c) or (d) of clause 1 may opt to pay fees in
accordance with this Schedule before completion of the relevant time periods mentioned
in those sub-clauses, by exercising an option in writing to that effect and communicating
it to the Board, in such manner and within such time as may be specified by the Board.
Part B – Charge of fees
3. On and from the applicability of this Schedule, every stock broker shall pay to the
Board in accordance with Part C, a fee in respect of the securities transactions including
off-market transactions undertaken by them, at the rates mentioned below:
Sl.
No.
Nature of the securities
transaction
Rate of fee
a. All sale and purchase
transactions in securities other
than debt securities.
0.0002 per cent. of the price at which
the securities are purchased or sold
(Rs.20/- per crore)
b. All sale and purchase
transactions in debt securities.
0.00005 per cent. of the price at which
the securities are purchased or sold
(Rs.5/- per crore)
75 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. 1-
10-2006..
4. Nothing in clause 3 shall affect the liability of any stock broker to pay fees under
Schedule III, which accrued before this Schedule became applicable to him and such fees
shall be paid as per the relevant provisions of Schedule III as if they had not ceased to be
applicable to him.
Part C – Manner of payment and recovery
5. (1) Every recognised stock exchange shall collect from every stock broker to whom
this Schedule applies, the fee payable under clause 3 in respect of -
(a) securities transactions entered into by him in that stock exchange; and
(b) off-market transactions entered into by him which are reported to that stock
exchange –
in accordance with the provisions of its bye-laws.
Explanation: The Board may specify the manner in which fees shall be collected from
stock brokers who report the same transactions to different stock exchanges in which they
are members, under clause (b).
(2) The fee collected by a recognised stock exchange under sub-clause (1) during a
calendar month shall be paid by the stock exchange to the Board by the fifth working day
of the following calendar month.
(3) All recognised stock exchanges shall maintain such registers and furnish such returns
or information to the Board in respect of the fee collected under this Schedule, as may be
specified by the Board.
(4) Without prejudice to sub-clause (3), a recognised stock exchange shall also be liable
to furnish such information or explanations to the Board as may be required by it in
respect of fee collected or liable to be collected under this Schedule.
6. (1) Nothing contained in clause 5 shall affect the primary liability of a stock broker to
pay the fees under clause 3 or shall preclude the Board from recovering any such fee
remaining unpaid by any stock broker directly from him.
(2) Where due to the stock broker’s default any fee which was liable to be paid on his
behalf under clause 5 remains unpaid or is paid belatedly, he shall, without prejudice to
any other action that may be taken under the Act, rules or regulations, pay an interest of
15 per cent. per annum for every month of delay or part thereof to the Board.
(3) Every stock broker shall be liable to furnish such information or explanations to the
Board as may be required by it in respect of fee paid or payable under this Schedule.”]
[SCHEDULE IV
[Regulation 16G (1)]
FEES TO BE PAID BY THE TRADING OR CLEARING MEMBER 76[OR SELFCLEARING
MEMBER] OF DERIVATIVES EXCHANGE / DERIVATIVES
SEGMENT / CLEARING CORPORATION / CLEARING HOUSE.
1. A clearing member shall pay a fee of 77[Rs. 50, 000/-] every year till his registration is
in force, in the manner specified below:-
(a) for the first financial year along with the application for registration;
(b) for the subsequent financial years before 1st June of that financial year.
78[“2. Every trading member shall pay to the Board, a fee in respect of the transactions
undertaken by him on the derivatives segment of a recognised stock exchange, at the rate
of 0.0002 per cent. of his turnover (Rs.20/- per crore).
76 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
77 Substituted for Rs. 25,000 by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. 1-10-2006..
78 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f.
1-10-2006. Prior to substitution, it was read as under:
“2. A trading member shall pay every year a fee till his registration is in force, in the
manner specified below:-
(a) where the annual turnover does not exceed Rs. 500 crore in the financial year, a sum
of Rs. 10, 000 for each financial year; and
(b) where the annual turnover exceeds Rs. 500 crore in the financial year, a sum of Rs.
10, 000 plus 10 paisa per Rs. 1, 00, 000 of turnover, for the turnover in excess of Rs. 500
crore in the financial year.
Explanation: For the purpose of clause 2, the expression `annual turnover’ shall mean the
aggregate value of all trades executed by the trading member on the derivatives exchange
or the derivatives segment and shall also include the value of trades settled on the
expiration of derivatives contracts.
59*[However, for option contracts, the `annual turnover’ shall be computed on the basis of
the premium traded for the option contracts and in case where the option is exercised /
assigned, the `annual turnover’ shall be computed on the basis of the notional value of the
Explanation: (A) For the purpose of this clause, the expression ‘turnover’ shall include
the value of the trades executed by the trading member on the derivatives segment of the
recognised stock exchange and of the trades settled on the expiration of derivatives
contracts.
(B) In case of options contracts, ‘turnover’ shall be computed on the basis of premium
traded for the option contracts and in case where the option is exercised or assigned, it
shall be additionally computed on the basis of notional value of option contracts
exercised or assigned.”]
79[2A The “self-clearing member” shall pay every year a fee as specified in clause 1 & 2.
The provisions of clauses 3 to 6 shall be applicable mutatis mutandis to a self-clearing
member.]
80[“3. (1) Every recognised stock exchange shall collect from every trading member,
clearing member and self-clearing member, the fee payable under clause 2 in respect of
his turnover in the derivatives segment of that stock exchange in accordance with the
provisions of its bye-laws.
(2) The fee collected by a recognised stock exchange under sub-clause (1) during a
calendar month shall be paid by the stock exchange to the Board by the fifth working day
of the following calendar month.
option contracts exercised / assigned, in addition to the annual turnover’ computed on the
basis of premium traded]
79 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. 15-11-2003.
80 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. 1-10-2006. Prior to substitution, it was read as under:
“3. Every remittance of fees by a trading member as specified in clause 2 shall be made
every financial year as under:-
(a) For the first financial year in which certificate of registration is granted a sum of Rs.
10, 000/- shall be paid along with the application for registration.
(b) For the subsequent financial years from the initial registration:
(i) A sum of Rs. 10, 000/- shall be paid before 1st June of that financial year; and
(ii) A balance fee of the preceding financial year for the turnover in excess of Rs.500
crores shall be paid before the 1st June of the financial year.
(c) The remittance shall be accompanied by a certificate authenticating the turnover by
the concerned derivatives exchange or derivatives segment.”
(3) All recognised stock exchanges shall maintain such registers and furnish such returns
or information to the Board in respect of the fee collected under this Schedule, as may be
specified by the Board.
(4) Without prejudice to sub-clause (3), a recognised stock exchange shall also be liable
to furnish such information or explanations to the Board as may be required by it in
respect of fee collected or liable to be collected under this Schedule.”]
4. A trading member who also acts as a clearing member shall pay the annual fee
separately, as applicable to each category 81[as specified in clause 1 and 2 above].
82[“5. (1) Nothing contained in clause 3 shall affect the primary liability of a trading
member to pay the fees under clause 2 or shall preclude the Board from recovering any
such fee remaining unpaid by any trading member directly from him.
(2) Where due to the trading member’s default any fee which was liable to be paid on his
behalf under clause 3 remains unpaid or is paid belatedly, he shall, without prejudice to
any other action that may be taken under the Act, rules or regulations, pay an interest of
15 per cent. per annum for every month of delay or part thereof to the Board.
(3) Every trading member shall be liable to furnish such information or explanations to
the Board as may be required by it in respect of fee paid or payable under this
Schedule.”]
6. The financial year shall mean the year commencing from 1st April and ending on 31st
March of the following year.
** Notification: No. GSR 780(E), dated 23-10-1992.s
81 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. 1-10-2006 for the words, “as specified in clause 2 and 3”
82 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. 1-10-2006 for the words,
“ 5. The fees indicated above shall be paid by draft in favour of ` Securities and Exchange
Board of India, Mumbai’. Such draft shall be forwarded to the Board through the
concerned derivatives exchange or derivatives segment or clearing corporation or
clearing house.’’
(STOCK BROKERS & SUB-BROKERS) Regulations, 1992
CODE OF CONDUCT FOR SUB-BROKERS
(Regulation 15)
A. GENERAL
(1) INTEGRITY: A sub-broker, shall maintain high standards of integrity, promptitude
and fairness in the conduct of all investment business.
(2) EXERCISE OF DUE SKILL AND CARE: A sub-broker, shall act with due skill, care
and diligence in the conduct of all investment business.
B. DUTY TO THE INVESTOR
(1) EXECUTION OF ORDERS: A sub-broker, in his dealings with the clients and the
general investing public, shall faithfully execute the orders for buying and selling of
securities at the best available market price. A sub-broker shall promptly inform his client
about the execution or non-execution of an order 61[******]
62 [(2) A sub-broker shall render necessary assistance to his client in obtaining the
contract note from the stock broker]
(3) BREACH OF TRUST: A sub-broker shall not disclose or discuss with any other
person or make improper use of the details of personal investments and other information
of a confidential nature of the client which he comes to know in his business relationship.
(4) BUSINESS AND COMMISSION:
(a) A sub-broker shall not encourage sales or purchases of securities with the sole object
of generating brokerage or commission.
(b)A sub-broker shall not furnish false or misleading quotations or give any other false or
misleading advice or information to the clients with a view of inducing him to do
61 Words ‘and make payment in respect of securities sold and arrange for prompt delivery of securities
purchased by clients” inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. 23-9-2003.
62 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003 for the words, “
(2) A. Issue of purchase or sale notes:
(a) A sub-broker shall issue promptly to his clients purchase or sale notes for all the transactions entered
into by him with his clients.
(b) A sub-broker shall issue promptly to his clients scrip wise split purchase or sale notes and similarly bills
and receipts showing the brokerage separately in respect of all transactions in the specified form.
(c) A sub-broker shall only split the contract notes client-wise and scrip wise originally issued to him by the
affiliated broker into different denominations.
(d) A sub-broker shall not match the purchase and sale orders of his clients and each such order must
invariably be routed through a member-broker of the stock exchange with whom he is affiliated.”
business in particular securities and enabling himself to earn brokerage or commission
thereby.
(c)A sub-broker shall not charge from his clients a commission exceeding one and onehalf
of one percent of the value mentioned in the respective sale or purchase notes.
(5) BUSINESS OF DEFAULTING CLIENTS: A sub-broker shall not deal or transact
business knowingly, directly or indirectly or execute an order for a client who has failed
to carry out his commitments in relation to securities and is in default with another broker
or sub-broker.
(6) FAIRNESS TO CLIENTS: A sub-broker, when dealing with a client, shall disclose
that he is acting as an agent 63[******] ensuring at the same time, that no conflict of
interest arises between him and the client. In the event of a conflict of interest, he shall
inform the client accordingly and shall not seek to gain a direct or indirect personal
advantage from the situation and shall not consider clients' interest inferior to his own.
(7) INVESTMENT ADVICE: A sub-broker shall not make a recommendation to any
client who might be expected to rely thereon to acquire, dispose of, retain any securities
unless he has reasonable grounds for believing that the recommendation is suitable for
such a client upon the basis of the facts, if disclosed by such a client as to his own
security holdings, financial situation and objectives of such investment. The sub-broker
should seek such information from clients, wherever they feel it is appropriate to do so.
64[7A – Investment Advice in publicly accessible media –
(a) A sub-broker or any of his employees shall not render, directly and indirectly any
investment advice about any security in the publicly accessible media, whether real –
time or non real-time, unless a disclosure of his interest including his long or short
position in the said security has been made, while rendering such advice.
(b) In case, an employee of the sub-broker is rendering such advice, he shall also disclose
the interest of his dependent family members and the employer including their long or
short position in the said security, while rendering such advice.]
(8) COMPETENCE OF SUB-BROKER: A sub-broker should have adequately trained
staff and arrangements to render fair, prompt and competent services to his clients and
continuous compliance with the regulatory system.
63 Words, ‘and shall issue appropriate purchase / sale note” omitted by the SEBI (Stock Brokers and Subbrokers)
(Amendment) Regulations, 2003, w.e.f. 23-9-2003.
64 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 29-5-
2001.
C. SUB-BROKERS VIS-A-VIS STOCK BROKERS
(1) CONDUCT OF DEALINGS: A sub-broker shall co-operate with his broker in
comparing unmatched transactions. Sub-broker shall not knowingly and willfully deliver
documents which constitute bad delivery. A sub-broker shall co-operate with other
contracting party for prompt replacement of documents which are declared as bad
delivery.
(2) PROTECTION OF CLIENTS INTERESTS: A sub-broker shall extend fullest cooperation
to his stock-broker in protecting the interests of their clients regarding their
rights to dividends, right or bonus shares or any other rights relatable to such securities.
(3) TRANSACTIONS WITH BROKERS: A sub-broker shall not fail to carry out his
stock broking transactions with his broker nor shall he fail to meet his business liabilities
or show negligence in completing the settlement of transactions with them.
65[(4) Agreement between sub-broker, client of the sub-broker and main broker: A subbroker
shall enter into a tripartite agreement with his client and with the main stock
broker specifying the scope of rights and obligations of the stock broker, sub-broker and
such client of the sub-broker]
(5) ADVERTISEMENT AND PUBLICITY: A sub-broker shall not advertise his
business publicly unless permitted by the stock exchange.
(6) INDUCEMENT OF CLIENTS: A sub-broker shall not resort to unfair means of
inducing clients from other brokers.
D. SUB-BROKERS VIS-A-VIS REGULATORY AUTHORITIES.
(1) GENERAL CONDUCT: A sub-broker shall not indulge in dishonourable, disgraceful
or disorderly or improper conduct on the stock exchange nor shall he wilfully obstruct the
business of the stock exchange. He shall comply with the rules, bye-laws and regulations
of the stock exchange.
(2) FAILURE TO GIVE INFORMATION: A sub-broker shall not neglect or fail or
refuse to submit to the Board or the stock exchange with which he is registered, such
books, special returns, correspondence, documents, and papers or any part thereof as may
be required.
(3) FALSE OR MISLEADING RETURNS: A sub-broker shall not neglect or fail or
refuse to submit the required returns and not make any false or misleading statement on
any returns required to be submitted to the Board or the stock exchanges.
65 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003.
(4) MANIPULATION: A sub-broker shall not indulge in manipulative, fraudulent or
deceptive transactions or schemes or spread rumours with a view to distorting market
equilibrium or making personal gains.
(5) MALPRACTICES : A sub-broker shall not create false market either singly or in
concert with others or indulge in any act detrimental to the public interest or which leads
to interference with the fair and smooth functions of the market mechanism of the stock
exchanges. A sub-broker shall not involve himself in excessive speculative business in
the market beyond reasonable levels not commensurate with his financial soundness.
SCHEDULE III
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers And Sub-Brokers) Regulations, 1992
(Regulation 10)
I. FEES TO BE PAID BY THE STOCK-BROKER
1. Every stock-broker shall subject to paragraphs 2 and 3 of this Schedule pay registration
fees in the manner set out below:
(a) Where the annual turnover does not exceed rupees one crore during any financial
year, a sum of rupees five thousand for each financial year or;
(b) Where the annual turnover of the stock-broker exceeds rupees one crore during any
financial year, a sum of rupees five thousand plus one hundredth of one percent of the
turnover in excess of rupees one crore for each financial year;
66 [(bb) Notwithstanding anything contained in clause (b) it is clarified that the fee shall
be recoverable as computed as under:
(i) in respect of jobbing transactions that is to say all transactions which are squared off
during the same day which have not been undertaken by the broker on behalf of clients,
the fees shall be computed at the rate of one two hundredth of one percent in respect of
the sale side of such transactions;
(ii) in respect of transactions in Government securities, the bonds issued by any Public
Sector Undertaking and the units traded in a similar manner, the fee payable shall be
computed at the rate of one thousandth of one percent of the turnover;
66 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2002, w.e.f. 20-2-
2002.
(iii) in case of carry forward, renewal or badla transactions the fees shall be computed at
the rate of one hundredth of one percent of the turnover and the reverse off setting
transactions shall not be counted as part of the turnover.
(iv) if brokers are carrying out transactions in securities without reporting them to the
stock exchange, those transactions shall be taken into account for the purpose of turnover
and the fees shall be computed at the rate of one hundredth of one percent of the
turnover;
(v) the trade put through on other stock exchanges shall be included in the turnover of
that exchange if market for that security does not exist on the exchange of which he is a
member and the fees shall be computed at the rate of one hundredth of one percent of the
turnover;
(vi) activity such as underwriting and collection of deposits shall not be taken into
account for the purpose of calculating the turnover’.]
(c) After the expiry of five financial years from the date of initial registration as a stockbroker,
he shall pay a sum of rupees five thousand for 67[every] block of five financial
years commencing from the sixth financial year after the date of grant of initial
registration to keep his registration in force.
2. Fees referred to in clause (a) and (b) of paragraph 1 above shall be paid -
(a) in respect of the financial year 1992-1993 within one month of the commencement of
these regulations;
(b) in respect of the financial year beginning on the 1st day of April, 1993 and the
following financial years, on or before the first day of October of the financial year to
which such payment relates,
and such fees shall be computed with reference to the annual turnover relating to the
preceding financial year.
3. Every remittance of fees referred to in clauses (a) and (b) of paragraph 1, shall be
accompanied by a certificate as to the authenticity of turnover on the basis of which fees
have been computed duly signed by the stock exchange of which the stock-broker is a
member or by a qualified auditor as defined in Section 226 of the Companies Act, 1956.
Explanation - For the purposes of paragraphs 1, 2 and 3 "annual turnover" means the
aggregate of the sale and purchase prices of securities received and receivable by the
67 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2002, w.e.f. 20-2-
2002.
stock broker either on his own account as well as on account of his clients in respect of
sale and purchase or dealing in securities during any financial year.
68[4. Where a corporate entity has been formed by converting the individual or
partnership membership card of the exchange, such corporate entity shall be exempted
from payment of fee for the period for which the erstwhile individual or partnership
member, as the case may be, has already paid the fees subject to the condition that the
erstwhile individual or partner shall be the wholetime Director of the corporate member
so converted and such Director will continue to hold minimum 40% shares of the paid-up
equity capital of the corporate entity for a period of at least three years from the date of
such conversion]
69[“Explanation: It is clarified that the conversion of individual or partnership
membership card of the exchange into corporate entity shall be deemed to be in
continuation of the old entity and no fee shall be collected again from the converted
corporate entity for the period for which the erstwhile entity has paid the fee as per the
regulations”].
70[4A. Where a stock exchange has formed a subsidiary company, which has become a
stock broker of another stock exchange, then the turnover of the stock broker who is
buying, selling or dealing in securities, through the subsidiary company as a sub-broker,
shall be excluded from the turnover of the subsidiary company, only if the stock broker
has paid five years turnover based fees plus fee for a block of five years in accordance
with the regulations, on the concerned stock exchange which has formed the subsidiary
company.]
71[5. If a stock broker fails to remit fees in accordance with paragraph 1 and 2, he shall be
liable to pay interest @ 15% per annum for each month of delay or part thereof;
Provided that the liability to pay interest as aforesaid may be addition to any other action
which the Board may take as deem fit against the stock broker under the Act, or the
Regulations;
Provided further that if the liability of the stock broker on account of payment of interest
works out to be Rs. 100 or less the same may be waived off by the Board taking into
consideration the administrative cost involved in recovering the said amount].
68 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Second Amendment) Regulations, 1998, w.e.f.
21-1-1998.
69 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 1998, w.e.f. 20-2-
2002.
70 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 30-8-
2000.
71 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 1998, w.e.f. 16-
12-1998.
