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SECURITIES AND EXCHANGE BOARD OF (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 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 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 FORM B: APPLICATION
FORM FOR REGISTRATION AS A SUB BROKER WITH SECURITIES AND EXCHANGE BOARD OF 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 (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; (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][***] �(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. 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"] [15][Applicability of Securities and Exchange
Board of 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. 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 sub- regulation (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 stock-broker 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 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; 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 sub-broker 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; (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 � (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 sub-broker 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. 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 bye-laws 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] (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. (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�. 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.� (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.] 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; �[42][(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. �[43][(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 sub-broker.] (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. [44][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 ] [45][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. [46][[47][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.] Appointment of Auditor 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 [48][�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. (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 sub-broker
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][*********] SCHEDULE I � FORMS 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? 8. Indicate Fax, Telex and Phone
number(s) of office and residence. 9. In the case of members admitted
on any Stock Exchange after 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
[50]FORM AA
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. 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
FORM B
APPLICATION
FORM FOR REGISTRATION AS A SUB-BROKER WITH SECURITIES AND EXCHANGE BOARD OF 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.
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___________________
_______________________________________________________________________ Recommendation
of the Stock Exchange. This
is to certify that ________________________________ is a [54][recognized] sub-broker affiliated
to_________________________________ member-broker of this Exchange. The
application is recommended/not recommended for registration by the Board. AUTHORISED
SIGNATORY Signature
__________________________
Stock Exchange. FORM C � To,
The
____________________________________ Stock Exchange Dear
Sirs,
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 sub-broker. 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 (Stock Brokers and Sub Brokers) Regulations, 1992. Recognition letter to be issued by the Stock Exchange To, The
Securities and Exchange Board of 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] FORM D
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 [56] [FORM DA
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 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 Securities
and Exchange Board of FORM E
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
SCHEDULE II
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. (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 co-operate 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 co-operation 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.] SECURITIES AND EXCHANGE BOARD OF 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 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 one-half 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. 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 co-operation 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
sub-broker 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. (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 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; (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 stock- broker, 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 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]. [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 (i) he
shall pay a sum of ten thousand rupees for the block of five financial years
commencing from (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 (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 [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.] [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:
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
FEES TO BE PAID BY THE TRADING OR
CLEARING MEMBER [76][OR
SELF-CLEARING 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). 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. (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.
[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. [2] [3] Inserted
by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. [4] Inserted
by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2000,
w.e.f. [5] Clause
(a) renumbered as clause ((ad) by the SEBI (Stock Brokers Sub-brokers) (Second
Amendment) Regulations, 2006, w.e.f. [6] Clause (aa) renumbered as clause (ae) )
by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. [7] Inserted
by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. [8] Omitted
by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. [9] Inserted
by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2001, w.e.f. [10]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. [11]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2000,
w.e.f. [12] Clause
(ga) renumbered as clause (gd)
by the SEBI (Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006,
w.e.f. [13] Words �and
the rules� omitted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. [14]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 1998,
w.e.f. [15]
Inserted by the SEBI (Criteria for Fit and Proper Person ) Regulations, 2004
w.e.f. [16]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. [17]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Third Amendment) Regulations,
2006, w.e.f. [18]
Regulation 11 renumbered as 11A and this new regulation 11 inserted by the SEBI
(Stock Brokers Sub-brokers) (Second Amendment) Regulations, 2006, w.e.f. [19]
Renumbered as 11A by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. [20]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 1998,
w.e.f. [21]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003,
w.e.f. [22]
Substituted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations,
2003, w.e.f. [23]
Substituted for �as stated in rule 5� by the SEBI (Stock Brokers Sub-brokers)
(Second Amendment) Regulations, 2006, w.e.f. [24]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. [25]
Substituted for �11� by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. [26]
Substituted for �11� by the SEBI (Stock Brokers Sub-brokers) (Second Amendment)
Regulations, 2006, w.e.f. [27]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003,
w.e.f. [28]
The words, �(k)� omitted by the SEBI (Stock Brokers Sub-brokers) (Amendment)
Regulations, 2003,w.e.f. [29]
Inserted by the SEBI (Stock Brokers Sub-brokers) (Amendment) Regulations, 2003,
w.e.f. [30] Chapter
III �A, consisting of regulations 16A to 16-I , inserted� by the SEBI (Stock Brokers and Sub-brokers)
(Amendment) Regulations, 2000, w.e.f. [31]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [32]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [33]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2002, w.e.f. [34]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [35]
Substituted for the words, �sub-regulations (2) and (3)� by the SEBI (Stock
Brokers and Sub-brokers) (Amendment) Regulations, 2001, w.e.f. [36]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [37]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [38]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. � [39]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [40]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [41]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [42]
Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment)
Regulations, 2003, w.e.f. [43]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. [44]
Inserted by the SEBI (Investment Advice by Intermediaries) (Amendment)
Regulations, 2001, w.e.f. [45]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. [46] Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 20-11-2003 for the words, �The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or Chairman may deem fit and appropriate including action under Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002.� [47] The
original text of regulation 23 had been substituted by the Securities and
Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and
Imposing Penalty) Regulations, 2002 w.e.f. ��23. Communication of Findings etc. � (1) The Board shall after consideration of the inspection report communicate the findings to the stock-broker to give him an opportunity of being heard before any action is taken by the Board on the findings of the inspecting authority. (2) On receipt of the explanation, if any, from the stock-broker, the Board may call upon the stock-broker to take such measures as the Board may deem fit in the interest of the securities market and for due compliance with the provisions of the Act, rules and regulations. [48]
Regulations 25to 28 substituted for regulation 25 by the SEBI (Stock Brokers
and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. � 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. [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. �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 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*[******]. a. "and to the Central Government"
omitted by the SEBI (Stock Brokers and Sub brokers) Amendment Regulations, 1999
published in the Official Gazette of 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 a. Substituted for the following
provision by the SEBI (Appeal to the Securities Appellate Tribunal)
(Amendments) Regulations, 2000 published in the Official Gazette of "Any
person aggrieved by an order of the Board may prefer an appeal to the Central
Government"
[50]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2000, w.e.f. [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. [54]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. [55]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. [56]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2000, w.e.f. [57]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [58]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2000, w.e.f. [59]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [60]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2003, w.e.f. [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. [62]
Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment)
Regulations, 2003, w.e.f. (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.� [63]
Words,�� �and shall issue appropriate
purchase / sale note� omitted by the SEBI (Stock Brokers and Sub-brokers)
(Amendment) Regulations, 2003, w.e.f. [64] �Inserted
by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003,
w.e.f. [65]
Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment)
Regulations, 2003, w.e.f. [66]� Inserted by the SEBI (Stock Brokers and
Sub-brokers) (Amendment) Regulations, 2002, w.e.f. [67]
Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment)
Regulations, 2002, w.e.f. [68]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Second Amendment) Regulations,
1998, w.e.f. [69]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
1998, w.e.f. [70]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2000, w.e.f. [71]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 1998, w.e.f. [72]
Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 1998, w.e.f. �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. �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. [75]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. [76]
Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations,
2001, w.e.f. [77]
Substituted for Rs. 25,000 by the SEBI (Stock Brokers
and Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. [78]
Substituted by the SEBI (Stock Brokers and Sub-brokers) (Third Amendment)
Regulations, 2006, w.e.f. �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 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. [80] Substituted by the SEBI (Stock Brokers and
Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. �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.� [81] Substituted by the SEBI (Stock Brokers and
Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. [82] Substituted by the SEBI (Stock Brokers and
Sub-brokers) (Third Amendment) Regulations, 2006, w.e.f. � 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.���
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