1. Stock Broking Chapter 15 Financial Services M Y Khan

2. Stock Brokers Is a member of a recognized stock exchange who buys, sells or deals in securities. As a member of stock exchange, will have to abide by its rules, regulations, bye-laws, pay the fee, and take steps for addressing investors grievances. Registration : has to apply through the stock exchange where is a member, who then forwards to SEBI within 30 days of its receipt. Fees : registration fee on the annual turnover to be paid to SEBI. Annual Turnover up to Rs. 1 crore, Rs.5000, Annual turnover in excess of 1 crore, Rs.5000+one hundredth of 1%of the turnover in excess of Rs.1 crore for each financial year. Code of conduct as specified to be followed.

3. Stock Brokers… regulatory framework General Obligations and Responsibilities: - has to maintain books of accounts, records w.r.t. a) Register of Transactions (sauda book) b) Documents register containing records relating to receipt/delivery of securities in physical form and those provided by depository participant. C) Journals d) Cash book e) Member’s contract book - Member’s contract book showing details of contract’s entered into with him, f) Margin Deposit book g) Registers of sub broker accounts etc. Has to appoint compliance officer who will inspect all compliances of SEBI guidelines and report independently to SEBI. A stock broker not allowed to deal with a sub broker, who is not registered with SEBI.

4. Stock Brokers……regulatory framework Liability for Contravention of the SEBI Act – monetary penalty under chapter VI-A of SEBI. - Penalties as specified by SEBI, including suspension or cancellation of Registration. - Prosecution under section 24 of the SEBI Act. ( market manipulation, dealing without registration etc, dealing outside recognized stock exchange.) Capital Adequacy Norms for Brokers -Base minimum capital -: a min. of Rs.5 lakhs as deposit with stock exchange by members of Mumbai and Kolkatta. Rs.3.5 lakh for Delhi and A' bad stock exchange members. For other stock exchange members Rs. 2 lakhs minimum. -The security deposit forms part of base minimum capital. - 25% of base minimum capital to be kept in cash with the exchange. Another 25% as long term fixed deposit(min3yrs) with a bank, whose lien is given to the stock exchange. The remaining requirement to be maintained as securities. -The securities to be pledged with the stock exchange.

5. Capital Adequacy norms for brokers.. Additional Capital Related to Volume of Business : Additional Capital should be such that with base minimum it should not be less than 8% of the Gross outstanding business in the stock exchanges. Outstanding business is aggregate of up to date purchases and sales by the broker in all securities put together.(no netting of sales and purchases allowed). Gross outstanding business, should not exceed 12.5 times the base and additional capital. If outstanding business exceeds 12.5 times, then Broker should then not increase his business until additional capital is brought into his business and stock exchange permits further trading.

6. Monitoring Requirements.. Should inform the stock exchange regarding the compliance of additional capital, every quarter end, with an auditor’s certification. Has to inform the stock exchange, if the outstanding position is 10 times of their base capital and additional capital. Failure to comply with Capital Adequacy Requirement invites, penalties, suspension from trading.

7. Sub brokers Sub brokers : acts on behalf of the stockbroker as an agent for assisting investors in buying and selling of securities. - not a member of stock exchange, but registered with SEBI. Separate registration with SEBI, for sub broking contract for each broker. Compliance includes payment of fees, adequate steps for redressal of investor grievances and reporting of the same to SEBI.

8. Foreign Brokers Foreign stock exchange registered brokers, who assist the FIIs to buy and sell securities in the Indian stock exchange. Registered with SEBI