72[“II. Fees to be paid by sub-brokers
Every sub-broker shall pay fees in the manner set out below:
(a) Where a sub-broker was granted certificate of registration by the Board before
August 1, 2006 -
(i) he shall pay a sum of ten thousand rupees for the block of five financial
years commencing from April 1, 2007; and
(ii) after the expiry of the said block of five financial years, he shall pay a sum
of five thousand rupees for every subsequent block of five financial years.
(b) Where a sub-broker is granted certificate of registration by the Board on or
after August 1, 2006 -
(i) he shall pay a sum of ten thousand rupees for the block of five financial
years commencing from the financial year in which registration has been
granted; and
(ii) after the expiry of the said block of five financial years, he shall pay a
sum of five thousand rupees for every subsequent block of five financial
years.
(c) Every sub-broker shall pay fees under sub-clause (a) or sub-clause (b), as the
case may be, within such time as may be specified by the Board.”]
III. MANNER OF FEES TO BE PAID
73[The fees indicated above shall be paid on or before the 1st day of October each year
payable by draft in favour of the Securities and Exchange Board of India at Bombay or at
the respective regional office].
74[IV.Non-applicability to stock – brokers governed by Schedule IIIA.
The provisions of this schedule shall not apply to stock brokers to whom Schedule III-A
applies, from the time when it becomes so applicable.]
72 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 1998, w.e.f.
16-12-1998 for the words,
“II. FEES TO BE PAID BY SUB-BROKER:
(a) A Sub-broker shall pay a fee of rupees one thousand for each financial year for an initial
period of five years.
(b) After the expiry of the five years mentioned above, the sub-broker shall pay a fee of rupees
five hundred for each financial year as long as the Certificate remains in force.”
73 Substituted by the SEBI (Payment of Fees) (Amendment) Regulations, 1995, w.e.f. 28-11-1995 for the
words,
“The fees indicated above shall be paid on or before the 1st day of October each year
payable by a cheque or draft in favour of the Securities and Exchange Board of India" at
Bombay”
74 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. 1-
10-2006.
75[“Schedule III-A
PAYMENT OF FEES BY STOCK BROKERS
[Regulation 10(1)]
Part A – Applicability
1. This schedule shall apply to stock brokers from the following points of time:
(a) All stock brokers who are granted registration by the Board on or after the first
day of October, 2006 – upon grant of such registration;
(b) All stock brokers who were granted registration by the Board on or after the first
day of April, 2006, but before the first day of October, 2006 – from the first day
of October, 2006;
(c) All stock brokers who have not completed five financial years from the date of
grant of registration by the Board, as on the thirty first day of March, 2006 – upon
completion of ten financial years from the date of grant of registration by the
Board;
(d) All stock brokers who have completed five financial years from the date of grant
of registration by the Board, as on the thirty first day of March, 2006 – upon
completion of the current block of five financial years, within the meaning of item
I(1)(c) of Schedule III;
(e) All stock brokers falling under sub-clauses (c) or (d), who opt in accordance with
clause 2 to be governed by the provisions of this Schedule – from such date as
may be specified by the Board.
2. Stock brokers falling under sub-clauses (c) or (d) of clause 1 may opt to pay fees in
accordance with this Schedule before completion of the relevant time periods mentioned
in those sub-clauses, by exercising an option in writing to that effect and communicating
it to the Board, in such manner and within such time as may be specified by the Board.
Part B – Charge of fees
3. On and from the applicability of this Schedule, every stock broker shall pay to the
Board in accordance with Part C, a fee in respect of the securities transactions including
off-market transactions undertaken by them, at the rates mentioned below:
Sl.
No.
Nature of the securities
transaction
Rate of fee
a. All sale and purchase
transactions in securities other
than debt securities.
0.0002 per cent. of the price at which
the securities are purchased or sold
(Rs.20/- per crore)
b. All sale and purchase
transactions in debt securities.
0.00005 per cent. of the price at which
the securities are purchased or sold
(Rs.5/- per crore)
75 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. 1-
10-2006..
4. Nothing in clause 3 shall affect the liability of any stock broker to pay fees under
Schedule III, which accrued before this Schedule became applicable to him and such fees
shall be paid as per the relevant provisions of Schedule III as if they had not ceased to be
applicable to him.
Part C – Manner of payment and recovery
5. (1) Every recognised stock exchange shall collect from every stock broker to whom
this Schedule applies, the fee payable under clause 3 in respect of -
(a) securities transactions entered into by him in that stock exchange; and
(b) off-market transactions entered into by him which are reported to that stock
exchange –
in accordance with the provisions of its bye-laws.
Explanation: The Board may specify the manner in which fees shall be collected from
stock brokers who report the same transactions to different stock exchanges in which they
are members, under clause (b).
(2) The fee collected by a recognised stock exchange under sub-clause (1) during a
calendar month shall be paid by the stock exchange to the Board by the fifth working day
of the following calendar month.
(3) All recognised stock exchanges shall maintain such registers and furnish such returns
or information to the Board in respect of the fee collected under this Schedule, as may be
specified by the Board.
(4) Without prejudice to sub-clause (3), a recognised stock exchange shall also be liable
to furnish such information or explanations to the Board as may be required by it in
respect of fee collected or liable to be collected under this Schedule.
6. (1) Nothing contained in clause 5 shall affect the primary liability of a stock broker to
pay the fees under clause 3 or shall preclude the Board from recovering any such fee
remaining unpaid by any stock broker directly from him.
(2) Where due to the stock broker’s default any fee which was liable to be paid on his
behalf under clause 5 remains unpaid or is paid belatedly, he shall, without prejudice to
any other action that may be taken under the Act, rules or regulations, pay an interest of
15 per cent. per annum for every month of delay or part thereof to the Board.
(3) Every stock broker shall be liable to furnish such information or explanations to the
Board as may be required by it in respect of fee paid or payable under this Schedule.”]
[SCHEDULE IV
[Regulation 16G (1)]
FEES TO BE PAID BY THE TRADING OR CLEARING MEMBER 76[OR SELFCLEARING
MEMBER] OF DERIVATIVES EXCHANGE / DERIVATIVES
SEGMENT / CLEARING CORPORATION / CLEARING HOUSE.
1. A clearing member shall pay a fee of 77[Rs. 50, 000/-] every year till his registration is
in force, in the manner specified below:-
(a) for the first financial year along with the application for registration;
(b) for the subsequent financial years before 1st June of that financial year.
78[“2. Every trading member shall pay to the Board, a fee in respect of the transactions
undertaken by him on the derivatives segment of a recognised stock exchange, at the rate
of 0.0002 per cent. of his turnover (Rs.20/- per crore).
76 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
77 Substituted for Rs. 25,000 by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. 1-10-2006..
78 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f.
1-10-2006. Prior to substitution, it was read as under:
“2. A trading member shall pay every year a fee till his registration is in force, in the
manner specified below:-
(a) where the annual turnover does not exceed Rs. 500 crore in the financial year, a sum
of Rs. 10, 000 for each financial year; and
(b) where the annual turnover exceeds Rs. 500 crore in the financial year, a sum of Rs.
10, 000 plus 10 paisa per Rs. 1, 00, 000 of turnover, for the turnover in excess of Rs. 500
crore in the financial year.
Explanation: For the purpose of clause 2, the expression `annual turnover’ shall mean the
aggregate value of all trades executed by the trading member on the derivatives exchange
or the derivatives segment and shall also include the value of trades settled on the
expiration of derivatives contracts.
59*[However, for option contracts, the `annual turnover’ shall be computed on the basis of
the premium traded for the option contracts and in case where the option is exercised /
assigned, the `annual turnover’ shall be computed on the basis of the notional value of the
Explanation: (A) For the purpose of this clause, the expression ‘turnover’ shall include
the value of the trades executed by the trading member on the derivatives segment of the
recognised stock exchange and of the trades settled on the expiration of derivatives
contracts.
(B) In case of options contracts, ‘turnover’ shall be computed on the basis of premium
traded for the option contracts and in case where the option is exercised or assigned, it
shall be additionally computed on the basis of notional value of option contracts
exercised or assigned.”]
79[2A The “self-clearing member” shall pay every year a fee as specified in clause 1 & 2.
The provisions of clauses 3 to 6 shall be applicable mutatis mutandis to a self-clearing
member.]
80[“3. (1) Every recognised stock exchange shall collect from every trading member,
clearing member and self-clearing member, the fee payable under clause 2 in respect of
his turnover in the derivatives segment of that stock exchange in accordance with the
provisions of its bye-laws.
(2) The fee collected by a recognised stock exchange under sub-clause (1) during a
calendar month shall be paid by the stock exchange to the Board by the fifth working day
of the following calendar month.
option contracts exercised / assigned, in addition to the annual turnover’ computed on the
basis of premium traded]
79 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. 15-11-2003.
80 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. 1-10-2006. Prior to substitution, it was read as under:
“3. Every remittance of fees by a trading member as specified in clause 2 shall be made
every financial year as under:-
(a) For the first financial year in which certificate of registration is granted a sum of Rs.
10, 000/- shall be paid along with the application for registration.
(b) For the subsequent financial years from the initial registration:
(i) A sum of Rs. 10, 000/- shall be paid before 1st June of that financial year; and
(ii) A balance fee of the preceding financial year for the turnover in excess of Rs.500
crores shall be paid before the 1st June of the financial year.
(c) The remittance shall be accompanied by a certificate authenticating the turnover by
the concerned derivatives exchange or derivatives segment.”
(3) All recognised stock exchanges shall maintain such registers and furnish such returns
or information to the Board in respect of the fee collected under this Schedule, as may be
specified by the Board.
(4) Without prejudice to sub-clause (3), a recognised stock exchange shall also be liable
to furnish such information or explanations to the Board as may be required by it in
respect of fee collected or liable to be collected under this Schedule.”]
4. A trading member who also acts as a clearing member shall pay the annual fee
separately, as applicable to each category 81[as specified in clause 1 and 2 above].
82[“5. (1) Nothing contained in clause 3 shall affect the primary liability of a trading
member to pay the fees under clause 2 or shall preclude the Board from recovering any
such fee remaining unpaid by any trading member directly from him.
(2) Where due to the trading member’s default any fee which was liable to be paid on his
behalf under clause 3 remains unpaid or is paid belatedly, he shall, without prejudice to
any other action that may be taken under the Act, rules or regulations, pay an interest of
15 per cent. per annum for every month of delay or part thereof to the Board.
(3) Every trading member shall be liable to furnish such information or explanations to
the Board as may be required by it in respect of fee paid or payable under this
Schedule.”]
6. The financial year shall mean the year commencing from 1st April and ending on 31st
March of the following year.
** Notification: No. GSR 780(E), dated 23-10-1992.s
81 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. 1-10-2006 for the words, “as specified in clause 2 and 3”
82 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. 1-10-2006 for the words,
“ 5. The fees indicated above shall be paid by draft in favour of ` Securities and Exchange
Board of India, Mumbai’. Such draft shall be forwarded to the Board through the
concerned derivatives exchange or derivatives segment or clearing corporation or
clearing house.’’
SEBI Stock Broker Regulations - Part-3
SCHEDULE I – FORMS
FORM A
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers And Sub-Brokers) Regulations, 1992
(Regulation 3)
APPLICATION FORM FOR REGISTRATION AS STOCK BROKERS WITH
SECURITIES AND EXCHANGE BOARD OF INDIA
NAME OF THE STOCK EXCHANGE:
1. Name of Member with Code No.
2. Address of Member
3. Trade name of Member
4. Form of Organisation - Sole proprietorship, partnership, corporate body, financial
institution. Please give names of proprietor / partners / directors.
5. Educational Qualifications
6. Date of admission to membership
7. Whether member of more than one Stock Exchange?
If so, please give name(s) of the Stock Exchange(s) with Code Number(s).
8. Indicate Fax, Telex and Phone number(s) of office and residence.
9. In the case of members admitted on any Stock Exchange after February 21, 1992 the
copy of the information given to the Stock Exchange at the time of admission.
I declare that the information given in this form is true to the best of my knowledge and
belief.
Dated: Signature
Recommendation of the Stock Exchange
This is to certify that _________________ is a member of this Exchange and is
recommended for registration with the Securities and Exchange Board of India.
Signature
Name
Designation
50FORM AA
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS AND SUB-BROKERS) REGULATIONS, 1992
(REGULATION 16A)
APPLICATION FORM FOR REGISTRATION AS A TRADING AND / OR A
CLEARING MEMBER 51[and / or a self clearing member] WITH THE SECURITIES
AND EXCHANGE BOARD OF INDIA
1. Name of the Derivatives Exchange / Segment / Clearing Corporation / Clearing House
of which the applicant is the member. Please furnish the tenure of membership.
2. Name of the Member with Code No.
3. Whether the applicant is to act as a Trading member and/or a Clearing member 52[and /
or a self clearing member]
4. If the applicant is to act as a Trading member, the applicant is required to furnish the
name and details of the clearing member 53[or self clearing member] through whom he
intend to clear and settle his trade.
5. Address of the Member
6. Trade Name of Member
7. Form of Organisation: sole proprietorship / partnership / corporate body / financial
institution. (Please give names of proprietor/ partners/directors)
8. Please furnish a copy of the Memorandum and Articles of Association or the
Partnership Deed, as the case may be.
9. Educational Qualifications of proprietor/partners /directors, etc.
10. Whether the applicant or its sales personnel or approved user has passed any
certification programme? If so, please specify the detail.
50 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 14-3-
2000.
51 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f15-11-
2001.
52 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f15-11-
2001.
53 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
11. The experience of the applicant or their two directors or partners in derivatives
trading or securities market, if so, please give details.
12. Date of admission to membership to the derivatives exchange or derivatives segment /
clearing corporation / clearing house.
13. Whether a member of more than one exchange or derivatives segment or clearing
corporation or clearing house of any segment? If So, please give name (s) of the clearing
corporation / clearing house, or any stock exchange(s) with code number(s)?
14. Networth of the applicant. Please furnish details along with necessary documents in
support thereof.
15. Whether the applicant or its director or partners, any time convicted of any economic
offence ? If so, please furnish the details?
16. Whether the applicant or its directors or partners, declared insolvent / bankrupt or
declared defaulter by any exchange? If so, please furnish details?
17. Whether the applicant or its directors or partners anytime subjected to any
proceedings or penalty by the Board under SEBI Act or any of the regulations framed
under the SEBI Act? If so, please furnish the details.
18. Indicate fax, telex and phone number(s)
19. Whether the application is accompanied by a requisite fee as per Schedule IV of the
Regulations as applicable to the applicant.
I declare that the information given in this form is true and in the event of any
information furnished is false, misleading or suppression of facts, my certificate of
registration is liable to be cancelled by SEBI without assigning any reasons whatsoever.
Dated: Signature:
_____________________________________________________________________
Recommendation of the derivatives exchange / derivatives segment, clearing corporation
/ house.
This is to certify that __________________________ is a member of this Derivatives
Exchange / Derivatives Segment or Clearing Corporation or Clearing House and is
recommended for registration with the Securities and Exchange Board of India.
Signature
Name
Designation
FORM B
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers and Sub-Brokers) Regulations, 1992
(Regulation 11)
APPLICATION FORM FOR REGISTRATION AS A SUB-BROKER WITH
SECURITIES AND EXCHANGE BOARD OF INDIA
1. Name of applicant sub-broker:
2. Trader name of sub-broker, firm, corporate body.
3. Form of organisation – sole proprietorship, partnership, corporate body. Please give
names of proprietor, all partners, directors etc.
4. Educational qualifications of proprietor, partners, directors etc.
Name Status Qualifications
5. Name of the member-broker and Stock Exchange to which applicant is affiliated.
6. Date of acquiring sub-brokership
7. Infrastructural arrangements - indicate fax, telex, phones, number of offices and
residential numbers. Also indicate the number of employees.
Office Address
Phone No
Telex No
Fax No
Residential phone nos. of proprietor, partners, directors etc.
8. Number of branch offices and their location with phone, telex and fax numbers.
I certify that the information given in this application form is true to the best of my/our
knowledge and belief.
Recommendation letter from the stock broker to whom I/we am/are affiliated and two
references, including one from the banker as required are enclosed.
Signature___________________
Date_______________________
_______________________________________________________________________
Recommendation of the Stock Exchange.
This is to certify that ________________________________ is a 54[recognized] subbroker
affiliated to_________________________________ member-broker of this
Exchange.
The application is recommended/not recommended for registration by the Board.
AUTHORISED SIGNATORY
Signature
__________________________ Stock Exchange.
__________________________ Stock Exchange.
FORM C
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS & SUB-BROKERS) REGULATIONS, 1992
RECOMMENDATION LETTER TO BE GIVEN BY THE MEMBER
WITH WHOM THE SUB-BROKER IS AFFILIATED
To,
The ____________________________________ Stock Exchange
Dear Sirs,
I/We understand that___________________________ son of_______ aged_______
Years, residing at_____________________________ and attached to me
at_________________________ for carrying on the shares and securities business as a
sub- broker.
I/We confirm that ______________________ is transacting business through me for a
period from ______________ and he is a fit and proper person to be registered as a subbroker.
54 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003.
I/We also confirm that he is known to me/us for well over_____ years and he has got
good financial background, moral character and integrity. He has been transacting
business frequently and was meeting the market commitments as and when they arise.
I/We hereby recommend his application for granting registration for carrying on shares
and securities business as sub-broker. I/We also wish to state that whatever the
information that has been submitted is true to the best of my/our knowledge and if at a
later date if any material information comes to my/our knowledge subsequent to the
submission of this application, I/We undertake to keep informed about the same.
I/We member/s of ___________________________Exchange hereby agree to
recommend the above mentioned applicant.
Yours faithfully,
Signature of Member (s).
55[FORM CA]
Securities and Exchange Board of India
(Stock Brokers and Sub Brokers) Regulations, 1992.
Recognition letter to be issued by the Stock Exchange
To,
The Securities and Exchange Board of India,
Mumbai.
Dear Sir,
This is to certify that ___________ has been recognized as a sub-broker by this Exchange
being a sub-broker affiliated to member broker ___________ of this Exchange.
Place : Authorized Signatory
Date : For and on behalf of ___________Exchange]
55 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003.
FORM D
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers and Sub-Brokers) Regulations, 1992
(Regulation 6)
CERTIFICATE OF REGISTRATION
In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and
Exchange Board of India Act, 1992 read with the rules and regulations made thereunder,
the Board hereby grants a certificate of registration to_____________________________
a member of the _________________________________________ Stock Exchange(s)
as a Stock Broker for carrying on the activities of buying, selling or dealing in securities
and carrying on such other activities as are permitted by such Stock Exchange(s) subject
to conditions prescribed in the rules and in accordance with the regulations.
Registration number allotted is as under:
_________________________________________
This certificate shall be valid till it is suspended or cancelled in accordance with the
regulations.
Date: ______________ By Order
For and on behalf of
Securities and Exchange Board of India
56 [FORM DA
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS AND SUB BROKERS) REGULATIONS, 1992
(Regulation 16 D)
CERTIFICATE OF REGISTRATION
In exercise of the powers conferred by sub section (1) of section 12 of the Securities and
Exchange Board of India Act, 1992 read with the rules and regulations made thereunder,
the Board hereby grants a certificate of registration to
__________________________________ a member of the __________________
derivatives exchange / derivatives segment / clearing corporation / clearing house as
trading / clearing member 57[or self-clearing member] for carrying on the activities of
dealing in derivatives / clearing & settlement of derivatives trades and for carrying on
56 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 14-3-
2000.
57 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
such other activities as are permitted by such exchange(s) / segment(s) / clearing
corporation / clearing house subject to the conditions prescribed therefor, from time to
time, by the Board.
