Investor protection measures

• Simplification of share transfer and allotment procedure

  SEBI appointed a committee under the chairmanship of Shri R Chandrasekaran, Managing Director of the Stock Holding Corporation of India Limited, to suggest a procedure for expediting and simplifying share transfer and allotment. The committee has submitted its draft report which has been circulated to various market intermediaries for their comments. Based on the feedback received, the report will be finalised and necessary action will be taken to implement the recommendations. It is expected that implementation of the recommendations of this committee would considerably ease the difficulties faced by investors on account of inordinate delays in share transfers and bad deliveries.
  
  

• Unique order code number

  All stock exchanges have been required to ensure that a system is put in place whereby each transaction is assigned a unique order code number which is intimated by the broker to his client. Once the order is executed, this number is to be printed on the contract note.
  
  

• Time stamping of contracts

  Stock brokers have been required to maintain a record of time when the client has placed the order and reflect the same in the contract note along with the time of the execution of the order. This will ensure that the broker gives due preference in execution of client's order and charges the correct price to his client without taking advantage of any intra-day price fluctuation for himself.
  
  

• Role of sub-brokers

  Historically, the brokers have been operating through a network of sub-brokers who form an important link between the brokers and the investors. While the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 provide for compulsory registration of sub-brokers, only 1,798 sub-brokers have registered with SEBI. In an attempt to safeguard the interest of investors and bring sub-brokers under the regulatory framework of SEBI and the stock exchanges, the following measures have been initiated:
  
  
  1. Efforts have been made to revive the institution of remisier under the rules and bye-laws of the stock exchanges. A remisier is an agent of a broker and is registered with the stock exchange. However he is not authorised to issue a contract/confirmation note to his investor; instead the contract is issued by the broker and as such the broker takes full responsibility in respect of that deal. This way the interest of the investor vis-…-vis the remisier or broker is protected.
  2. Transfer deeds bearing rubber stamps on the reverse other than those of clearing members of the stock exchanges/clearing house/clearing corporations, SEBI registered sub-brokers and remisiers registered with the stock exchanges would become bad delivery in the stock exchanges for all transfer deeds dated June 1, 1997 and thereafter.
  3. A stock broker may not deal with a person who is acting as a sub-broker unless he is registered with SEBI. It shall be the responsibility of the broker to ensure that his client are not acting in the capacity of a sub-broker unless he is registered with SEBI as sub-broker or is recognised by the stock exchange as a remisier.

• Investor protection fund

  The amount of compensation available against a single claim of an investor arising out of default by a member broker of a stock exchange has already been increased to Rs.1 lakh in case of major stock exchanges, to Rs.25,000 in case of smaller stock exchanges viz. Gauhati, Bhubaneshwar, Magadh and Madhya Pradesh and to Rs. 50,000 in case of the other stock exchanges.