Beruflich Dokumente
Kultur Dokumente
1. Client Registration procedure – For this purpose the broker is supposed to make
available a book/folder containing all the documents necessary for account opening, the
documents being segregated into two parts – mandatory and non-mandatory.
(iv) Indication of Stock exchange and market segment where the client wishes to trade
(vii) Details of action taken against a client by SEBI or other authorities during the last 3
years.
d. Penalty and delayed payment charges – The rate and the period
netting of trades
g. Conditions under which a client may not be allowed to take further position or
the broker
may close the existing position of a client,
h. Temporarily suspending or closing a client’s account at the client’s request, and
i. Deregistering a client
6. General instructions – Apart from these, the brokers were also directed on general
points like documents font size, providing a free copy of documents to clients, displaying
policies and procedures of brokers’ website, change in terms of agreement, policy regarding
treatment of inactive accounts, delivering statements of balance of funds and securities on 31st
March every year.
The stock brokers were directed to take necessary steps to implement this circular immediately
and ensure its full compliance in respect of all clients – existing or new – at the latest by 31 st
March 2010.
Was it the first time SEBI came up with guidelines to protect client’s interests
and to increase transparency in dealings between clients and broking houses?
Before this circular, there has been number of circulars by SEBI to protect the interests of
investors in the last two decades issuing guidelines to broking houses and stock exchanges. A
gist of few of these circulars is as follows:
The guidelines issued in the circular required broking houses to work on the following tasks:
1. Amending the account opening and KYC procedure as per the new guidelines
2. Collecting documents of the existing clients related to financial information at the time of
annual document updation
3. Documenting and intimating the policies and procedures on the points mentioned in the
circular. For that each of the brokers needed to work on following points
c. Taking a firm stand on practices such as selling client’s securities in case of non-
repayment of dues.
4. In case of clients with running accounts, maintaining funds for margin money as per SEBI
guidelines and transferring funds at least once every quarter were the two main issues.
1. Added work pressure chasing clients and their details for successful implementation of
new norms.
2. Paying out large amount of funds and securities and also ensure that these are brought
back in timely manner to allow fresh positions for the client.
3. Paying out funds would mean losing low cost short term funds.
4. Use of font size 11 would increase the printing and stationary cost of the brokers.
Directions by BSE
Following the circular, there was a clarification issued by BSE on how to implement the
directions in circulars. This document clarified on the implementation of the circular with respect
to existing and prospective clients. Main points to be noted from the BSE document are as
follows:
3. Existing clients must be notified about the information on exchanges/segments they deal
in, through the quarterly statements. For new clients, this information should be taken in writing
as prescribed in the circular
5. It’s the primary responsibility of clients to declare the actions taken by SEBI on the
clients; however the Trading member should use all the information from public sources to
verify the information.
ii. For cash segment, trading member may retain entire pay-in obligation of funds & securities
due from clients as on date of settlement.
8. If the trading member has generated e-mail id for an existing client, trading member would be
required to obtain duly signed physical confirmation letter confirming the e-mail id and
exercising choice to receive documents on this e-mail id. For all prospective clients, e-mail id
should be created / provided by the investor only.
Was the circular implemented in time as prescribed by SEBI?
Few months later to the circular, there were reports in media that that broking houses are
not yet able to implement some main requirements of the circular. The requirement to transfer
funds to the account of clients’ account once a quarter was a most common one not adhered with.
Later the representatives of broking houses such as Association of National exchange Members
of India (ANMI) and BSE Brokers Forum requested SEBI to extend the timeline because of
various issues faced by them in implementing the circular. Before the official news, there were
news already in the media that deadline would be extended upto as long as 6 months.
In response to the request, SEBI issued a circular for extending the timeline on 31st March.
The circular no. MIRSD/ SE /Cir- 5/2010 declared the extension in timeline till June 31st 2010.
Along with the extension in deadline, SEBI directed stock exchanges to inform brokers
about the circular, publish the circular on website, make necessary amendments to the relevant
bye-laws, rules and regulations for the implementation of the decision in circular, keep on
updating SEBI about the developments on implementation of the circular.