Registration number allotted is as under:
_________________________
This certificate shall be valid till it is suspended or cancelled in accordance with the
Regulations.
Date : _______________
By order
For and on behalf of
Securities and Exchange Board of India
FORM E
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers and Sub-Brokers) Regulations, 1992
(Regulation 12)
CERTIFICATE OF REGISTRATION
In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and
Exchange Board of India Act, 1992 read with the rules and regulations made thereunder,
the Board hereby grants a certificate of registration to ___________________ as a Sub-
Broker subject to the Rules and in accordance with the regulations.
Registration number allotted is as under:
_________________________________________
This certificate shall be valid till it is suspended or cancelled in accordance with the
regulations.
Date: __________
By Order
For and on behalf of
Securities and Exchange Board of India
SCHEDULE II
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS AND SUB-BROKERS) REGULATIONS, 1992
CODE OF CONDUCT FOR STOCK BROKERS
(Regulation 7)
A. GENERAL
(1) INTEGRITY: A stock-broker, shall maintain high standards of integrity, promptitude
and fairness in the conduct of all his business.
(2) EXERCISE OF DUE SKILL AND CARE: A stock-broker, shall act with due skill,
care and diligence in the conduct of all his business.
(3) MANIPULATION: A stock-broker shall not indulge in manipulative, fraudulent or
deceptive transactions or schemes or spread rumours with a view to distorting market
equilibrium or making personal gains.
(4) MALPRACTICES: A stock-broker shall not create false market either singly or in
concert with others or indulge in any act detrimental to the investors interest or which
leads to interference with the fair and smooth functioning of the market. A stock-broker
shall not involve himself in excessive speculative business in the market beyond
reasonable levels not commensurate with his financial soundness.
(5) COMPLIANCE WITH STATUTORY REQUIREMENTS: A stock-broker shall
abide by all the provisions of the Act and the rules, regulations issued by the
Government, the Board and the stock exchange from time to time as may be applicable to
him.
B. DUTY TO THE INVESTOR
(1) EXECUTION OF ORDERS: A stock-broker, in his dealings with the clients and the
general investing public, shall faithfully execute the orders for buying and selling of
securities at the best available market price and not refuse to deal with a Small Investor
merely on the ground of the volume of business involved. A stock-broker shall promptly
inform his client about the execution or non-execution of an order, and make prompt
payment in respect of securities sold and arrange for prompt delivery of securities
purchased by clients.
(2) ISSUE OF CONTRACT NOTE: A stock-broker shall issue without delay to his client
58[or client of the sub-broker, as the case may be] a contract note for all transactions in
the form specified by the stock exchange.
(3) BREACH OF TRUST: A stock-broker shall not disclose or discuss with any other
person or make improper use of the details of personal investments and other information
of a confidential nature of the client which he comes to know in his business relationship.
(4) BUSINESS AND COMMISSION:
(a) A stock-broker shall not encourage sales or purchases of securities with the sole
object of generating brokerage or commission.
(b)A stock-broker shall not furnish false or misleading quotations or give any other false
or misleading advice or information to the clients with a view of inducing him to do
business in particular securities and enabling himself to earn brokerage or commission
thereby.
(5) BUSINESS OF DEFAULTING CLIENTS: A stock-broker shall not deal or transact
business knowingly, directly or indirectly or execute an order for a client who has failed
to carry out his commitments in relation to securities with another stock-broker.
(6) FAIRNESS TO CLIENTS: A stock-broker, when dealing with a client, shall disclose
whether he is acting as a principal or as an agent and shall ensure at the same time, that
no conflict of interest arises between him and the client. In the event of a conflict of
interest, he shall inform the client accordingly and shall not seek to gain a direct or
indirect personal advantage from the situation and shall not consider clients' interest
inferior to his own.
(7) INVESTMENT ADVICE: A stock-broker shall not make a recommendation to any
client who might be expected to rely thereon to acquire, dispose of, retain any securities
unless he has reasonable grounds for believing that the recommendation is suitable for
such a client upon the basis of the facts, if disclosed by such a client as to his own
security holdings, financial situation and objectives of such investment. The stock-broker
should seek such information from clients, wherever he feels it is appropriate to do so.
59[(7A) Investment Advice in publicly accessible media –
(a) A stock broker or any of his employees shall not render, directly or indirectly, any
investment advice about any security in the publicly accessible media, whether real - time
or non real-time, unless a disclosure of his interest including the interest of his dependent
family members and the employer including their long or short position in the said
security has been made, while rendering such advice.
58 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 13-9-
2003.
59 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 29-5-
2001.
(b) In case, an employee of the stock broker is rendering such advice, he shall also
disclose the interest of his dependent family members and the employer including their
long or short position in the said security, while rendering such advice.]
(8) COMPETENCE OF STOCK BROKER: A stock-broker should have adequately
trained staff and arrangements to render fair, prompt and competent services to his
clients.
C. STOCK-BROKERS VIS-A-VIS OTHER STOCK-BROKERS
(1) CONDUCT OF DEALINGS: A stock-broker shall co-operate with the other
contracting party in comparing unmatched transactions. A stock-broker shall not
knowingly and willfully deliver documents which constitute bad delivery and shall cooperate
with other contracting party for prompt replacement of documents which are
declared as bad delivery.
(2) PROTECTION OF CLIENTS INTERESTS: A stock-broker shall extend fullest cooperation
to other stock-brokers in protecting the interests of his clients regarding their
rights to dividends, bonus shares, right shares and any other right related to such
securities.
(3) TRANSACTIONS WITH STOCK-BROKERS: A stock-broker shall carry out his
transactions with other stock-brokers and shall comply with his obligations in completing
the settlement of transactions with them.
(4) ADVERTISEMENT AND PUBLICITY: A stock-broker shall not advertise his
business publicly unless permitted by the stock exchange.
(5) INDUCEMENT OF CLIENTS: A stock-broker shall not resort to unfair means of
inducing clients from other stock- brokers.
(6) FALSE OR MISLEADING RETURNS: A stock-broker shall not neglect or fail or
refuse to submit the required returns and not make any false or misleading statement on
any returns required to be submitted to the Board and the stock exchange.
60[D (1) A stock broker shall enter into an agreement as specified by the Board with his
client.
(2) A stock broker shall also enter into an agreement as specified by the Board with the
client of the sub-broker.]
60 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003.
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS & SUB-BROKERS) Regulations, 1992
CODE OF CONDUCT FOR SUB-BROKERS
(Regulation 15)
A. GENERAL
(1) INTEGRITY: A sub-broker, shall maintain high standards of integrity, promptitude
and fairness in the conduct of all investment business.
(2) EXERCISE OF DUE SKILL AND CARE: A sub-broker, shall act with due skill, care
and diligence in the conduct of all investment business.
B. DUTY TO THE INVESTOR
(1) EXECUTION OF ORDERS: A sub-broker, in his dealings with the clients and the
general investing public, shall faithfully execute the orders for buying and selling of
securities at the best available market price. A sub-broker shall promptly inform his client
about the execution or non-execution of an order 61[******]
62 [(2) A sub-broker shall render necessary assistance to his client in obtaining the
contract note from the stock broker]
(3) BREACH OF TRUST: A sub-broker shall not disclose or discuss with any other
person or make improper use of the details of personal investments and other information
of a confidential nature of the client which he comes to know in his business relationship.
(4) BUSINESS AND COMMISSION:
(a) A sub-broker shall not encourage sales or purchases of securities with the sole object
of generating brokerage or commission.
(b)A sub-broker shall not furnish false or misleading quotations or give any other false or
misleading advice or information to the clients with a view of inducing him to do
61 Words ‘and make payment in respect of securities sold and arrange for prompt delivery of securities
purchased by clients” inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. 23-9-2003.
62 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003 for the words, “
(2) A. Issue of purchase or sale notes:
(a) A sub-broker shall issue promptly to his clients purchase or sale notes for all the transactions entered
into by him with his clients.
(b) A sub-broker shall issue promptly to his clients scrip wise split purchase or sale notes and similarly bills
and receipts showing the brokerage separately in respect of all transactions in the specified form.
(c) A sub-broker shall only split the contract notes client-wise and scrip wise originally issued to him by the
affiliated broker into different denominations.
(d) A sub-broker shall not match the purchase and sale orders of his clients and each such order must
invariably be routed through a member-broker of the stock exchange with whom he is affiliated.”
business in particular securities and enabling himself to earn brokerage or commission
thereby.
(c)A sub-broker shall not charge from his clients a commission exceeding one and onehalf
of one percent of the value mentioned in the respective sale or purchase notes.
(5) BUSINESS OF DEFAULTING CLIENTS: A sub-broker shall not deal or transact
business knowingly, directly or indirectly or execute an order for a client who has failed
to carry out his commitments in relation to securities and is in default with another broker
or sub-broker.
(6) FAIRNESS TO CLIENTS: A sub-broker, when dealing with a client, shall disclose
that he is acting as an agent 63[******] ensuring at the same time, that no conflict of
interest arises between him and the client. In the event of a conflict of interest, he shall
inform the client accordingly and shall not seek to gain a direct or indirect personal
advantage from the situation and shall not consider clients' interest inferior to his own.
(7) INVESTMENT ADVICE: A sub-broker shall not make a recommendation to any
client who might be expected to rely thereon to acquire, dispose of, retain any securities
unless he has reasonable grounds for believing that the recommendation is suitable for
such a client upon the basis of the facts, if disclosed by such a client as to his own
security holdings, financial situation and objectives of such investment. The sub-broker
should seek such information from clients, wherever they feel it is appropriate to do so.
64[7A – Investment Advice in publicly accessible media –
(a) A sub-broker or any of his employees shall not render, directly and indirectly any
investment advice about any security in the publicly accessible media, whether real –
time or non real-time, unless a disclosure of his interest including his long or short
position in the said security has been made, while rendering such advice.
(b) In case, an employee of the sub-broker is rendering such advice, he shall also disclose
the interest of his dependent family members and the employer including their long or
short position in the said security, while rendering such advice.]
(8) COMPETENCE OF SUB-BROKER: A sub-broker should have adequately trained
staff and arrangements to render fair, prompt and competent se
FORM A
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers And Sub-Brokers) Regulations, 1992
(Regulation 3)
APPLICATION FORM FOR REGISTRATION AS STOCK BROKERS WITH
SECURITIES AND EXCHANGE BOARD OF INDIA
NAME OF THE STOCK EXCHANGE:
1. Name of Member with Code No.
2. Address of Member
3. Trade name of Member
4. Form of Organisation - Sole proprietorship, partnership, corporate body, financial
institution. Please give names of proprietor / partners / directors.
5. Educational Qualifications
6. Date of admission to membership
7. Whether member of more than one Stock Exchange?
If so, please give name(s) of the Stock Exchange(s) with Code Number(s).
8. Indicate Fax, Telex and Phone number(s) of office and residence.
9. In the case of members admitted on any Stock Exchange after February 21, 1992 the
copy of the information given to the Stock Exchange at the time of admission.
I declare that the information given in this form is true to the best of my knowledge and
belief.
Dated: Signature
Recommendation of the Stock Exchange
This is to certify that _________________ is a member of this Exchange and is
recommended for registration with the Securities and Exchange Board of India.
Signature
Name
Designation
50FORM AA
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS AND SUB-BROKERS) REGULATIONS, 1992
(REGULATION 16A)
APPLICATION FORM FOR REGISTRATION AS A TRADING AND / OR A
CLEARING MEMBER 51[and / or a self clearing member] WITH THE SECURITIES
AND EXCHANGE BOARD OF INDIA
1. Name of the Derivatives Exchange / Segment / Clearing Corporation / Clearing House
of which the applicant is the member. Please furnish the tenure of membership.
2. Name of the Member with Code No.
3. Whether the applicant is to act as a Trading member and/or a Clearing member 52[and /
or a self clearing member]
4. If the applicant is to act as a Trading member, the applicant is required to furnish the
name and details of the clearing member 53[or self clearing member] through whom he
intend to clear and settle his trade.
5. Address of the Member
6. Trade Name of Member
7. Form of Organisation: sole proprietorship / partnership / corporate body / financial
institution. (Please give names of proprietor/ partners/directors)
8. Please furnish a copy of the Memorandum and Articles of Association or the
Partnership Deed, as the case may be.
9. Educational Qualifications of proprietor/partners /directors, etc.
10. Whether the applicant or its sales personnel or approved user has passed any
certification programme? If so, please specify the detail.
50 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 14-3-
2000.
51 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f15-11-
2001.
52 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f15-11-
2001.
53 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
11. The experience of the applicant or their two directors or partners in derivatives
trading or securities market, if so, please give details.
12. Date of admission to membership to the derivatives exchange or derivatives segment /
clearing corporation / clearing house.
13. Whether a member of more than one exchange or derivatives segment or clearing
corporation or clearing house of any segment? If So, please give name (s) of the clearing
corporation / clearing house, or any stock exchange(s) with code number(s)?
14. Networth of the applicant. Please furnish details along with necessary documents in
support thereof.
15. Whether the applicant or its director or partners, any time convicted of any economic
offence ? If so, please furnish the details?
16. Whether the applicant or its directors or partners, declared insolvent / bankrupt or
declared defaulter by any exchange? If so, please furnish details?
17. Whether the applicant or its directors or partners anytime subjected to any
proceedings or penalty by the Board under SEBI Act or any of the regulations framed
under the SEBI Act? If so, please furnish the details.
18. Indicate fax, telex and phone number(s)
19. Whether the application is accompanied by a requisite fee as per Schedule IV of the
Regulations as applicable to the applicant.
I declare that the information given in this form is true and in the event of any
information furnished is false, misleading or suppression of facts, my certificate of
registration is liable to be cancelled by SEBI without assigning any reasons whatsoever.
Dated: Signature:
_____________________________________________________________________
Recommendation of the derivatives exchange / derivatives segment, clearing corporation
/ house.
This is to certify that __________________________ is a member of this Derivatives
Exchange / Derivatives Segment or Clearing Corporation or Clearing House and is
recommended for registration with the Securities and Exchange Board of India.
Signature
Name
Designation
FORM B
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers and Sub-Brokers) Regulations, 1992
(Regulation 11)
APPLICATION FORM FOR REGISTRATION AS A SUB-BROKER WITH
SECURITIES AND EXCHANGE BOARD OF INDIA
1. Name of applicant sub-broker:
2. Trader name of sub-broker, firm, corporate body.
3. Form of organisation – sole proprietorship, partnership, corporate body. Please give
names of proprietor, all partners, directors etc.
4. Educational qualifications of proprietor, partners, directors etc.
Name Status Qualifications
5. Name of the member-broker and Stock Exchange to which applicant is affiliated.
6. Date of acquiring sub-brokership
7. Infrastructural arrangements - indicate fax, telex, phones, number of offices and
residential numbers. Also indicate the number of employees.
Office Address
Phone No
Telex No
Fax No
Residential phone nos. of proprietor, partners, directors etc.
8. Number of branch offices and their location with phone, telex and fax numbers.
I certify that the information given in this application form is true to the best of my/our
knowledge and belief.
Recommendation letter from the stock broker to whom I/we am/are affiliated and two
references, including one from the banker as required are enclosed.
Signature___________________
Date_______________________
_______________________________________________________________________
Recommendation of the Stock Exchange.
This is to certify that ________________________________ is a 54[recognized] subbroker
affiliated to_________________________________ member-broker of this
Exchange.
The application is recommended/not recommended for registration by the Board.
AUTHORISED SIGNATORY
Signature
__________________________ Stock Exchange.
__________________________ Stock Exchange.
FORM C
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS & SUB-BROKERS) REGULATIONS, 1992
RECOMMENDATION LETTER TO BE GIVEN BY THE MEMBER
WITH WHOM THE SUB-BROKER IS AFFILIATED
To,
The ____________________________________ Stock Exchange
Dear Sirs,
I/We understand that___________________________ son of_______ aged_______
Years, residing at_____________________________ and attached to me
at_________________________ for carrying on the shares and securities business as a
sub- broker.
I/We confirm that ______________________ is transacting business through me for a
period from ______________ and he is a fit and proper person to be registered as a subbroker.
54 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003.
I/We also confirm that he is known to me/us for well over_____ years and he has got
good financial background, moral character and integrity. He has been transacting
business frequently and was meeting the market commitments as and when they arise.
I/We hereby recommend his application for granting registration for carrying on shares
and securities business as sub-broker. I/We also wish to state that whatever the
information that has been submitted is true to the best of my/our knowledge and if at a
later date if any material information comes to my/our knowledge subsequent to the
submission of this application, I/We undertake to keep informed about the same.
I/We member/s of ___________________________Exchange hereby agree to
recommend the above mentioned applicant.
Yours faithfully,
Signature of Member (s).
55[FORM CA]
Securities and Exchange Board of India
(Stock Brokers and Sub Brokers) Regulations, 1992.
Recognition letter to be issued by the Stock Exchange
To,
The Securities and Exchange Board of India,
Mumbai.
Dear Sir,
This is to certify that ___________ has been recognized as a sub-broker by this Exchange
being a sub-broker affiliated to member broker ___________ of this Exchange.
Place : Authorized Signatory
Date : For and on behalf of ___________Exchange]
55 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003.
FORM D
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers and Sub-Brokers) Regulations, 1992
(Regulation 6)
CERTIFICATE OF REGISTRATION
In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and
Exchange Board of India Act, 1992 read with the rules and regulations made thereunder,
the Board hereby grants a certificate of registration to_____________________________
a member of the _________________________________________ Stock Exchange(s)
as a Stock Broker for carrying on the activities of buying, selling or dealing in securities
and carrying on such other activities as are permitted by such Stock Exchange(s) subject
to conditions prescribed in the rules and in accordance with the regulations.
Registration number allotted is as under:
_________________________________________
This certificate shall be valid till it is suspended or cancelled in accordance with the
regulations.
Date: ______________ By Order
For and on behalf of
Securities and Exchange Board of India
56 [FORM DA
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS AND SUB BROKERS) REGULATIONS, 1992
(Regulation 16 D)
CERTIFICATE OF REGISTRATION
In exercise of the powers conferred by sub section (1) of section 12 of the Securities and
Exchange Board of India Act, 1992 read with the rules and regulations made thereunder,
the Board hereby grants a certificate of registration to
__________________________________ a member of the __________________
derivatives exchange / derivatives segment / clearing corporation / clearing house as
trading / clearing member 57[or self-clearing member] for carrying on the activities of
dealing in derivatives / clearing & settlement of derivatives trades and for carrying on
56 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 14-3-
2000.
57 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
such other activities as are permitted by such exchange(s) / segment(s) / clearing
corporation / clearing house subject to the conditions prescribed therefor, from time to
time, by the Board.
Registration number allotted is as under:
_________________________
This certificate shall be valid till it is suspended or cancelled in accordance with the
Regulations.
Date : _______________
By order
For and on behalf of
Securities and Exchange Board of India
FORM E
SECURITIES AND EXCHANGE BOARD OF INDIA
(Stock Brokers and Sub-Brokers) Regulations, 1992
(Regulation 12)
CERTIFICATE OF REGISTRATION
In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and
Exchange Board of India Act, 1992 read with the rules and regulations made thereunder,
the Board hereby grants a certificate of registration to ___________________ as a Sub-
Broker subject to the Rules and in accordance with the regulations.
Registration number allotted is as under:
_________________________________________
This certificate shall be valid till it is suspended or cancelled in accordance with the
regulations.
