Sebi move on better client access to limit sub-brokers

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Mumbai: The stock market regulator Securities and Exchange Board of India (Sebi) has decided to allow Sebi-registered stock brokers, including trading members of stock exchanges, to provide access to clients through authorised persons.

The move that was recommended by Secondary Market Advisory Committee (SMAC) is expected to expand the reach of markets for exchange-traded products.

Experts opine that the regulators decision will replace the current sub-broker system and would make the process simpler and transparent. “This is a welcome move that will make the existing process faster and simpler with clear demarcation of responsibility among the stockbroker and the authorised person,” said EMC Palaniappan, president , Association of National Exchange Members of India (ANMI).

Currently, a sub-broker of the main broker has to get registered with the market regulator. However, the new regulatory framework has made the process simpler as the authorised person appointed by the stockbroker has to just get a prior approval of the stock exchange to provide trading access to the clients. But the clients shall be directly registered with the stockbroker and the funds and the securities of the clients shall be settled directly between stockbroker and client.

The new guidelines clearly make the stockbroker responsible for all acts of omission and commission of the authorised person. The Sebi guideline said, “All acts of omission and commission of the authorised person shall be deemed to be those of the brokers. The authorised person shall not receive or pay any money or securities in its own name or account and instead all receipts and payments of securities and funds shall be in the name or account of the stockbroker”.

“The new guidelines have brought more responsibility on the main stock broker for the actions and deeds of person authorised by him. This will also help raise the confidence level of investors in trading in the securities market,” said a member with BSE.