THE GAZETTE OF INDIA

EXTRAORDINARY

PART –II – SECTION 3 – SUB SECTION (ii)

PUBLISHED BY AUTHORITY

SECURITIES AND EXCHANGE BOARD OF INDIA

NOTIFICATION

Mumbai, the 7^thSeptember, 2006

SECURITIES AND EXCHANGE BOARD OF INDIA

(STOCK BROKERS AND SUB-BROKERS) (SECOND AMENDMENT) REGULATIONS, 2006

S.O No.1447 (E). 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 makes the following Regulations to further amend the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992, namely :-

1. These Regulations may be called the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) (Second Amendment) Regulations, 2006.

2. They shall come into force on the date of their publication in the Official Gazette.

3. In the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 -

(i) in regulation 2 –

a. clauses (a) and (aa) shall respectively be renumbered as clauses (ad) and (ae) and before the clauses so renumbered, the following clauses shall be inserted, namely:-

“(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

(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;”

b. clause (e) shall be omitted;

c. clause (ga) shall be renumbered as clause (gd) and before the clause so renumbered, the following clauses shall be inserted, namely:-

“(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;”

d. in clause (h), the words “and the rules” occurring in the end shall be omitted;

(ii) after regulation 6, the following regulation shall be inserted, namely:

“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.”

(iii) regulation 11 shall be renumbered as regulation 11A and before the regulation so renumbered, the following regulation shall be inserted, namely:-

“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.”

(iv) in regulation 12, in sub-regulation (2), for the words and figure “as stated in rule 5” occurring at the end, the words, brackets and figures “laid down in sub-regulation (1) of regulation 12A” shall be substituted;

(v) after regulation 12, the following regulation shall be inserted, namely:

“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;

(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;

(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.”

(vi) in regulation 13, for the words and figures “regulation 11” wherever they occur, the words and figures “regulation 11A” shall be substituted.

F.No. SEBI/LAD/DOP/ 0709 /2006

M. DAMODARAN

CHAIRMAN

SECURITIES AND EXCHANGE BOARD OF INDIA

Footnotes:

1. Securities and Exchange Board of India (Stock Brokers And Sub-Brokers) Regulations, 1992, the Principal Regulations, was published in the Gazette of India on October 23, 1992 vide GSR No. 780 (E).

2. The Principal Regulations subsequently amended on :

(a) November 28, 1995 by the SEBI (Payment of Fees) (Amendment) Regulations, 1995 vide S.O. No. 939 (E).

(b) January 5, 1998 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 1998 vide S.O. No. 13 (E).

(d) December 16, 1998 by SEBI (Stock Brokers and Sub-Brokers) (Third Amendment) Regulations, 1998 vide S.O. No. 1078 (E).

(e) July 6, 1999 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 1999 vide S.O. No. 541 (E).

(f) March 14, 2000 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2000 vide S.O. No. 234 (E).

(g) March 28, 2000 by SEBI (Appeal to Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O. No. 278 (E).

(h) August 30, 2000 by SEBI (Stock Brokers and Sub-Brokers) (Second Amendment) Regulations, 2000 vide S.O. No. 787 (E).

(i) May 29, 2001 by SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide S.O. No. 476(E).

(j) November 15, 2001 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2001 vide S.O. No. 1128 (E).

(k) February 20, 2002 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2002 vide S.O. No. 220 (E).

(l) September 27, 2002 by SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide S.O. No. 1045 (E).

(m) September 23, 2003 by the SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2003 vide S.O. 1095 (E).

(n) November 20, 2003 by the SEBI (Stock Brokers and Sub-Brokers) (Second Amendment) Regulations, 2003 vide F. No. SEBI /LAD /20795 /2003.

(o) on March 10, 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398(E).

(p) on August 1, 2006 by the SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2006 vide S.O. 1235 (E).

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THE GAZETTE OF INDIA EXTRAORDINARY PART –II – SECTION 3 – SUB SECTION (ii) PUBLISHED BY AUTHORITY SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 7^thSeptember, 2006 SECURITIES AND EXCHANGE BOARD OF INDIA (STOCK BROKERS AND SUB-BROKERS) (SECOND AMENDMENT) REGULATIONS, 2006 S.O No.1447 (E). 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 makes the following Regulations to further amend the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992, namely :- 1. These Regulations may be called the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) (Second Amendment) Regulations, 2006. 2. They shall come into force on the date of their publication in the Official Gazette. 3. In the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 - (i) in regulation 2 – a. clauses (a) and (aa) shall respectively be renumbered as clauses (ad) and (ae) and before the clauses so renumbered, the following clauses shall be inserted, namely:- “(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; (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;” b. clause (e) shall be omitted; c. clause (ga) shall be renumbered as clause (gd) and before the clause so renumbered, the following clauses shall be inserted, namely:- “(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;” d. in clause (h), the words “and the rules” occurring in the end shall be omitted; (ii) after regulation 6, the following regulation shall be inserted, namely: “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.” (iii) regulation 11 shall be renumbered as regulation 11A and before the regulation so renumbered, the following regulation shall be inserted, namely:- “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.” (iv) in regulation 12, in sub-regulation (2), for the words and figure “as stated in rule 5” occurring at the end, the words, brackets and figures “laid down in sub-regulation (1) of regulation 12A” shall be substituted; (v) after regulation 12, the following regulation shall be inserted, namely: “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; (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.” (vi) in regulation 13, for the words and figures “regulation 11” wherever they occur, the words and figures “regulation 11A” shall be substituted. F.No. SEBI/LAD/DOP/ 0709 /2006 M. DAMODARAN CHAIRMAN SECURITIES AND EXCHANGE BOARD OF INDIA Footnotes: 1. Securities and Exchange Board of India (Stock Brokers And Sub-Brokers) Regulations, 1992, the Principal Regulations, was published in the Gazette of India on October 23, 1992 vide GSR No. 780 (E). 2. The Principal Regulations subsequently amended on : (a) November 28, 1995 by the SEBI (Payment of Fees) (Amendment) Regulations, 1995 vide S.O. No. 939 (E). (b) January 5, 1998 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 1998 vide S.O. No. 13 (E). (c) January 21, 1998 by SEBI (Stock Brokers and Sub-Brokers) (Second Amendment) Regulations, 1998 vide S.O. No. 75 (E). (d) December 16, 1998 by SEBI (Stock Brokers and Sub-Brokers) (Third Amendment) Regulations, 1998 vide S.O. No. 1078 (E). (e) July 6, 1999 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 1999 vide S.O. No. 541 (E). (f) March 14, 2000 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2000 vide S.O. No. 234 (E). (g) March 28, 2000 by SEBI (Appeal to Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O. No. 278 (E). (h) August 30, 2000 by SEBI (Stock Brokers and Sub-Brokers) (Second Amendment) Regulations, 2000 vide S.O. No. 787 (E). (i) May 29, 2001 by SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide S.O. No. 476(E). (j) November 15, 2001 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2001 vide S.O. No. 1128 (E). (k) February 20, 2002 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2002 vide S.O. No. 220 (E). (l) September 27, 2002 by SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide S.O. No. 1045 (E). (m) September 23, 2003 by the SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2003 vide S.O. 1095 (E). (n) November 20, 2003 by the SEBI (Stock Brokers and Sub-Brokers) (Second Amendment) Regulations, 2003 vide F. No. SEBI /LAD /20795 /2003. (o) on March 10, 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398(E). (p) on August 1, 2006 by the SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2006 vide S.O. 1235 (E).