Date: __________
By Order
For and on behalf of
Securities and Exchange Board of India
SCHEDULE II
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS AND SUB-BROKERS) REGULATIONS, 1992
CODE OF CONDUCT FOR STOCK BROKERS
(Regulation 7)
A. GENERAL
(1) INTEGRITY: A stock-broker, shall maintain high standards of integrity, promptitude
and fairness in the conduct of all his business.
(2) EXERCISE OF DUE SKILL AND CARE: A stock-broker, shall act with due skill,
care and diligence in the conduct of all his business.
(3) MANIPULATION: A stock-broker shall not indulge in manipulative, fraudulent or
deceptive transactions or schemes or spread rumours with a view to distorting market
equilibrium or making personal gains.
(4) MALPRACTICES: A stock-broker shall not create false market either singly or in
concert with others or indulge in any act detrimental to the investors interest or which
leads to interference with the fair and smooth functioning of the market. A stock-broker
shall not involve himself in excessive speculative business in the market beyond
reasonable levels not commensurate with his financial soundness.
(5) COMPLIANCE WITH STATUTORY REQUIREMENTS: A stock-broker shall
abide by all the provisions of the Act and the rules, regulations issued by the
Government, the Board and the stock exchange from time to time as may be applicable to
him.
B. DUTY TO THE INVESTOR
(1) EXECUTION OF ORDERS: A stock-broker, in his dealings with the clients and the
general investing public, shall faithfully execute the orders for buying and selling of
securities at the best available market price and not refuse to deal with a Small Investor
merely on the ground of the volume of business involved. A stock-broker shall promptly
inform his client about the execution or non-execution of an order, and make prompt
payment in respect of securities sold and arrange for prompt delivery of securities
purchased by clients.
(2) ISSUE OF CONTRACT NOTE: A stock-broker shall issue without delay to his client
58[or client of the sub-broker, as the case may be] a contract note for all transactions in
the form specified by the stock exchange.
(3) BREACH OF TRUST: A stock-broker shall not disclose or discuss with any other
person or make improper use of the details of personal investments and other information
of a confidential nature of the client which he comes to know in his business relationship.
(4) BUSINESS AND COMMISSION:
(a) A stock-broker shall not encourage sales or purchases of securities with the sole
object of generating brokerage or commission.
(b)A stock-broker shall not furnish false or misleading quotations or give any other false
or misleading advice or information to the clients with a view of inducing him to do
business in particular securities and enabling himself to earn brokerage or commission
thereby.
(5) BUSINESS OF DEFAULTING CLIENTS: A stock-broker shall not deal or transact
business knowingly, directly or indirectly or execute an order for a client who has failed
to carry out his commitments in relation to securities with another stock-broker.
(6) FAIRNESS TO CLIENTS: A stock-broker, when dealing with a client, shall disclose
whether he is acting as a principal or as an agent and shall ensure at the same time, that
no conflict of interest arises between him and the client. In the event of a conflict of
interest, he shall inform the client accordingly and shall not seek to gain a direct or
indirect personal advantage from the situation and shall not consider clients' interest
inferior to his own.
(7) INVESTMENT ADVICE: A stock-broker shall not make a recommendation to any
client who might be expected to rely thereon to acquire, dispose of, retain any securities
unless he has reasonable grounds for believing that the recommendation is suitable for
such a client upon the basis of the facts, if disclosed by such a client as to his own
security holdings, financial situation and objectives of such investment. The stock-broker
should seek such information from clients, wherever he feels it is appropriate to do so.
59[(7A) Investment Advice in publicly accessible media –
(a) A stock broker or any of his employees shall not render, directly or indirectly, any
investment advice about any security in the publicly accessible media, whether real - time
or non real-time, unless a disclosure of his interest including the interest of his dependent
family members and the employer including their long or short position in the said
security has been made, while rendering such advice.
58 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 13-9-
2003.
59 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 29-5-
2001.
(b) In case, an employee of the stock broker is rendering such advice, he shall also
disclose the interest of his dependent family members and the employer including their
long or short position in the said security, while rendering such advice.]
(8) COMPETENCE OF STOCK BROKER: A stock-broker should have adequately
trained staff and arrangements to render fair, prompt and competent services to his
clients.
C. STOCK-BROKERS VIS-A-VIS OTHER STOCK-BROKERS
(1) CONDUCT OF DEALINGS: A stock-broker shall co-operate with the other
contracting party in comparing unmatched transactions. A stock-broker shall not
knowingly and willfully deliver documents which constitute bad delivery and shall cooperate
with other contracting party for prompt replacement of documents which are
declared as bad delivery.
(2) PROTECTION OF CLIENTS INTERESTS: A stock-broker shall extend fullest cooperation
to other stock-brokers in protecting the interests of his clients regarding their
rights to dividends, bonus shares, right shares and any other right related to such
securities.
(3) TRANSACTIONS WITH STOCK-BROKERS: A stock-broker shall carry out his
transactions with other stock-brokers and shall comply with his obligations in completing
the settlement of transactions with them.
(4) ADVERTISEMENT AND PUBLICITY: A stock-broker shall not advertise his
business publicly unless permitted by the stock exchange.
(5) INDUCEMENT OF CLIENTS: A stock-broker shall not resort to unfair means of
inducing clients from other stock- brokers.
(6) FALSE OR MISLEADING RETURNS: A stock-broker shall not neglect or fail or
refuse to submit the required returns and not make any false or misleading statement on
any returns required to be submitted to the Board and the stock exchange.
60[D (1) A stock broker shall enter into an agreement as specified by the Board with his
client.
(2) A stock broker shall also enter into an agreement as specified by the Board with the
client of the sub-broker.]
60 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003.
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK BROKERS & SUB-BROKERS) Regulations, 1992
CODE OF CONDUCT FOR SUB-BROKERS
(Regulation 15)
A. GENERAL
(1) INTEGRITY: A sub-broker, shall maintain high standards of integrity, promptitude
and fairness in the conduct of all investment business.
(2) EXERCISE OF DUE SKILL AND CARE: A sub-broker, shall act with due skill, care
and diligence in the conduct of all investment business.
B. DUTY TO THE INVESTOR
(1) EXECUTION OF ORDERS: A sub-broker, in his dealings with the clients and the
general investing public, shall faithfully execute the orders for buying and selling of
securities at the best available market price. A sub-broker shall promptly inform his client
about the execution or non-execution of an order 61[******]
62 [(2) A sub-broker shall render necessary assistance to his client in obtaining the
contract note from the stock broker]
(3) BREACH OF TRUST: A sub-broker shall not disclose or discuss with any other
person or make improper use of the details of personal investments and other information
of a confidential nature of the client which he comes to know in his business relationship.
(4) BUSINESS AND COMMISSION:
(a) A sub-broker shall not encourage sales or purchases of securities with the sole object
of generating brokerage or commission.
(b)A sub-broker shall not furnish false or misleading quotations or give any other false or
misleading advice or information to the clients with a view of inducing him to do
61 Words ‘and make payment in respect of securities sold and arrange for prompt delivery of securities
purchased by clients” inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. 23-9-2003.
62 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-
2003 for the words, “
(2) A. Issue of purchase or sale notes:
(a) A sub-broker shall issue promptly to his clients purchase or sale notes for all the transactions entered
into by him with his clients.
(b) A sub-broker shall issue promptly to his clients scrip wise split purchase or sale notes and similarly bills
and receipts showing the brokerage separately in respect of all transactions in the specified form.
(c) A sub-broker shall only split the contract notes client-wise and scrip wise originally issued to him by the
affiliated broker into different denominations.
(d) A sub-broker shall not match the purchase and sale orders of his clients and each such order must
invariably be routed through a member-broker of the stock exchange with whom he is affiliated.”
business in particular securities and enabling himself to earn brokerage or commission
thereby.
(c)A sub-broker shall not charge from his clients a commission exceeding one and onehalf
of one percent of the value mentioned in the respective sale or purchase notes.
(5) BUSINESS OF DEFAULTING CLIENTS: A sub-broker shall not deal or transact
business knowingly, directly or indirectly or execute an order for a client who has failed
to carry out his commitments in relation to securities and is in default with another broker
or sub-broker.
(6) FAIRNESS TO CLIENTS: A sub-broker, when dealing with a client, shall disclose
that he is acting as an agent 63[******] ensuring at the same time, that no conflict of
interest arises between him and the client. In the event of a conflict of interest, he shall
inform the client accordingly and shall not seek to gain a direct or indirect personal
advantage from the situation and shall not consider clients' interest inferior to his own.
(7) INVESTMENT ADVICE: A sub-broker shall not make a recommendation to any
client who might be expected to rely thereon to acquire, dispose of, retain any securities
unless he has reasonable grounds for believing that the recommendation is suitable for
such a client upon the basis of the facts, if disclosed by such a client as to his own
security holdings, financial situation and objectives of such investment. The sub-broker
should seek such information from clients, wherever they feel it is appropriate to do so.
64[7A – Investment Advice in publicly accessible media –
(a) A sub-broker or any of his employees shall not render, directly and indirectly any
investment advice about any security in the publicly accessible media, whether real –
time or non real-time, unless a disclosure of his interest including his long or short
position in the said security has been made, while rendering such advice.
(b) In case, an employee of the sub-broker is rendering such advice, he shall also disclose
the interest of his dependent family members and the employer including their long or
short position in the said security, while rendering such advice.]
(8) COMPETENCE OF SUB-BROKER: A sub-broker should have adequately trained
staff and arrangements to render fair, prompt and competent se
SEBI Stock Broker Regulation - Part-2
CHAPTER IV
GENERAL OBLIGATIONS AND RESPONSIBILITIES
To maintain proper books of accounts, records etc.
17
(1) Every stock-broker shall keep and maintain the following books of accounts,
records and documents namely; -
(a) Register of transactions (Sauda Book);
(b) Clients ledger;
(c) General ledger;
(d) Journals;
(e) Cash book;
(f) Bank pass book;
(g) Documents register containing, inter-alia, particulars of securities received
and delivered in physical form and the statement of accounts and other records
relating to receipt and delivery of securities provided by the Depository
Participants in respect of dematerialized securities.
(h) Members' contract books showing details of all contracts entered into by him
with other members of the same exchange or counterfoils or duplicates of memos of confirmation issued to such other member;
(i) Counterfoils or duplicates of contract notes issued to clients;
(j) Written consent of clients in respect of contracts entered into as principals;
(k) Margin deposit book;
(l) Registers of accounts of sub- brokers;
(m) an agreement with a sub- broker specifying the scope of authority and
responsibilities of the Stock-Broker and such sub- broker.
(n) An agreement with the stock broker and with the client of the sub-broker to
establish privity of contract between a stock broker and the client of the subbroker.
(2) Every stock-broker shall intimate to the Board the place where the books of
accounts, records and documents are maintained.
(3) Without prejudice to sub- regulation (1), every stock- broker shall, after the close of each accounting period furnish to the Board if so required as soon as possible but not later than six months from the close of the said period a copy of the audited balance sheet and profit and loss account, as at the end of the said
accounting period:
Provided that, if it is not possible to furnish the above documents within the time
specified, the stock-broker shall keep the Board informed of the same together
with the reasons for the delay and the period of time by which such documents
would be furnished.
Maintenance of books of accounts and records
18. Every stock broker shall preserve the books of account and other records maintained under regulation 17 for a minimum period of five years.
Appointment of compliance officer
18A (1) Every stock broker shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines instructions, etc, issued by the Board or the Central Government and for redressal of investors grievances.
(2) The compliance officer shall immediately and independently report the Board any
non-compliance observed by him
Stock broker not to deal with unregistered stock broker.
18B The stock broker shall not deal with any person as a sub-broker unless such person has been granted certificate of registration by the Board under sub-regulation(1) of Regulation 12.
CHAPTER V
PROCEDURE FOR INSPECTION
Board's right to inspect.
19 (1) Where it appears to the Board so to do, it may appoint one or more persons as
inspecting authority to undertake inspection of the books of accounts, other
records and documents of the stock- brokers for any of the purposes specified in
sub-regulation (2).
(2) The purposes referred to in sub-regulation (1) shall be as follows, namely:
(a) to ensure that the books of accounts and other books are being maintained in
the manner required;
(b) that the provisions of the Act, rules, regulations and the provisions of the
Securities Contracts (Regulation) Act and the rules made thereunder are being
complied with;
(c) to investigate into the complaints received from investors, other stock brokers,
sub-brokers or any other person on any matter having a bearing on the
activities of the stock- brokers; and
(d) to investigate suo-moto, in the interest of securities business or investors'
interest, into the affairs of the stock- broker.
Procedure for inspection.
20. (1) Before undertaking any inspection under regulation 19, the Board shall give a
reasonable notice to the stock- broker for that purpose.
(2) Notwithstanding anything contained in sub-regulation (1), where the Board is
satisfied that in the interest of the investors or in public interest no such notice
should be given, it may by an order in writing direct that the inspection of the
affairs of the stock broker be taken up without such notice.
(3) On being empowered by the Board, the inspecting authority shall undertake the
inspection and the stock-broker against whom an inspection is being carried out
shall be bound to discharge his obligations as provided under regulation 21.
Obligations of stock - broker on inspection by the Board.
21. (1) It shall be the duty of every director, proprietor, partner, officer and employee of the stock-broker, who is being inspected, to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with the statements and information relating to the transactions in securities market within such time as the said officer may require.
(2) The stock-broker shall allow the inspecting authority to have reasonable access
to the premises occupied by such stock- broker or by any other person on his
behalf and also extend reasonable facility for examining any books, records,
documents and computer data in the possession of the stock- broker or any other
person and also provide copies of documents or other materials which, in the
opinion of the inspecting authority are relevant.
(3) The inspecting authority, in the course of inspection, shall be entitled to examine or record statements of any member, director, partner, proprietor and employee of the stock- broker.
(4) It shall be the duty of every director proprietor, partner, officer and employee of the stock broker to give to the inspecting authority all assistance in connection
with the inspection, which the stock broker may be reasonably expected to give.
Submission of Report to the Board.
22. The inspecting authority shall, as soon as may be possible, submit an inspection
report to the Board.
Action on inspection or investigation report
23. The Board shall after consideration of inspection or investigation report take such action as it may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and
Imposing Penalty) Regulations, 2002, Chapter VIA of the Act or section 24 of the
Act.
24. Notwithstanding anything contained above, the Board may appoint a qualified auditor to investigate into the books of account or the affairs of the stock-broker:
Provided that, the auditor so appointed shall have the same powers of the inspecting
authority as mentioned in regulation 19 and the obligations of the stock- broker in
regulation 21 shall be applicable to the investigation under this regulation.
CHAPTER VI
PROCEDURE FOR ACTION IN CASE OF DEFAULT
25. Liability for contravention of the Act, rules or the regulations – A stock
broker or a sub-broker who contravenes any of the provisions of the Act, rules or
regulations framed thereunder shall be liable for any one or more of the following actions
–
(i) Monetary penalty under Chapter VIA of the Act.
(ii) Penalties as specified under Securities and Exchange Board of India
(Procedure for Holding Enquiry Officer and Imposing Penalty) Regulation,
2002 including suspension or cancellation of certificate of registration as a
stock broker or a sub-broker.
(iii) Prosecution under section 24 of the Act.
26. Liability for monetary penalty – A stock broker or a sub-broker shall be liable
for monetary penalty in respect of the following violations, namely -
(i) Failure to file any return or report with the Board.
(ii) Failure to furnish any information, books or other documents within 15 days
of issue of notice by the Board.
(iii) Failure to maintain books of accounts or records as per the Act, rules or
regulations framed thereunder.
(iv) Failure to redress the grievances of investors within 30 days of receipt of
notice from the Board.
48 Regulations 25to 28 substituted for regulation 25 by the SEBI (Stock Brokers and Sub-brokers)
(Amendment) Regulations, 2003, w.e.f. 20-11-2003. Prior to substitution, these were read as,
“ Liability for action in case of default – (1) A sub-broker who
(a) fails to comply with any conditions subject to which registration has been granted;
(b) contravenes any of the provisions of the Act, rules or regulations;
(c) contravenes the provisions of the Securities Contracts (Regulation) Act or the rules made
thereunder;
(d) contravenes the rules, regulations or bye-laws of the stock exchange;
shall be liable to any of the penalties specified in sub-regulation (2).
(2) The penalties referred to in sub-regulation (1) may be either—
(a) suspension of registration after the inquiry, for a specified period; or
(b) cancellation of registration.
(v) Failure to issue contract notes in the form and manner specified by the stock
exchange of which sub broker is a member.
(vi) Failure to deliver any security or make payment of the amount due to the
investor within 48 hours of the settlement of trade unless the client has agreed
in writing otherwise.
(vii) Charging of brokerage which is in excess of brokerage specified in the
regulations or the bye-laws of the stock exchange.
(viii) Dealing in securities of a body corporate listed on any stock exchange on his
own behalf or on behalf of any other person on the basis of any unpublished
price sensitive information.
(ix) Procuring or communicating any unpublished price sensitive information
except as required in the ordinary course of business or under any law.
(x) Counseling any person to deal in securities of any body corporate on the basis
of unpublished price sensitive information.
(xi) Indulging in fraudulent and unfair trade practices relating to securities.
(xii) Execution of trade without entering into agreement with the client under the
Act, rules or regulations framed thereunder or failure to maintain client
registration form or commission of any irregularities in maintaining the client
agreement.
(xiii) Failure to segregate his own funds or securities from the client’s funds or
securities or using the securities or funds of the client for his own purpose or
for purpose of any other client.
(xiv) Acting as an unregistered sub-broker or dealing with unregistered sub-brokers.
(xv) Failure to comply with directions issued by the Board under the Act or the
regulations framed thereunder.
(xvi) Failure to exercise due skill, care and diligence.
(xvii) Failure to seek prior permission of the Board in case of any change in its
status and constitution.
(xviii) Failure to satisfy the net worth or capital adequacy norms, if any, specified by
the Board.
(xix) Extending use of trading terminal to any unauthorized person or place.
(xx) Violations for which no separate penalty has been provided under these
regulations.
27. Liability for action under the Enquiry Proceeding Regulations – A stock
broker or a sub-broker shall be liable for any action as specified in the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and
Imposing Penalty) Regulations, 2002 including suspension or cancellation of his
certificate of registration as a stock broker or a sub-broker, as the case may be, if he-
(i) ceases to be a member of a stock exchange; or
(ii) has been declared defaulter by a stock exchange and not readmitted as a
member within a period of six months; or
(iii) surrenders his certificate of registration to the Board; or
(iv) has been found to be not a fit and proper person by the Board under these or
any other regulations ; or
(v) has been declared insolvent or order for winding up has been passed in the
case of a broker or sub-broker being a company registered under the
Companies Act, 1956; or
(vi) or any of the partners or any whole time director in case a broker or subbroker
is a company registered under the Companies Act, 1956 has been
convicted by a court of competent jurisdiction for an offence involving moral
turpitude; or
(vii) fails to pay fee as per Schedule III of these regulations; or
(viii) fails to comply with the rules, regulations and bye-laws of the stock exchange
of which he is a member; or
(ix) fails to co-operate with the inspecting or investigating authority; or
(x) fails to abide by any award of the Ombudsman or decision of the Board under
the Securities and Exchange Board of India (Ombudsman) Regulations, 2003;
or
(xi) fails to pay the penalty imposed by the Adjudicating Officer; or
(xii) indulges in market manipulation of securities or index; or
(xiii) indulges in insider trading in violation of Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 1992; or
(xiv) violates Securities and Exchange Board of India (Prohibition of Fraudulent
and Unfair Trade Practices relating to Securities Market) Regulations, 2003;
or
(xv) commits violation of any of the provisions for which monetary penalty or
other penalties could be imposed; or
(xvi) fails to comply with the circulars issued by the Board; or
(xvii) commits violations specified in regulation 26 which in the opinion of the
Board are of a grievous nature.
