Calcutta, Feb 12: The Sebi inspection of the books of about 18 CSE members in September, 1997 has revealed that a large number of these brokers continue to ignore not only the rules prescribed by the regulator, but also the byelaws of the exchange.The deficiencies noticed by the Sebi inspection team are improper maintenance of contract notes, non-maintenance of proper books of account, non-charging of brokerage, unreported transactions, delayed payments to clients, transactions done at rates outside the day's price band, non-segregation of client and own bank accounts, carry forward transactions and non-payment of Sebi registration fees in full.
Some of these deficiencies have been appearing with regularity in all Sebi inspection reports, but brokers have shown scant regard for some of the recommendations made earlier. In particular, suggestions pertaining to issue of serially numbered contract notes to clients and maintenance of separate bank accounts for clients have not been taken seriously at all asmembers find them impractical.
In the latest report, Sebi has observed that members have in certain cases not charged any brokerage from clients which is a violation of byelaw 208 of the Calcutta Stock Exchange Association (CSEA). The inspection has also come across cases of unreported transactions and delayed payments to clients. Non-reporting of trades is a violation of byelaws 334(viii) and 336(xiii) of CSEA, while delayed payment is against the code of conduct B(1) under regulation 7 of the Sebi (Brokers & Sub-brokers) Rules.
The last round of inspection done from September 22, 1997 in phases was based on an order on July 14, 1997, issued by Sebi executive director M D Patel, ordering inspection of the books of accounts, other records and documents of selected stock brokers. The purpose of the inspection was to verify whether the brokers have maintained records in the manner specified by the Securities Contracts (Regulation) Rules, 1957 and the Sebi (Stock Brokers and Sub-Brokers) Regulations, 1992.It will also ascertain whether these brokers complied with the provisions of the Sebi Act, 1992, Securities Contracts (Regulation) Act, 1956 and the rules prescribed by the securities watchdog from time-to-time.
The inspection sought details of the individual members from the stock exchange related to violations of trading restrictions, margin money, pending arbitration cases, payment or delivery defaults and particulars of auction notices `served to or issued by the clearing house' arising out of a default in settlement. Besides, it called for information on the top 10 clients of a broker, his business volume during the last 12 months and how much of it is on jobbing, client and own account, respectively. In addition, members were required to furnish details of dealings with top 20 brokers and top 20 securities in the jobbing, client and own categories.
The inspection covered the last fiscal and five months of the current financial year. Sebi will initiate action against the concerned members only aftergiving them an opportunity to explain their actions.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