28. Liability for prosecution – A stock broker or a sub-broker shall be liable for
prosecution under section 24 of the Act for any of the following violations, namely:-
(i) Dealing in securities without obtaining certificate of registration from the
Board as a stock broker or a sub-broker.
(ii) Dealing in securities or providing trading floor or assisting in trading outside
the recognized stock exchange in violation of provisions of the Securities
Contract (Regulation) Act, 1956 or rules made or notifications issued
thereunder.
(iii) Market manipulation of securities or index.
(iv) Indulging in insider trading in violation of Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 1992.
(v) Violating the Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 2003.
(vi) Failure without reasonable cause(
a) to produce to the investigating authority or any person authorized by him
in this behalf, any books registers, records or other documents which are
in his custody or power; or
(b) to appear before the investigating authority personally or to answer any
question which is put to him by the investigating authority or
(c) to sign the notes of any examination taken down by the investigating
authority.
(vii) Failure to pay penalty imposed by the adjudicating officer or failure to comply
with any of his directions or orders.]
49[*********]
49 Regulations 26 to 32 had been omitted by the Securities and Exchange Board of India (Procedure for
Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 w.e.f. 27-9-2002. Prior to
this these regulations were read as under:
“Suspension, cancellation of registration, etc.
26. (1) A penalty of suspension of registration of a stock- broker may be imposed if:-
(i) the stock-broker violates the provisions of the Act, rules and regulations;
(ii) the stock-broker does not follow the code of conduct annexed at Schedule II;
(iii) the stock-broker –
(a) fails to furnish any information related to his transactions in securities as required by the
Board;
(b) furnishes wrong or false information,
(c) does not submit periodical returns as required by the Board;
(d) does not co-operate in any enquiry conducted by the Board;
(iv) the stock-broker fails to resolve the complaints of the investors or fails to give a satisfactory
reply to the Board in this behalf;
(v) the stock-broker indulges in manipulating or price rigging or cornering activities in the market;
(vi) the stock-broker is guilty of misconduct or improper or unbusinesslike or unprofessional
conduct;
(vii) the financial position of the stock broker deteriorates to such an extent that the Board is of the
opinion that his continuance in securities business is not in the interest of investors and other
stock- brokers;
(viii) the stock-broker fails to pay the fees;
(ix) the stock-broker violates the conditions of registration;
(x) the membership of the stock- broker is suspended by the stock exchange:
Provided that the Board for reasons to be recorded in writing may in case of repeated
defaults of the type mentioned above impose a penalty of cancellation of registration of the
stock-broker.
(2) A penalty of cancellation of registration of a stock-broker may be imposed if:-
(i) the stock-broker violates any provisions of insider trading regulations or take-over
regulations;
(ii) The stock-broker is guilty of fraud, or is convicted of a criminal offence; and
(iii) cancellation of membership of the stock-broker by the stock exchange.
Manner of order of suspension or cancellation
27. No order of penalty of suspension and cancellation shall be imposed except after holding an enquiry in
accordance with the procedure specified in regulation 28.
a*[Provided that the holding of such an enquiry shall not be necessary in cases where the stock
broker:
(a) ceases to be a member of a recognised stock exchange; or
(b) is declared defaulter by the stock exchange and is not readmitted to the membership of the
exchange within a period of six months from such declaration ;or
(c) surrenders the membership of the stock exchange; or
(d) is declared insolvent by a Court; or
(e) fails to pay the registration or annual fees to the Board in the manner specified in the regulations;
or
(f) voluntarily surrenders certificate to the Board; or
(g) is wound up by an order passed by the Court.
Provided further that no action shall be taken against the stock broker without giving an
opportunity of hearing to the stock broker].
a. Proviso to regulation 27 was inserted by the SEBI (Stock Brokers and Sub Brokers)
(Amendment) Regulations, 1999 published in the Official Gazette of India dated 06.07.1999.
Manner of holding enquiry
28. (1) For the purpose of holding an enquiry under regulation 27, the Board may appoint an enquiry
officer.
(2) The enquiry officer shall issue to the stock-broker a notice at the registered office or the principal
place of business of the stock-broker.
(3) The stock-broker may, within thirty days from the date of receipt of such notice, furnish to the
enquiry officer a reply together with copies of documentary or other evidence relied on by him or
sought by the Board from him.
(4) The enquiry officer shall, give a reasonable opportunity of hearing to the stock-broker to enable
him to make submissions in support of his reply made under sub-regulation (3).
(5) Before the enquiry officer, the stock-broker may either appear in person or through any person
duly authorised on his behalf:
Provided that no lawyer or advocate shall be permitted to represent the stock-broker at the
enquiry:
Provided further that where a lawyer or an advocate has been appointed by the Board as a presenting officer under sub- regulation (6), it shall be lawful for the stock-broker to present his case through a lawyer or advocate.
(6) If it is considered necessary, the enquiry officer may request the Board to appoint a presenting
officer to present its case.
(7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the
stock-broker, submit a report to the Board and recommend the penalty to be awarded as also on
the justification of the penalty proposed in the notice.
Show-cause notice and order
29. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice as to why the penalty as it considers appropriate should not be imposed.
(2) The stock-broker shall within twenty-one days of the date of the receipt of the show- cause send a reply to the Board.
(3) The Board after considering the reply to the show-cause notice, if received, shall as soon as possible but not later than thirty days from the receipt of the reply, if any, pass such order as it deems fit.
(4) Every order passed under sub- regulation (3) shall be self- contained and give reasons for the conclusions stated therein including justification of the penalty imposed by that order.
(5) The Board shall send a copy of the order under sub- regulation (3) to the stock- broker, stock exchange of which the stock-broker is the member, a*[******].
(5) The Board shall send a copy of the order under sub- regulation (3) to the stock- broker, stock exchange of which the stock-broker is the member, a*[******].
a. "and to the Central Government" omitted by the SEBI (Stock Brokers and Sub brokers)Amendment Regulations, 1999 published in the Official Gazette of India dated 06.07.1999.
Effect of suspension and cancellation of registration of stock-broker.
30. (1) On and from the date of the suspension of broker he shall cease to buy, sell or deal in securities as a stock-broker during the period of suspension.
(2) On and from the date of cancellation, the stock-broker shall with immediate effect cease to buy sell or deal in securities as a stock-broker.
Publication of order of suspension
31. The order of suspension or cancellation of certificate passed in sub- regulation (3) of regulation 29 shall be published in at least two daily newspapers by the Board be published in at least two daily newspapers by the Boards.
Appeal to the Securities Appellate Tribunal
32. a*[Any person aggrieved by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, (i.e., after 16th December 1999), under these regulations may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter]
a. Substituted for the following provision by the SEBI (Appeal to the Securities Appellate Tribunal) (Amendments) Regulations, 2000 published in the Official Gazette of India dated 28.03.2000
"Any person aggrieved by an order of the Board may prefer an appeal to the Central
Government"
GENERAL OBLIGATIONS AND RESPONSIBILITIES
To maintain proper books of accounts, records etc.
17
(1) Every stock-broker shall keep and maintain the following books of accounts,
records and documents namely; -
(a) Register of transactions (Sauda Book);
(b) Clients ledger;
(c) General ledger;
(d) Journals;
(e) Cash book;
(f) Bank pass book;
(g) Documents register containing, inter-alia, particulars of securities received
and delivered in physical form and the statement of accounts and other records
relating to receipt and delivery of securities provided by the Depository
Participants in respect of dematerialized securities.
(h) Members' contract books showing details of all contracts entered into by him
with other members of the same exchange or counterfoils or duplicates of memos of confirmation issued to such other member;
(i) Counterfoils or duplicates of contract notes issued to clients;
(j) Written consent of clients in respect of contracts entered into as principals;
(k) Margin deposit book;
(l) Registers of accounts of sub- brokers;
(m) an agreement with a sub- broker specifying the scope of authority and
responsibilities of the Stock-Broker and such sub- broker.
(n) An agreement with the stock broker and with the client of the sub-broker to
establish privity of contract between a stock broker and the client of the subbroker.
(2) Every stock-broker shall intimate to the Board the place where the books of
accounts, records and documents are maintained.
(3) Without prejudice to sub- regulation (1), every stock- broker shall, after the close of each accounting period furnish to the Board if so required as soon as possible but not later than six months from the close of the said period a copy of the audited balance sheet and profit and loss account, as at the end of the said
accounting period:
Provided that, if it is not possible to furnish the above documents within the time
specified, the stock-broker shall keep the Board informed of the same together
with the reasons for the delay and the period of time by which such documents
would be furnished.
Maintenance of books of accounts and records
18. Every stock broker shall preserve the books of account and other records maintained under regulation 17 for a minimum period of five years.
Appointment of compliance officer
18A (1) Every stock broker shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines instructions, etc, issued by the Board or the Central Government and for redressal of investors grievances.
(2) The compliance officer shall immediately and independently report the Board any
non-compliance observed by him
Stock broker not to deal with unregistered stock broker.
18B The stock broker shall not deal with any person as a sub-broker unless such person has been granted certificate of registration by the Board under sub-regulation(1) of Regulation 12.
CHAPTER V
PROCEDURE FOR INSPECTION
Board's right to inspect.
19 (1) Where it appears to the Board so to do, it may appoint one or more persons as
inspecting authority to undertake inspection of the books of accounts, other
records and documents of the stock- brokers for any of the purposes specified in
sub-regulation (2).
(2) The purposes referred to in sub-regulation (1) shall be as follows, namely:
(a) to ensure that the books of accounts and other books are being maintained in
the manner required;
(b) that the provisions of the Act, rules, regulations and the provisions of the
Securities Contracts (Regulation) Act and the rules made thereunder are being
complied with;
(c) to investigate into the complaints received from investors, other stock brokers,
sub-brokers or any other person on any matter having a bearing on the
activities of the stock- brokers; and
(d) to investigate suo-moto, in the interest of securities business or investors'
interest, into the affairs of the stock- broker.
Procedure for inspection.
20. (1) Before undertaking any inspection under regulation 19, the Board shall give a
reasonable notice to the stock- broker for that purpose.
(2) Notwithstanding anything contained in sub-regulation (1), where the Board is
satisfied that in the interest of the investors or in public interest no such notice
should be given, it may by an order in writing direct that the inspection of the
affairs of the stock broker be taken up without such notice.
(3) On being empowered by the Board, the inspecting authority shall undertake the
inspection and the stock-broker against whom an inspection is being carried out
shall be bound to discharge his obligations as provided under regulation 21.
Obligations of stock - broker on inspection by the Board.
21. (1) It shall be the duty of every director, proprietor, partner, officer and employee of the stock-broker, who is being inspected, to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with the statements and information relating to the transactions in securities market within such time as the said officer may require.
(2) The stock-broker shall allow the inspecting authority to have reasonable access
to the premises occupied by such stock- broker or by any other person on his
behalf and also extend reasonable facility for examining any books, records,
documents and computer data in the possession of the stock- broker or any other
person and also provide copies of documents or other materials which, in the
opinion of the inspecting authority are relevant.
(3) The inspecting authority, in the course of inspection, shall be entitled to examine or record statements of any member, director, partner, proprietor and employee of the stock- broker.
(4) It shall be the duty of every director proprietor, partner, officer and employee of the stock broker to give to the inspecting authority all assistance in connection
with the inspection, which the stock broker may be reasonably expected to give.
Submission of Report to the Board.
22. The inspecting authority shall, as soon as may be possible, submit an inspection
report to the Board.
Action on inspection or investigation report
23. The Board shall after consideration of inspection or investigation report take such action as it may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and
Imposing Penalty) Regulations, 2002, Chapter VIA of the Act or section 24 of the
Act.
24. Notwithstanding anything contained above, the Board may appoint a qualified auditor to investigate into the books of account or the affairs of the stock-broker:
Provided that, the auditor so appointed shall have the same powers of the inspecting
authority as mentioned in regulation 19 and the obligations of the stock- broker in
regulation 21 shall be applicable to the investigation under this regulation.
CHAPTER VI
PROCEDURE FOR ACTION IN CASE OF DEFAULT
25. Liability for contravention of the Act, rules or the regulations – A stock
broker or a sub-broker who contravenes any of the provisions of the Act, rules or
regulations framed thereunder shall be liable for any one or more of the following actions
–
(i) Monetary penalty under Chapter VIA of the Act.
(ii) Penalties as specified under Securities and Exchange Board of India
(Procedure for Holding Enquiry Officer and Imposing Penalty) Regulation,
2002 including suspension or cancellation of certificate of registration as a
stock broker or a sub-broker.
(iii) Prosecution under section 24 of the Act.
26. Liability for monetary penalty – A stock broker or a sub-broker shall be liable
for monetary penalty in respect of the following violations, namely -
(i) Failure to file any return or report with the Board.
(ii) Failure to furnish any information, books or other documents within 15 days
of issue of notice by the Board.
(iii) Failure to maintain books of accounts or records as per the Act, rules or
regulations framed thereunder.
(iv) Failure to redress the grievances of investors within 30 days of receipt of
notice from the Board.
48 Regulations 25to 28 substituted for regulation 25 by the SEBI (Stock Brokers and Sub-brokers)
(Amendment) Regulations, 2003, w.e.f. 20-11-2003. Prior to substitution, these were read as,
“ Liability for action in case of default – (1) A sub-broker who
(a) fails to comply with any conditions subject to which registration has been granted;
(b) contravenes any of the provisions of the Act, rules or regulations;
(c) contravenes the provisions of the Securities Contracts (Regulation) Act or the rules made
thereunder;
(d) contravenes the rules, regulations or bye-laws of the stock exchange;
shall be liable to any of the penalties specified in sub-regulation (2).
(2) The penalties referred to in sub-regulation (1) may be either—
(a) suspension of registration after the inquiry, for a specified period; or
(b) cancellation of registration.
(v) Failure to issue contract notes in the form and manner specified by the stock
exchange of which sub broker is a member.
(vi) Failure to deliver any security or make payment of the amount due to the
investor within 48 hours of the settlement of trade unless the client has agreed
in writing otherwise.
(vii) Charging of brokerage which is in excess of brokerage specified in the
regulations or the bye-laws of the stock exchange.
(viii) Dealing in securities of a body corporate listed on any stock exchange on his
own behalf or on behalf of any other person on the basis of any unpublished
price sensitive information.
(ix) Procuring or communicating any unpublished price sensitive information
except as required in the ordinary course of business or under any law.
(x) Counseling any person to deal in securities of any body corporate on the basis
of unpublished price sensitive information.
(xi) Indulging in fraudulent and unfair trade practices relating to securities.
(xii) Execution of trade without entering into agreement with the client under the
Act, rules or regulations framed thereunder or failure to maintain client
registration form or commission of any irregularities in maintaining the client
agreement.
(xiii) Failure to segregate his own funds or securities from the client’s funds or
securities or using the securities or funds of the client for his own purpose or
for purpose of any other client.
(xiv) Acting as an unregistered sub-broker or dealing with unregistered sub-brokers.
(xv) Failure to comply with directions issued by the Board under the Act or the
regulations framed thereunder.
(xvi) Failure to exercise due skill, care and diligence.
(xvii) Failure to seek prior permission of the Board in case of any change in its
status and constitution.
(xviii) Failure to satisfy the net worth or capital adequacy norms, if any, specified by
the Board.
(xix) Extending use of trading terminal to any unauthorized person or place.
(xx) Violations for which no separate penalty has been provided under these
regulations.
27. Liability for action under the Enquiry Proceeding Regulations – A stock
broker or a sub-broker shall be liable for any action as specified in the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and
Imposing Penalty) Regulations, 2002 including suspension or cancellation of his
certificate of registration as a stock broker or a sub-broker, as the case may be, if he-
(i) ceases to be a member of a stock exchange; or
(ii) has been declared defaulter by a stock exchange and not readmitted as a
member within a period of six months; or
(iii) surrenders his certificate of registration to the Board; or
(iv) has been found to be not a fit and proper person by the Board under these or
any other regulations ; or
(v) has been declared insolvent or order for winding up has been passed in the
case of a broker or sub-broker being a company registered under the
Companies Act, 1956; or
(vi) or any of the partners or any whole time director in case a broker or subbroker
is a company registered under the Companies Act, 1956 has been
convicted by a court of competent jurisdiction for an offence involving moral
turpitude; or
(vii) fails to pay fee as per Schedule III of these regulations; or
(viii) fails to comply with the rules, regulations and bye-laws of the stock exchange
of which he is a member; or
(ix) fails to co-operate with the inspecting or investigating authority; or
(x) fails to abide by any award of the Ombudsman or decision of the Board under
the Securities and Exchange Board of India (Ombudsman) Regulations, 2003;
or
(xi) fails to pay the penalty imposed by the Adjudicating Officer; or
(xii) indulges in market manipulation of securities or index; or
(xiii) indulges in insider trading in violation of Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 1992; or
(xiv) violates Securities and Exchange Board of India (Prohibition of Fraudulent
and Unfair Trade Practices relating to Securities Market) Regulations, 2003;
or
(xv) commits violation of any of the provisions for which monetary penalty or
other penalties could be imposed; or
(xvi) fails to comply with the circulars issued by the Board; or
(xvii) commits violations specified in regulation 26 which in the opinion of the
Board are of a grievous nature.
28. Liability for prosecution – A stock broker or a sub-broker shall be liable for
prosecution under section 24 of the Act for any of the following violations, namely:-
(i) Dealing in securities without obtaining certificate of registration from the
Board as a stock broker or a sub-broker.
(ii) Dealing in securities or providing trading floor or assisting in trading outside
the recognized stock exchange in violation of provisions of the Securities
Contract (Regulation) Act, 1956 or rules made or notifications issued
thereunder.
(iii) Market manipulation of securities or index.
(iv) Indulging in insider trading in violation of Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 1992.
(v) Violating the Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 2003.
(vi) Failure without reasonable cause(
a) to produce to the investigating authority or any person authorized by him
in this behalf, any books registers, records or other documents which are
in his custody or power; or
(b) to appear before the investigating authority personally or to answer any
question which is put to him by the investigating authority or
(c) to sign the notes of any examination taken down by the investigating
authority.
(vii) Failure to pay penalty imposed by the adjudicating officer or failure to comply
with any of his directions or orders.]
49[*********]
49 Regulations 26 to 32 had been omitted by the Securities and Exchange Board of India (Procedure for
Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 w.e.f. 27-9-2002. Prior to
this these regulations were read as under:
“Suspension, cancellation of registration, etc.
26. (1) A penalty of suspension of registration of a stock- broker may be imposed if:-
(i) the stock-broker violates the provisions of the Act, rules and regulations;
(ii) the stock-broker does not follow the code of conduct annexed at Schedule II;
(iii) the stock-broker –
(a) fails to furnish any information related to his transactions in securities as required by the
Board;
(b) furnishes wrong or false information,
(c) does not submit periodical returns as required by the Board;
(d) does not co-operate in any enquiry conducted by the Board;
(iv) the stock-broker fails to resolve the complaints of the investors or fails to give a satisfactory
reply to the Board in this behalf;
(v) the stock-broker indulges in manipulating or price rigging or cornering activities in the market;
(vi) the stock-broker is guilty of misconduct or improper or unbusinesslike or unprofessional
conduct;
(vii) the financial position of the stock broker deteriorates to such an extent that the Board is of the
opinion that his continuance in securities business is not in the interest of investors and other
stock- brokers;
(viii) the stock-broker fails to pay the fees;
(ix) the stock-broker violates the conditions of registration;
(x) the membership of the stock- broker is suspended by the stock exchange:
Provided that the Board for reasons to be recorded in writing may in case of repeated
defaults of the type mentioned above impose a penalty of cancellation of registration of the
stock-broker.
(2) A penalty of cancellation of registration of a stock-broker may be imposed if:-
(i) the stock-broker violates any provisions of insider trading regulations or take-over
regulations;
(ii) The stock-broker is guilty of fraud, or is convicted of a criminal offence; and
(iii) cancellation of membership of the stock-broker by the stock exchange.
Manner of order of suspension or cancellation
27. No order of penalty of suspension and cancellation shall be imposed except after holding an enquiry in
accordance with the procedure specified in regulation 28.
a*[Provided that the holding of such an enquiry shall not be necessary in cases where the stock
broker:
(a) ceases to be a member of a recognised stock exchange; or
(b) is declared defaulter by the stock exchange and is not readmitted to the membership of the
exchange within a period of six months from such declaration ;or
(c) surrenders the membership of the stock exchange; or
(d) is declared insolvent by a Court; or
(e) fails to pay the registration or annual fees to the Board in the manner specified in the regulations;
or
(f) voluntarily surrenders certificate to the Board; or
(g) is wound up by an order passed by the Court.
Provided further that no action shall be taken against the stock broker without giving an
opportunity of hearing to the stock broker].
a. Proviso to regulation 27 was inserted by the SEBI (Stock Brokers and Sub Brokers)
(Amendment) Regulations, 1999 published in the Official Gazette of India dated 06.07.1999.
Manner of holding enquiry
28. (1) For the purpose of holding an enquiry under regulation 27, the Board may appoint an enquiry
officer.
(2) The enquiry officer shall issue to the stock-broker a notice at the registered office or the principal
place of business of the stock-broker.
(3) The stock-broker may, within thirty days from the date of receipt of such notice, furnish to the
enquiry officer a reply together with copies of documentary or other evidence relied on by him or
sought by the Board from him.
(4) The enquiry officer shall, give a reasonable opportunity of hearing to the stock-broker to enable
him to make submissions in support of his reply made under sub-regulation (3).
(5) Before the enquiry officer, the stock-broker may either appear in person or through any person
duly authorised on his behalf:
Provided that no lawyer or advocate shall be permitted to represent the stock-broker at the
enquiry:
Provided further that where a lawyer or an advocate has been appointed by the Board as a presenting officer under sub- regulation (6), it shall be lawful for the stock-broker to present his case through a lawyer or advocate.
(6) If it is considered necessary, the enquiry officer may request the Board to appoint a presenting
officer to present its case.
(7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the
stock-broker, submit a report to the Board and recommend the penalty to be awarded as also on
the justification of the penalty proposed in the notice.
Show-cause notice and order
29. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice as to why the penalty as it considers appropriate should not be imposed.
(2) The stock-broker shall within twenty-one days of the date of the receipt of the show- cause send a reply to the Board.
(3) The Board after considering the reply to the show-cause notice, if received, shall as soon as possible but not later than thirty days from the receipt of the reply, if any, pass such order as it deems fit.
(4) Every order passed under sub- regulation (3) shall be self- contained and give reasons for the conclusions stated therein including justification of the penalty imposed by that order.
(5) The Board shall send a copy of the order under sub- regulation (3) to the stock- broker, stock exchange of which the stock-broker is the member, a*[******].
(5) The Board shall send a copy of the order under sub- regulation (3) to the stock- broker, stock exchange of which the stock-broker is the member, a*[******].
a. "and to the Central Government" omitted by the SEBI (Stock Brokers and Sub brokers)Amendment Regulations, 1999 published in the Official Gazette of India dated 06.07.1999.
Effect of suspension and cancellation of registration of stock-broker.
30. (1) On and from the date of the suspension of broker he shall cease to buy, sell or deal in securities as a stock-broker during the period of suspension.
(2) On and from the date of cancellation, the stock-broker shall with immediate effect cease to buy sell or deal in securities as a stock-broker.
Publication of order of suspension
31. The order of suspension or cancellation of certificate passed in sub- regulation (3) of regulation 29 shall be published in at least two daily newspapers by the Board be published in at least two daily newspapers by the Boards.
Appeal to the Securities Appellate Tribunal
32. a*[Any person aggrieved by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, (i.e., after 16th December 1999), under these regulations may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter]
a. Substituted for the following provision by the SEBI (Appeal to the Securities Appellate Tribunal) (Amendments) Regulations, 2000 published in the Official Gazette of India dated 28.03.2000
"Any person aggrieved by an order of the Board may prefer an appeal to the Central
Government"
SEBI Stock Brokers Regulations India- Part-1
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK-BROKERS AND SUB-BROKERS) REGULATIONS, 1992
CONTENTS
CHAPTER I: PRELIMINARY
1. Short title and commencement
2. Definitions
CHAPTER II: REGISTRATION OF STOCK BROKERS
3. Application for registration of stock broker
4. Furnishing information, clarification, etc.
5. Consideration of application
5A. Applicability of Securities and Exchange Board of India (Criteria for Fit and Proper
Person)
6. Procedure for registration
6A. Conditions of registration
7. Stock Brokers to abide by Code of Conduct
8. Procedure where registration is not granted
9. Effect of refusal of certificate of registration
10. Payment of fees and the consequences of failure to pay fees
CHAPTER III: REGISTRATION OF SUB BROKER
11. Registration as sub-broker
11A. Application for registration of sub-broker
12. Procedure for registration
13. Procedure for registration is not granted
14. Effect of refusal
15. General obligations and inspection
15A. Director not to act as sub-broker
16. Application of Chapter IV, V & VI
CHAPTER IIIA: REGISTRATION OF TRADING AND CLEARING MEMBERS
16A. Application for registration of trading member or clearing member
16B. Furnishing of information, clarification etc
16C. Consideration of application
16D. Procedure for registration
16E. Procedure where registration is not granted
16F. Effect of refusal of certificate of registration
16G. Payment of fees and consequences of failure to pay fees
16H. Trading member / clearing member to abide by the Code of Conduct etc
16I. Chapter IV, V & VI applicable
CHAPTER IV: GENERAL OBLIGATIONS AND RESPONSIBILITIES
17. To maintain proper books of accounts, records etc.
18. Maintenance of books of accounts and records
18A. Appointment of compliance officer
18B. Stock broker not deal with un-registered sub-broker
CHAPTER V: PROCEDURE FOR INSPECTION
19. Board’s right to inspect
20. Procedure for inspection
21. Obligations of stock broker on inspection by the board
22. Submission of report to the Board
23. Action on inspection or investigation report
24. Appointment of auditor
CHAPTER VI: PROCEDURE FOR ACTION IN CASE OF DEFAULT
25A.Liability for contravention of the Act, rules or the regulations.
26. Liability for monetary penalty
27. Liability for action under the Enquiry Proceeding Regulations.
28. Liability for prosecution
SCHEDULE I: FORMS
FORM A: APPLICATION FORM FOR REGISTRATION AS STOCK BROKERS
WITH SECURITIES AND EXCHANGE BOARD OF INDIA
FORM AA: APPLICATION FORM FOR REGISTRATION AS A TRADING AND
/OR A CLEARING MEMBER [AND /OR A SELF – CLEARING
MEMBER] WITH THE SECURITIES AND EXCHANGE BOARD OF
INDIA
FORM B: APPLICATION FORM FOR REGISTRATION AS A SUB BROKER WITH
SECURITIES AND EXCHANGE BOARD OF INDIA
FORM C: RECOMMENDATION LETTER TO BE GIVEN BY THE MEMBER WITH
WHOM THE SUB BROKER IS AFFILIATED
FORM CA: RECOGNITION LETTER TO BE ISSUED BY STOCK EXCHANGE
FORM D: CERTIFICATE OF REGISTRATION
FORM DA: CERTIFICATE OF REGISTRATION
FORM E: CERTIFICATE OF REGISTRATION
SCHEDULE II: CODE OF CONDUCT WITH THE STOCK BROKERS
SCHEDULE III: FEES TO BE PAID BY THE STOCK BROKERS
SCHEDULE IIIA: PAYMENT OF FEES BY STOCK BROKERS
SCHEDULE IV: FEES TO BE PAID BY THE TRADING OR CLEARING
MEMBER [OR SELF CLEARING MEMBER] OF
DERIVATIVES EXCHANGE/ DERIVATIVES SEGMENT /
CLEARING CORPORATION /CLEARING HOUSE
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK-BROKERS AND SUB-BROKERS) REGULATIONS, 1992
In exercise of the powers conferred by section 30 of the Securities and Exchange Board
of India Act, 1992 (15 of 1992), the Board hereby 1[******] makes the following
regulations, namely: -
CHAPTER I
PRELIMINARY
Short title and commencement.
1. (1) These regulations may be called the Securities and Exchange Board of India
(Stock Brokers and Sub-brokers) Regulations, 1992.
(2) These regulations shall come into force on the date of their publication in the
Official Gazette.2
Definitions.
2. In these regulations, unless the context otherwise requires:-
3[ “(a) “Act” means the Securities and Exchange Board of India Act, 1992
(15 of 1992);
(aa) “certificate” means a certificate of registration issued by the Board;
(ab) “change of status or constitution” in relation to a stock broker or a
sub-broker means any change in its status or constitution of whatsoever
nature and includes –
(i) in case of a body corporate –
(A) amalgamation, demerger, consolidation or any other kind
of corporate restructuring falling within the scope of
section 391 of the Companies Act, 1956 (1 of 1956) or the
corresponding provision of any other law for the time being
in force;
(B) change in its managing director, whole-time director or
director appointed in compliance with clause (v) of sub-rule
(4A) of rule 8 of the Securities Contracts (Regulation)
Rules, 1957; and
(C) any change in control over the body corporate;
1 Words ‘with the previous approval of the Central Government” omitted by the the SEBI (Stock Brokers
Sub-brokers) (Third Amendment) Regulations, 1998, w.e.f. 16-12-1998.
2 23–10-1992
3 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006
(ii) any change between the following legal forms – individual,
partnership firm, Hindu undivided family, private company, public
company, unlimited company or statutory corporation and other
similar changes;
(iii) in case of a partnership firm any change in partners not amounting
to dissolution of the firm;
(ac) “change in control”, in relation to a stock broker or a sub-broker being
a body corporate, means:-
(i) if its shares are listed on any recognised stock exchange, change in
control within the meaning of regulation 12 of the Securities and
Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997;
(ii) in any other case, change in the controlling interest in the body
corporate;
Explanation: For the purpose of sub-clause (ii), the expression
“controlling interest” means an interest, whether direct or indirect, to the
extent of at least fifty one percent. of voting rights in the body corporate;”]
4[5(ad)] `clearing corporation or clearing house’ means the clearing corporation or
clearing house of a recognised stock exchange to clear and settle trades in
securities.
6[(ae)] `clearing member’ means a member of a clearing corporation or clearing
house of the derivatives exchange or derivatives segment of an exchange, who
may clear and settle transactions in securities.]
7[******]
(b) "form" means a form specified in Schedule I;
(c) "inspecting authority" means one or more persons appointed by the Board to
exercise powers conferred under Chapter V of these regulations;
(d) "regulations" means Securities and Exchange Board of India (Stock-brokers and
Sub- brokers) Regulations, 1992;
(e) 8[***]
4 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2000, w.e.f. 14-3-
2000.
5 Clause (a) renumbered as clause ((ad) by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006
6 Clause (aa) renumbered as clause (ae) ) by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006
7 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006.
(f) "Securities Contracts (Regulation) Act" means the Securities Contracts
(Regulation) Act, 1956 (42 of 1956);
9[(fa) "self clearing member" means a member of a clearing corporation or clearing
house of the derivatives exchange or derivatives segment of a stock exchange who
may clear and settle transactions on its own account or on account of its clients
only, and shaal not clear ort settle transactions in securities for any other trading
member(s)]
(g) "small investor" means any investor buying or selling securities on a cash
transaction for a market value not exceeding rupees fifty thousand in aggregate on
any day as shown in a contract note issued by the stock-broker.
10[“(ga) “stock exchange” means a stock exchange which is for the time being
recognised by the Central Government or by the Board under section 4 of the
Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(gb) “stock broker” means a member of a stock exchange;
(gc) “sub-broker” means any person not being a member of stock exchange who
acts on behalf of a stock broker as an agent or otherwise for assisting the investors
in buying, selling or dealing in securities thorough such stock brokers;”]
11[12(gd) `trading member’ means a member of the derivatives exchange or
derivatives segment of a stock exchange and who settles the trade in the clearing
corporation or clearing house through a clearing member;]
(h) all other words and expressions occurring in these regulations shall bear the same
meaning as in the Act 13[****].
CHAPTER II
REGISTRATION OF STOCK BROKERS
Application for registration of stock broker.
8 Omitted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006. Prior to omission, it was read as, “rules means securities and exchange Board of India(Stock Brokers
and Sub-brokers) Rules, 1992
9 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-2001.
10 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006. [(ga) renumbered as (gd) and before this the clauses (ga) to (gd) inserted.]
11 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 14-3-2000.
12 Clause (ga) renumbered as clause (gd) by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006.
13 Words “and the rules” omitted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006.
3. (1) An application by a stock-broker for grant of a certificate shall be made in Form A
through the stock exchange or stock exchanges, as the case may be, of which he is
admitted as a member.
(2) The stock exchange shall forward the application form to the Board as early as
possible but not later than thirty days from the date of its receipt.
(3) Notwithstanding anything contained in sub-regulation (1), any application made
by a stock- broker prior to coming into force of these regulations containing such
particulars or as near thereto as mentioned in the Form A shall be treated as an
application made in pursuance of sub-regulation (1) and dealt with accordingly:
Provided that the requirement of the payment of fees shall be the same as is
referred to in sub-regulation (1) of regulation 10.
Furnishing information, clarification, etc.
4. (1) The Board may require the applicant to furnish such further information or
clarifications, regarding the dealings in securities and matters connected thereto to
consider the application for grant of a certificate.
(2) The applicant or, its principal officer shall, if so required, appear before the Board
for personal representation.
Consideration application.
5. The Board shall take into account for considering the grant of a certificate all matters
relating to buying, selling, or dealing in securities and in particular the following,
namely, whether the stock broker
(a) is eligible to be admitted as a member of a stock exchange;
(b) has the necessary infrastructure like adequate office space, equipments and man
power to effectively discharge his activities;
(c) has any past experience in the business of buying, selling or dealing in securities;
(d) is subjected to disciplinary proceedings under the rules, regulations and bye-laws
of a stock exchange with respect to his business as a stock-broker involving either
himself or any of his partners, directors or employees;
14["(e) is a fit and proper person"]
14 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 1998, w.e.f. 5-1-1998.
15[Applicability of Securities and Exchange Board of India (Criteria for Fit and
Proper Person) Regulations, 2004.
5A. The provisions of the Securities and Exchange Board of India (Criteria for Fit
and Proper Person) Regulations, 2004 shall, as far as may be, apply to all applicants
or the stock brokers, sub-brokers, trading members and clearing members under these
regulations.]
Procedure for registration.
6. The Board on being satisfied that the stock-broker is eligible, shall grant a certificate in
Form D to the stock-broker and send an intimation to that effect to the stock exchange
or stock exchanges as the case may be.
16[“Conditions of registration
6A. (1) Any registration granted by the Board under regulation 6 shall be subject to the
following conditions, namely –
(a) the stock broker holds the membership of any stock exchange;
(b) he shall abide by the rules, regulations and bye-laws of the stock exchange
which are applicable to him;
(c) where the stock broker proposes to change his status or constitution, he
shall obtain prior approval of the Board for continuing to act as such after
the change;
(d) he shall pay fees charged by the Board in the manner provided in these
regulations; and
(e) he shall take adequate steps for redressal of grievances of the investors
within one month of the date of receipt of the complaint and keep the
Board informed about the number, nature and other particulars of the
complaints received from such investors.
(2) Nothing contained in clause (c) of sub-regulation (1) shall affect the obligation
to obtain a fresh registration under section 12 of the Act in a case where it is
applicable.”]
Stock-Brokers to abide by Code of Conduct.
7. The stock-broker holding a certificate shall at all times abide by the Code of Conduct
as specified at Schedule II.
15 Inserted by the SEBI (Criteria for Fit and Proper Person ) Regulations, 2004 w.e.f. 10-03-2004
16 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006.
Procedure where registration is not granted.
8. (1) Where an application for grant of a certificate under regulation 3, does not fulfill
the requirements mentioned in regulation 5, the Board may reject the application
after giving a reasonable opportunity of being heard.
(2) The refusal to grant the registration certificate shall be communicated by the Board
within thirty days of such refusal to the concerned stock exchange and to the
applicant stating therein the grounds on which the application has been rejected.
(3) An applicant may, being aggrieved by the decision of the Board under subregulation
(2) apply within a period of thirty days from the date of receipt of such
intimation, to the Board for reconsideration of its decision.
(4) The Board shall reconsider an application made under sub-regulation (3) and
communicate its decision as soon as possible in writing to the applicant and to the
concerned stock-exchange.
Effect of refusal of certificate of registration.
9. A stock-broker, whose application for grant of a certificate has been refused by the
Board, shall not, on and from the date of the receipt of the communication under the
sub-regulation (2) of regulation 8, buy, sell, or deal in securities as a stock-broker.
Payment of fees and the consequences of failure to pay fees.
10. (1) Every applicant eligible for grant of a certificate shall pay such fees and in such
manner as specified in 17[Schedule III or Schedule IIIA, as the case may be]
Provided that the Board may on sufficient cause being shown permit the stockbroker
to pay such fees at any time before the expiry of six months from the date
for which such fees become due.
(2) Where a stock-broker fails to pay the fees as provided in regulation 10, the Board
may suspend the registration certificate, whereupon the stock- broker shall cease
to buy, sell or deal in securities as a stock-broker
17 Inserted by the SEBI (Stock Brokers Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. 1-10-
2006.
CHAPTER III
REGISTRATION OF SUB - BROKERS
[18“Registration as sub-broker
11. (1) No sub-broker shall act as such unless he holds a certificate granted by the Board
under these regulations.
(2) No fresh certificate needs to be obtained under sub-regulation (1) where a sub-broker
merely changes his affiliation from one stock broker to another stock broker, being a
member of the same stock exchange.”]
Application for registration of sub-broker.
19[11A.] (1) An application by a sub- broker for the grant of a certificate shall be made in
Form B.
(2) The application for registration under sub-regulation (1) above, shall be
accompanied by a recommendation letter in ‘Form C’ from a stock-broker of a
recognised stock exchange with whom he is to be affiliated along with two
references including one from his banker.
(3) The application form shall be submitted to the stock exchange of which the
stock- broker with whom he is to be affiliated is a member.
(4) The stock exchange on receipt of an application under sub-regulation (3) shall
verify the information contained therein and shall also certify that the applicant
is eligible for registration as per criteria specified in sub-regulation (5).
(5) The eligibility criteria for registration as a sub-broker shall be as follows,
namely:
(i) in the case of an individual;
(a) the applicant is not less than 21 years of age;
(b) the applicant has not been convicted of any offence involving fraud or
dishonesty;
(c) the applicant has at least passed 12th standard equivalent examination from
an institution recognised by the Government;
18 Regulation 11 renumbered as 11A and this new regulation 11 inserted by the SEBI (Stock Brokers Subbrokers)
(Second Amendment) Regulations, 2006, w.e.f. 7-9-2006.
19 Renumbered as 11A by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. 7-9-2006.
Provided that the Board may relax the educational qualifications on
merits having regard to the applicant's experience.
20["(d) the applicant is a fit and proper person"].
(ii) In the case of partnership firm or a body corporate the partners or directors, as
the case may be, shall comply with the requirements contained in clauses (a)
to (c) of sub-regulation (i).
21[(iii) The applicant has the necessary infrastructure like adequate office space,
equipment and manpower to effectively discharge his activities.
(iv) The applicant shall be a person recognized by the Stock Exchange as a subbroker
affiliated to a member broker of the stock exchange.]
22[(6) The stock exchange shall forward the application in Form B of such
applicant along with the recommendation letter in Form C issued by the stock
broker with whom he is affiliated and also recognition letter in Form CA
issued by the stock exchange to the Board within 30 days from the date of the
receipt of the application.]
Procedure for registration.
12. (1) The Board on being satisfied that the sub-broker is eligible, shall grant a
certificate in Form E to the sub-broker and send an intimation to that effect to the
stock exchange or stock exchanges as the case may be.
(2) The Board may grant a certificate of registration to the appellant subject to the
terms and conditions 23[laid down in sub-regulation (1) of regulation 12A].
24[“Conditions of registration
12A. (1) Any registration granted by the Board under regulation 12 shall be subject to the
following conditions, namely –
(a) he shall abide by the rules, regulations and bye-laws of the stock exchange
which are applicable to him;
20 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 1998, w.e.f. 5-1-1998.
21 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-2003.
22 Substituted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-2003.
Prior to substitution, it was read as under, ‘The stock exchange shall forward the application who comply
with all the requirements specified in sub-regulations (1) to (5) to the Board as early as possible, but not
latter that thirty days from the date of its receipt.”
23 Substituted for “as stated in rule 5” by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006.
24 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006.
(b) where the sub-broker proposes to change his status or constitution, he
shall obtain prior approval of the Board for continuing to act as such after
the change;
(c) he shall pay fees charged by the Board in the manner provided in these
regulations;
(d) he shall take adequate steps for redressal of grievances of the investors
within one month of the date of receipt of the complaint and keep the
Board informed about the number, nature and other particulars of the
complaints received from such investors; and
(e) he is authorized in writing by a stock-broker being a member of a stock
exchange for affiliating himself in buying, selling or dealing in securities.
(2) Nothing contained in clause (b) of sub-regulation (1) shall affect the obligation
to obtain a fresh registration under section 12 of the Act in cases where it is
applicable.”]
Procedure where registration is not granted.
13. (1) Where an application for grant of a certificate under regulation 25[11A], does not
fulfill the requirements mentioned in regulation 26[11], the Board may reject the
application after giving a reasonable opportunity of being heard.
(2) The refusal to grant the certificate shall be communicated by the Board within
thirty days of such refusal to the concerned stock exchange and to the applicant
stating therein the grounds on which the application has been rejected.
(3) An applicant being aggrieved by the decision of the Board under sub-regulation
(2) within a period of thirty days from the date of receipt of such intimation, apply
to the Board for reconsideration of its decision.
(4) The Board shall reconsider an application made under sub-regulation (3) and
communicate its decision as soon as possible in writing to the applicant and to the
concerned stock exchange.
Effect of refusal.
14. A person whose application for grant of a certificate has been refused by the Board
shall, on and from the date of the communication of refusal under regulation 13 cease
to carry on any activities as a sub-broker.
General Obligations and Inspection.
15. (1) The sub-broker shall –
25 Substituted for “11” by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. 7-9-2006.
26 Substituted for “11” by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. 7-9-2006.
(a) pay the fees as specified in Schedule III;
(b) abide by the Code of Conduct specified in Schedule II;
(c) enter into an agreement with the stock broker for specifying the scope of his
authority and responsibilities.
27[(d) comply with the rules, regulations and bye-laws of the stock exchange,
(e) not be affiliated to more than one stock broker of one stock exchange]
(2) The sub-broker shall keep and maintain the books and documents specified in
regulation 17 except for the books and documents referred to in clauses (h), (i),
(j), 28[***], (l) and (m) of sub regulation (1) of regulation 17.
29[Director not to act as sub-broker
15A No director of a stock broker shall act as sub-broker to the same stock broker.]
Application of Chapter IV, V & VI
16. The provisions of Chapters IV, V and VI of these regulations shall apply to a subbroker
as they apply in case of a stock broker.
30[CHAPTER III A
REGISTRATION OF TRADING AND CLEARING MEMBERS
Application for registration of trading member or Clearing member.
16A (1) An application for grant of certificate of registration by a trading member of a
derivatives exchange or derivatives segment of a stock exchange shall be made in
Form AA of Schedule I, through the concerned derivatives exchange or derivative
segment of a stock exchange of which he is a member.
(2) An application for grant of certificate of registration by a clearing member 31[or
self clearing member] of the clearing corporation or clearing house of a
derivatives exchange or derivatives segment of a stock exchange, shall be made in
Form AA of Schedule I, through the concerned clearing corporation or clearing
house of which he is a member.
27 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-2003.
28 The words, ‘(k)’ omitted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations,
2003,w.e.f. 23-9-2003
29 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-2003.
30 Chapter III –A, consisting of regulations 16A to 16-I , inserted by the SEBI (Stock Brokers and Subbrokers)
(Amendment) Regulations, 2000, w.e.f. 14-3-2000.
31 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
Provided that a trading member who also seeks to act as a clearing member 32[or
self clearing member] shall make separate applications for each activity in Form
AA of Schedule I.
(3) The derivatives exchange or segment or clearing house or corporation as the case
may be shall forward the application to the Board as early as possible but not later
than thirty days from the date of its receipt.
Furnishing of Information, Clarification, etc.
16B (1) The Board may require the applicant or the concerned stock exchange or segment
or clearing house or corporation to furnish such other information or
clarifications, regarding the trading and settlement in derivatives and matters
connected thereto, to consider the application for grant of a certificate.
(2) The applicant or its principal officer shall, if so required, appear before the Board
for personal representation.
Consideration of Application.
16C (1) The Board shall take into account for considering the grant of a certificate all
matters relating to dealing and settlement in derivatives and in particular the
following, namely, whether the applicant –
(a) is eligible to be admitted as a trading member of a derivative exchange and / or
a clearing member of a derivatives exchange or derivatives segment of a stock
exchange or clearing corporation or house;
(b) has the necessary infrastructure like adequate office place, equipments and
manpower to effectively undertake his activities;
(c) is subjected to disciplinary proceedings under the rules, regulations and byelaws
of any stock exchange with respect to his business as a stock broker or
member of derivatives exchange or segment or member of clearing house or
corporation involving either himself or any of his partners, directors or
employees.
33[(d) has any financial liability which is due and payable to the Board under
these regulations]
32 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
33 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2002, w.e.f. 20-2-
2002.
(2) An applicant who desires to act as a trading member, in addition to complying
with the requirements of sub-regulation (1), shall have a net-worth as may be
specified by the derivative exchange or segment from time to time and the
approved user and sales personnel of the trading member have passed a
certification programme approved by the Board;
(3) An applicant who desires to act as a clearing member, in addition to complying
with the requirements of sub-regulation (1), shall have a minimum net worth of
Rs. 300 lacs and shall deposit at least a sum of Rs. 50 lacs or higher amount with
the clearing corporation or clearing house of the derivatives exchange or
derivatives segment in the form specified from time to time.
34[(4) An applicant who desires to act as a clearing member, in addition to complying
with the requirements of sub-regulation (1), shall have a minimum net worth of
Rs. 100 lacs and shall deposit at least a sum of Rs. 50 lacs or higher amount with
the clearing corporation or clearing house of the derivatives exchange or
derivatives segment in the form specified from time to time.]
Explanation: For the purpose of 35[sub-regulations (2), (3) and (4)] the expression
`net worth’ shall mean paid up capital and free reserves and other securities
approved by the Board from time to time (but does not include fixed assets, pledged
securities, value of member’s card, non-allowable securities (unlisted securities),
bad deliveries, doubtful debts and advances (debts or advances overdue for more
than three months or debts or advances given to the associate persons of the
member), prepaid expenses, losses, intangible assets and 30% value of marketable
securities).
Procedure for registration.
16D. The Board on being satisfied that the applicant is eligible, shall grant a certificate in
Form DA of Schedule I, to the applicant and send an intimation to that effect to the
derivatives segment of the stock exchange or derivatives exchange or clearing
corporation or clearing house, as the case may be.
Procedure where registration is not granted.
16E (1) Where an application for the grant of a certificate under regulation 16A does not
fulfill the requirements specified in 16C of the Regulations, the Board may reject the
application of the applicant after giving a reasonable opportunity of being heard.
34 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
35 Substituted for the words, “sub-regulations (2) and (3)’ by the SEBI (Stock Brokers and Sub-brokers)
(Amendment) Regulations, 2001, w.e.f. 15-11-2001.
(2) The refusal to grant the certificate of registration shall be communicated by the
Board within 30 days of such refusal to the concerned segment of the stock exchange,
or clearing house or corporation and to the applicant stating therein the grounds on
which the application has been rejected.
(3) An applicant may, if aggrieved by the decision of the Board under sub-regulation
(2) apply within a period of thirty days from the date of receipt of such
information to the Board for reconsideration of its decision.
(4) The Board shall reconsider an application made under sub-regulation (3) and
communicate its decision as soon as possible in writing to the applicant and to the
concerned segment of the stock exchange or clearing house or corporation.
Effect of refusal of certificate of registration.
16F. An applicant, whose application for the grant of a certificate of registration has been
refused by the Board, shall not, on and from the date of receipt of the communication
under sub-regulation (2) or sub-regulation (4) of regulation 16E, deal in or settle the
derivatives contracts as a member of the derivatives exchange or derivatives segment
or clearing corporation or clearing house.
Payment of fees and consequences of failure to pay fees.
16G (1) Every applicant eligible for grant of a certificate as a trading or clearing member
36[or self -clearing member] shall pay such fee and in such manner as specified in
Schedule IV.
(2) Where a trading or clearing member 37[or self clearing member] fails to pay the
fees as provided in sub-regulation (1), the Board may suspend or cancel the
registration certificate after giving an opportunity of being heard, whereupon the
trading and clearing member 38[or self clearing member] shall cease to deal in or
settle the derivatives contract as a member of the derivatives segment of the
exchange or derivatives exchange or clearing corporation or clearing house’.
36 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
37 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
38 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
Trading member / Clearing member [or self clearing member] to abide by the Code
of Conduct, etc.
16H (1) The code of conduct specified for the stock brokers as stipulated in Schedule II,
shall be applicable mutatis mutandis to the trading member, clearing member and
such members shall at all times abide by the same.
(2) The trading member and clearing member shall abide by the code of conduct as
specified in the rules, bye-laws and regulations of the derivatives exchange or
derivatives segment of the exchange.
(3) The trading members shall obtain details of the prospective clients in `Know Your
Client’ format as specified by the Board before executing an order on behalf of
such client.
(4) The trading member shall mandatorily furnish `Risk Disclosure Document’
disclosing the risk inherent in trading in derivatives to the prospective clients in
the form specified by the derivatives exchange or derivatives segment.
(5) The trading or clearing member shall deposit margin or any other deposit and
shall maintain position or exposure limit as specified by the Board or the
concerned exchange or segment or clearing corporation or clearing house from
time to time.
39[(6) The provisions of sub regulations (1) to (5) shall be applicable mutatis
mutandis to a self clearing member]
Chapter IV, V and VI applicable.
16-I (1) The provision of Chapter IV, V and VI shall be applicable mutatis mutandis to a
trading member and a clearing member 40[or self clearing member] and such
members shall abide by the provisions of the said Chapters.
(2) In the chapters referred to in sub-regulation (1), the word `stock broker’ shall
refer to trading member or clearing member 41[or self clearing member] and the
word ‘stock exchange’ shall refer to `derivatives exchange or derivatives
segment of an exchange or clearing corporation or clearing house.’
39 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
40 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
41 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
(3) The Board may issue such directions under section 11B of the Act to the trading
member or clearing member [or self clearing member] as may be deemed
appropriate and such member shall abide by such directions.
(4) In case of violation of any regulation, the trading or the clearing member [or self
clearing member] shall be liable to penalty as specified in regulation 26.]
(STOCK-BROKERS AND SUB-BROKERS) REGULATIONS, 1992
CONTENTS
CHAPTER I: PRELIMINARY
1. Short title and commencement
2. Definitions
CHAPTER II: REGISTRATION OF STOCK BROKERS
3. Application for registration of stock broker
4. Furnishing information, clarification, etc.
5. Consideration of application
5A. Applicability of Securities and Exchange Board of India (Criteria for Fit and Proper
Person)
6. Procedure for registration
6A. Conditions of registration
7. Stock Brokers to abide by Code of Conduct
8. Procedure where registration is not granted
9. Effect of refusal of certificate of registration
10. Payment of fees and the consequences of failure to pay fees
CHAPTER III: REGISTRATION OF SUB BROKER
11. Registration as sub-broker
11A. Application for registration of sub-broker
12. Procedure for registration
13. Procedure for registration is not granted
14. Effect of refusal
15. General obligations and inspection
15A. Director not to act as sub-broker
16. Application of Chapter IV, V & VI
CHAPTER IIIA: REGISTRATION OF TRADING AND CLEARING MEMBERS
16A. Application for registration of trading member or clearing member
16B. Furnishing of information, clarification etc
16C. Consideration of application
16D. Procedure for registration
16E. Procedure where registration is not granted
16F. Effect of refusal of certificate of registration
16G. Payment of fees and consequences of failure to pay fees
16H. Trading member / clearing member to abide by the Code of Conduct etc
16I. Chapter IV, V & VI applicable
CHAPTER IV: GENERAL OBLIGATIONS AND RESPONSIBILITIES
17. To maintain proper books of accounts, records etc.
18. Maintenance of books of accounts and records
18A. Appointment of compliance officer
18B. Stock broker not deal with un-registered sub-broker
CHAPTER V: PROCEDURE FOR INSPECTION
19. Board’s right to inspect
20. Procedure for inspection
21. Obligations of stock broker on inspection by the board
22. Submission of report to the Board
23. Action on inspection or investigation report
24. Appointment of auditor
CHAPTER VI: PROCEDURE FOR ACTION IN CASE OF DEFAULT
25A.Liability for contravention of the Act, rules or the regulations.
26. Liability for monetary penalty
27. Liability for action under the Enquiry Proceeding Regulations.
28. Liability for prosecution
SCHEDULE I: FORMS
FORM A: APPLICATION FORM FOR REGISTRATION AS STOCK BROKERS
WITH SECURITIES AND EXCHANGE BOARD OF INDIA
FORM AA: APPLICATION FORM FOR REGISTRATION AS A TRADING AND
/OR A CLEARING MEMBER [AND /OR A SELF – CLEARING
MEMBER] WITH THE SECURITIES AND EXCHANGE BOARD OF
INDIA
FORM B: APPLICATION FORM FOR REGISTRATION AS A SUB BROKER WITH
SECURITIES AND EXCHANGE BOARD OF INDIA
FORM C: RECOMMENDATION LETTER TO BE GIVEN BY THE MEMBER WITH
WHOM THE SUB BROKER IS AFFILIATED
FORM CA: RECOGNITION LETTER TO BE ISSUED BY STOCK EXCHANGE
FORM D: CERTIFICATE OF REGISTRATION
FORM DA: CERTIFICATE OF REGISTRATION
FORM E: CERTIFICATE OF REGISTRATION
SCHEDULE II: CODE OF CONDUCT WITH THE STOCK BROKERS
SCHEDULE III: FEES TO BE PAID BY THE STOCK BROKERS
SCHEDULE IIIA: PAYMENT OF FEES BY STOCK BROKERS
SCHEDULE IV: FEES TO BE PAID BY THE TRADING OR CLEARING
MEMBER [OR SELF CLEARING MEMBER] OF
DERIVATIVES EXCHANGE/ DERIVATIVES SEGMENT /
CLEARING CORPORATION /CLEARING HOUSE
SECURITIES AND EXCHANGE BOARD OF INDIA
(STOCK-BROKERS AND SUB-BROKERS) REGULATIONS, 1992
In exercise of the powers conferred by section 30 of the Securities and Exchange Board
of India Act, 1992 (15 of 1992), the Board hereby 1[******] makes the following
regulations, namely: -
CHAPTER I
PRELIMINARY
Short title and commencement.
1. (1) These regulations may be called the Securities and Exchange Board of India
(Stock Brokers and Sub-brokers) Regulations, 1992.
(2) These regulations shall come into force on the date of their publication in the
Official Gazette.2
Definitions.
2. In these regulations, unless the context otherwise requires:-
3[ “(a) “Act” means the Securities and Exchange Board of India Act, 1992
(15 of 1992);
(aa) “certificate” means a certificate of registration issued by the Board;
(ab) “change of status or constitution” in relation to a stock broker or a
sub-broker means any change in its status or constitution of whatsoever
nature and includes –
(i) in case of a body corporate –
(A) amalgamation, demerger, consolidation or any other kind
of corporate restructuring falling within the scope of
section 391 of the Companies Act, 1956 (1 of 1956) or the
corresponding provision of any other law for the time being
in force;
(B) change in its managing director, whole-time director or
director appointed in compliance with clause (v) of sub-rule
(4A) of rule 8 of the Securities Contracts (Regulation)
Rules, 1957; and
(C) any change in control over the body corporate;
1 Words ‘with the previous approval of the Central Government” omitted by the the SEBI (Stock Brokers
Sub-brokers) (Third Amendment) Regulations, 1998, w.e.f. 16-12-1998.
2 23–10-1992
3 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006
(ii) any change between the following legal forms – individual,
partnership firm, Hindu undivided family, private company, public
company, unlimited company or statutory corporation and other
similar changes;
(iii) in case of a partnership firm any change in partners not amounting
to dissolution of the firm;
(ac) “change in control”, in relation to a stock broker or a sub-broker being
a body corporate, means:-
(i) if its shares are listed on any recognised stock exchange, change in
control within the meaning of regulation 12 of the Securities and
Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997;
(ii) in any other case, change in the controlling interest in the body
corporate;
Explanation: For the purpose of sub-clause (ii), the expression
“controlling interest” means an interest, whether direct or indirect, to the
extent of at least fifty one percent. of voting rights in the body corporate;”]
4[5(ad)] `clearing corporation or clearing house’ means the clearing corporation or
clearing house of a recognised stock exchange to clear and settle trades in
securities.
6[(ae)] `clearing member’ means a member of a clearing corporation or clearing
house of the derivatives exchange or derivatives segment of an exchange, who
may clear and settle transactions in securities.]
7[******]
(b) "form" means a form specified in Schedule I;
(c) "inspecting authority" means one or more persons appointed by the Board to
exercise powers conferred under Chapter V of these regulations;
(d) "regulations" means Securities and Exchange Board of India (Stock-brokers and
Sub- brokers) Regulations, 1992;
(e) 8[***]
4 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2000, w.e.f. 14-3-
2000.
5 Clause (a) renumbered as clause ((ad) by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006
6 Clause (aa) renumbered as clause (ae) ) by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006
7 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006.
(f) "Securities Contracts (Regulation) Act" means the Securities Contracts
(Regulation) Act, 1956 (42 of 1956);
9[(fa) "self clearing member" means a member of a clearing corporation or clearing
house of the derivatives exchange or derivatives segment of a stock exchange who
may clear and settle transactions on its own account or on account of its clients
only, and shaal not clear ort settle transactions in securities for any other trading
member(s)]
(g) "small investor" means any investor buying or selling securities on a cash
transaction for a market value not exceeding rupees fifty thousand in aggregate on
any day as shown in a contract note issued by the stock-broker.
10[“(ga) “stock exchange” means a stock exchange which is for the time being
recognised by the Central Government or by the Board under section 4 of the
Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(gb) “stock broker” means a member of a stock exchange;
(gc) “sub-broker” means any person not being a member of stock exchange who
acts on behalf of a stock broker as an agent or otherwise for assisting the investors
in buying, selling or dealing in securities thorough such stock brokers;”]
11[12(gd) `trading member’ means a member of the derivatives exchange or
derivatives segment of a stock exchange and who settles the trade in the clearing
corporation or clearing house through a clearing member;]
(h) all other words and expressions occurring in these regulations shall bear the same
meaning as in the Act 13[****].
CHAPTER II
REGISTRATION OF STOCK BROKERS
Application for registration of stock broker.
8 Omitted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006. Prior to omission, it was read as, “rules means securities and exchange Board of India(Stock Brokers
and Sub-brokers) Rules, 1992
9 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-2001.
10 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006. [(ga) renumbered as (gd) and before this the clauses (ga) to (gd) inserted.]
11 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 14-3-2000.
12 Clause (ga) renumbered as clause (gd) by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006.
13 Words “and the rules” omitted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006.
3. (1) An application by a stock-broker for grant of a certificate shall be made in Form A
through the stock exchange or stock exchanges, as the case may be, of which he is
admitted as a member.
(2) The stock exchange shall forward the application form to the Board as early as
possible but not later than thirty days from the date of its receipt.
(3) Notwithstanding anything contained in sub-regulation (1), any application made
by a stock- broker prior to coming into force of these regulations containing such
particulars or as near thereto as mentioned in the Form A shall be treated as an
application made in pursuance of sub-regulation (1) and dealt with accordingly:
Provided that the requirement of the payment of fees shall be the same as is
referred to in sub-regulation (1) of regulation 10.
Furnishing information, clarification, etc.
4. (1) The Board may require the applicant to furnish such further information or
clarifications, regarding the dealings in securities and matters connected thereto to
consider the application for grant of a certificate.
(2) The applicant or, its principal officer shall, if so required, appear before the Board
for personal representation.
Consideration application.
5. The Board shall take into account for considering the grant of a certificate all matters
relating to buying, selling, or dealing in securities and in particular the following,
namely, whether the stock broker
(a) is eligible to be admitted as a member of a stock exchange;
(b) has the necessary infrastructure like adequate office space, equipments and man
power to effectively discharge his activities;
(c) has any past experience in the business of buying, selling or dealing in securities;
(d) is subjected to disciplinary proceedings under the rules, regulations and bye-laws
of a stock exchange with respect to his business as a stock-broker involving either
himself or any of his partners, directors or employees;
14["(e) is a fit and proper person"]
14 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 1998, w.e.f. 5-1-1998.
15[Applicability of Securities and Exchange Board of India (Criteria for Fit and
Proper Person) Regulations, 2004.
5A. The provisions of the Securities and Exchange Board of India (Criteria for Fit
and Proper Person) Regulations, 2004 shall, as far as may be, apply to all applicants
or the stock brokers, sub-brokers, trading members and clearing members under these
regulations.]
Procedure for registration.
6. The Board on being satisfied that the stock-broker is eligible, shall grant a certificate in
Form D to the stock-broker and send an intimation to that effect to the stock exchange
or stock exchanges as the case may be.
16[“Conditions of registration
6A. (1) Any registration granted by the Board under regulation 6 shall be subject to the
following conditions, namely –
(a) the stock broker holds the membership of any stock exchange;
(b) he shall abide by the rules, regulations and bye-laws of the stock exchange
which are applicable to him;
(c) where the stock broker proposes to change his status or constitution, he
shall obtain prior approval of the Board for continuing to act as such after
the change;
(d) he shall pay fees charged by the Board in the manner provided in these
regulations; and
(e) he shall take adequate steps for redressal of grievances of the investors
within one month of the date of receipt of the complaint and keep the
Board informed about the number, nature and other particulars of the
complaints received from such investors.
(2) Nothing contained in clause (c) of sub-regulation (1) shall affect the obligation
to obtain a fresh registration under section 12 of the Act in a case where it is
applicable.”]
Stock-Brokers to abide by Code of Conduct.
7. The stock-broker holding a certificate shall at all times abide by the Code of Conduct
as specified at Schedule II.
15 Inserted by the SEBI (Criteria for Fit and Proper Person ) Regulations, 2004 w.e.f. 10-03-2004
16 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006.
Procedure where registration is not granted.
8. (1) Where an application for grant of a certificate under regulation 3, does not fulfill
the requirements mentioned in regulation 5, the Board may reject the application
after giving a reasonable opportunity of being heard.
(2) The refusal to grant the registration certificate shall be communicated by the Board
within thirty days of such refusal to the concerned stock exchange and to the
applicant stating therein the grounds on which the application has been rejected.
(3) An applicant may, being aggrieved by the decision of the Board under subregulation
(2) apply within a period of thirty days from the date of receipt of such
intimation, to the Board for reconsideration of its decision.
(4) The Board shall reconsider an application made under sub-regulation (3) and
communicate its decision as soon as possible in writing to the applicant and to the
concerned stock-exchange.
Effect of refusal of certificate of registration.
9. A stock-broker, whose application for grant of a certificate has been refused by the
Board, shall not, on and from the date of the receipt of the communication under the
sub-regulation (2) of regulation 8, buy, sell, or deal in securities as a stock-broker.
Payment of fees and the consequences of failure to pay fees.
10. (1) Every applicant eligible for grant of a certificate shall pay such fees and in such
manner as specified in 17[Schedule III or Schedule IIIA, as the case may be]
Provided that the Board may on sufficient cause being shown permit the stockbroker
to pay such fees at any time before the expiry of six months from the date
for which such fees become due.
(2) Where a stock-broker fails to pay the fees as provided in regulation 10, the Board
may suspend the registration certificate, whereupon the stock- broker shall cease
to buy, sell or deal in securities as a stock-broker
17 Inserted by the SEBI (Stock Brokers Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. 1-10-
2006.
CHAPTER III
REGISTRATION OF SUB - BROKERS
[18“Registration as sub-broker
11. (1) No sub-broker shall act as such unless he holds a certificate granted by the Board
under these regulations.
(2) No fresh certificate needs to be obtained under sub-regulation (1) where a sub-broker
merely changes his affiliation from one stock broker to another stock broker, being a
member of the same stock exchange.”]
Application for registration of sub-broker.
19[11A.] (1) An application by a sub- broker for the grant of a certificate shall be made in
Form B.
(2) The application for registration under sub-regulation (1) above, shall be
accompanied by a recommendation letter in ‘Form C’ from a stock-broker of a
recognised stock exchange with whom he is to be affiliated along with two
references including one from his banker.
(3) The application form shall be submitted to the stock exchange of which the
stock- broker with whom he is to be affiliated is a member.
(4) The stock exchange on receipt of an application under sub-regulation (3) shall
verify the information contained therein and shall also certify that the applicant
is eligible for registration as per criteria specified in sub-regulation (5).
(5) The eligibility criteria for registration as a sub-broker shall be as follows,
namely:
(i) in the case of an individual;
(a) the applicant is not less than 21 years of age;
(b) the applicant has not been convicted of any offence involving fraud or
dishonesty;
(c) the applicant has at least passed 12th standard equivalent examination from
an institution recognised by the Government;
18 Regulation 11 renumbered as 11A and this new regulation 11 inserted by the SEBI (Stock Brokers Subbrokers)
(Second Amendment) Regulations, 2006, w.e.f. 7-9-2006.
19 Renumbered as 11A by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. 7-9-2006.
Provided that the Board may relax the educational qualifications on
merits having regard to the applicant's experience.
20["(d) the applicant is a fit and proper person"].
(ii) In the case of partnership firm or a body corporate the partners or directors, as
the case may be, shall comply with the requirements contained in clauses (a)
to (c) of sub-regulation (i).
21[(iii) The applicant has the necessary infrastructure like adequate office space,
equipment and manpower to effectively discharge his activities.
(iv) The applicant shall be a person recognized by the Stock Exchange as a subbroker
affiliated to a member broker of the stock exchange.]
22[(6) The stock exchange shall forward the application in Form B of such
applicant along with the recommendation letter in Form C issued by the stock
broker with whom he is affiliated and also recognition letter in Form CA
issued by the stock exchange to the Board within 30 days from the date of the
receipt of the application.]
Procedure for registration.
12. (1) The Board on being satisfied that the sub-broker is eligible, shall grant a
certificate in Form E to the sub-broker and send an intimation to that effect to the
stock exchange or stock exchanges as the case may be.
(2) The Board may grant a certificate of registration to the appellant subject to the
terms and conditions 23[laid down in sub-regulation (1) of regulation 12A].
24[“Conditions of registration
12A. (1) Any registration granted by the Board under regulation 12 shall be subject to the
following conditions, namely –
(a) he shall abide by the rules, regulations and bye-laws of the stock exchange
which are applicable to him;
20 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 1998, w.e.f. 5-1-1998.
21 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-2003.
22 Substituted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-2003.
Prior to substitution, it was read as under, ‘The stock exchange shall forward the application who comply
with all the requirements specified in sub-regulations (1) to (5) to the Board as early as possible, but not
latter that thirty days from the date of its receipt.”
23 Substituted for “as stated in rule 5” by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. 7-9-2006.
24 Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. 7-9-
2006.
(b) where the sub-broker proposes to change his status or constitution, he
shall obtain prior approval of the Board for continuing to act as such after
the change;
(c) he shall pay fees charged by the Board in the manner provided in these
regulations;
(d) he shall take adequate steps for redressal of grievances of the investors
within one month of the date of receipt of the complaint and keep the
Board informed about the number, nature and other particulars of the
complaints received from such investors; and
(e) he is authorized in writing by a stock-broker being a member of a stock
exchange for affiliating himself in buying, selling or dealing in securities.
(2) Nothing contained in clause (b) of sub-regulation (1) shall affect the obligation
to obtain a fresh registration under section 12 of the Act in cases where it is
applicable.”]
Procedure where registration is not granted.
13. (1) Where an application for grant of a certificate under regulation 25[11A], does not
fulfill the requirements mentioned in regulation 26[11], the Board may reject the
application after giving a reasonable opportunity of being heard.
(2) The refusal to grant the certificate shall be communicated by the Board within
thirty days of such refusal to the concerned stock exchange and to the applicant
stating therein the grounds on which the application has been rejected.
(3) An applicant being aggrieved by the decision of the Board under sub-regulation
(2) within a period of thirty days from the date of receipt of such intimation, apply
to the Board for reconsideration of its decision.
(4) The Board shall reconsider an application made under sub-regulation (3) and
communicate its decision as soon as possible in writing to the applicant and to the
concerned stock exchange.
Effect of refusal.
14. A person whose application for grant of a certificate has been refused by the Board
shall, on and from the date of the communication of refusal under regulation 13 cease
to carry on any activities as a sub-broker.
General Obligations and Inspection.
15. (1) The sub-broker shall –
25 Substituted for “11” by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. 7-9-2006.
26 Substituted for “11” by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. 7-9-2006.
(a) pay the fees as specified in Schedule III;
(b) abide by the Code of Conduct specified in Schedule II;
(c) enter into an agreement with the stock broker for specifying the scope of his
authority and responsibilities.
27[(d) comply with the rules, regulations and bye-laws of the stock exchange,
(e) not be affiliated to more than one stock broker of one stock exchange]
(2) The sub-broker shall keep and maintain the books and documents specified in
regulation 17 except for the books and documents referred to in clauses (h), (i),
(j), 28[***], (l) and (m) of sub regulation (1) of regulation 17.
29[Director not to act as sub-broker
15A No director of a stock broker shall act as sub-broker to the same stock broker.]
Application of Chapter IV, V & VI
16. The provisions of Chapters IV, V and VI of these regulations shall apply to a subbroker
as they apply in case of a stock broker.
30[CHAPTER III A
REGISTRATION OF TRADING AND CLEARING MEMBERS
Application for registration of trading member or Clearing member.
16A (1) An application for grant of certificate of registration by a trading member of a
derivatives exchange or derivatives segment of a stock exchange shall be made in
Form AA of Schedule I, through the concerned derivatives exchange or derivative
segment of a stock exchange of which he is a member.
(2) An application for grant of certificate of registration by a clearing member 31[or
self clearing member] of the clearing corporation or clearing house of a
derivatives exchange or derivatives segment of a stock exchange, shall be made in
Form AA of Schedule I, through the concerned clearing corporation or clearing
house of which he is a member.
27 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-2003.
28 The words, ‘(k)’ omitted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations,
2003,w.e.f. 23-9-2003
29 Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-2003.
30 Chapter III –A, consisting of regulations 16A to 16-I , inserted by the SEBI (Stock Brokers and Subbrokers)
(Amendment) Regulations, 2000, w.e.f. 14-3-2000.
31 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
Provided that a trading member who also seeks to act as a clearing member 32[or
self clearing member] shall make separate applications for each activity in Form
AA of Schedule I.
(3) The derivatives exchange or segment or clearing house or corporation as the case
may be shall forward the application to the Board as early as possible but not later
than thirty days from the date of its receipt.
Furnishing of Information, Clarification, etc.
16B (1) The Board may require the applicant or the concerned stock exchange or segment
or clearing house or corporation to furnish such other information or
clarifications, regarding the trading and settlement in derivatives and matters
connected thereto, to consider the application for grant of a certificate.
(2) The applicant or its principal officer shall, if so required, appear before the Board
for personal representation.
Consideration of Application.
16C (1) The Board shall take into account for considering the grant of a certificate all
matters relating to dealing and settlement in derivatives and in particular the
following, namely, whether the applicant –
(a) is eligible to be admitted as a trading member of a derivative exchange and / or
a clearing member of a derivatives exchange or derivatives segment of a stock
exchange or clearing corporation or house;
(b) has the necessary infrastructure like adequate office place, equipments and
manpower to effectively undertake his activities;
(c) is subjected to disciplinary proceedings under the rules, regulations and byelaws
of any stock exchange with respect to his business as a stock broker or
member of derivatives exchange or segment or member of clearing house or
corporation involving either himself or any of his partners, directors or
employees.
33[(d) has any financial liability which is due and payable to the Board under
these regulations]
32 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
33 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2002, w.e.f. 20-2-
2002.
(2) An applicant who desires to act as a trading member, in addition to complying
with the requirements of sub-regulation (1), shall have a net-worth as may be
specified by the derivative exchange or segment from time to time and the
approved user and sales personnel of the trading member have passed a
certification programme approved by the Board;
(3) An applicant who desires to act as a clearing member, in addition to complying
with the requirements of sub-regulation (1), shall have a minimum net worth of
Rs. 300 lacs and shall deposit at least a sum of Rs. 50 lacs or higher amount with
the clearing corporation or clearing house of the derivatives exchange or
derivatives segment in the form specified from time to time.
34[(4) An applicant who desires to act as a clearing member, in addition to complying
with the requirements of sub-regulation (1), shall have a minimum net worth of
Rs. 100 lacs and shall deposit at least a sum of Rs. 50 lacs or higher amount with
the clearing corporation or clearing house of the derivatives exchange or
derivatives segment in the form specified from time to time.]
Explanation: For the purpose of 35[sub-regulations (2), (3) and (4)] the expression
`net worth’ shall mean paid up capital and free reserves and other securities
approved by the Board from time to time (but does not include fixed assets, pledged
securities, value of member’s card, non-allowable securities (unlisted securities),
bad deliveries, doubtful debts and advances (debts or advances overdue for more
than three months or debts or advances given to the associate persons of the
member), prepaid expenses, losses, intangible assets and 30% value of marketable
securities).
Procedure for registration.
16D. The Board on being satisfied that the applicant is eligible, shall grant a certificate in
Form DA of Schedule I, to the applicant and send an intimation to that effect to the
derivatives segment of the stock exchange or derivatives exchange or clearing
corporation or clearing house, as the case may be.
Procedure where registration is not granted.
16E (1) Where an application for the grant of a certificate under regulation 16A does not
fulfill the requirements specified in 16C of the Regulations, the Board may reject the
application of the applicant after giving a reasonable opportunity of being heard.
34 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
35 Substituted for the words, “sub-regulations (2) and (3)’ by the SEBI (Stock Brokers and Sub-brokers)
(Amendment) Regulations, 2001, w.e.f. 15-11-2001.
(2) The refusal to grant the certificate of registration shall be communicated by the
Board within 30 days of such refusal to the concerned segment of the stock exchange,
or clearing house or corporation and to the applicant stating therein the grounds on
which the application has been rejected.
(3) An applicant may, if aggrieved by the decision of the Board under sub-regulation
(2) apply within a period of thirty days from the date of receipt of such
information to the Board for reconsideration of its decision.
(4) The Board shall reconsider an application made under sub-regulation (3) and
communicate its decision as soon as possible in writing to the applicant and to the
concerned segment of the stock exchange or clearing house or corporation.
Effect of refusal of certificate of registration.
16F. An applicant, whose application for the grant of a certificate of registration has been
refused by the Board, shall not, on and from the date of receipt of the communication
under sub-regulation (2) or sub-regulation (4) of regulation 16E, deal in or settle the
derivatives contracts as a member of the derivatives exchange or derivatives segment
or clearing corporation or clearing house.
Payment of fees and consequences of failure to pay fees.
16G (1) Every applicant eligible for grant of a certificate as a trading or clearing member
36[or self -clearing member] shall pay such fee and in such manner as specified in
Schedule IV.
(2) Where a trading or clearing member 37[or self clearing member] fails to pay the
fees as provided in sub-regulation (1), the Board may suspend or cancel the
registration certificate after giving an opportunity of being heard, whereupon the
trading and clearing member 38[or self clearing member] shall cease to deal in or
settle the derivatives contract as a member of the derivatives segment of the
exchange or derivatives exchange or clearing corporation or clearing house’.
36 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
37 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
38 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
Trading member / Clearing member [or self clearing member] to abide by the Code
of Conduct, etc.
16H (1) The code of conduct specified for the stock brokers as stipulated in Schedule II,
shall be applicable mutatis mutandis to the trading member, clearing member and
such members shall at all times abide by the same.
(2) The trading member and clearing member shall abide by the code of conduct as
specified in the rules, bye-laws and regulations of the derivatives exchange or
derivatives segment of the exchange.
(3) The trading members shall obtain details of the prospective clients in `Know Your
Client’ format as specified by the Board before executing an order on behalf of
such client.
(4) The trading member shall mandatorily furnish `Risk Disclosure Document’
disclosing the risk inherent in trading in derivatives to the prospective clients in
the form specified by the derivatives exchange or derivatives segment.
(5) The trading or clearing member shall deposit margin or any other deposit and
shall maintain position or exposure limit as specified by the Board or the
concerned exchange or segment or clearing corporation or clearing house from
time to time.
39[(6) The provisions of sub regulations (1) to (5) shall be applicable mutatis
mutandis to a self clearing member]
Chapter IV, V and VI applicable.
16-I (1) The provision of Chapter IV, V and VI shall be applicable mutatis mutandis to a
trading member and a clearing member 40[or self clearing member] and such
members shall abide by the provisions of the said Chapters.
(2) In the chapters referred to in sub-regulation (1), the word `stock broker’ shall
refer to trading member or clearing member 41[or self clearing member] and the
word ‘stock exchange’ shall refer to `derivatives exchange or derivatives
segment of an exchange or clearing corporation or clearing house.’
39 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
40 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
41 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. 15-11-
2001.
(3) The Board may issue such directions under section 11B of the Act to the trading
member or clearing member [or self clearing member] as may be deemed
appropriate and such member shall abide by such directions.
(4) In case of violation of any regulation, the trading or the clearing member [or self
clearing member] shall be liable to penalty as specified in regulation 26.]
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