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Informist, Tuesday, Sep 10, 2024

 

--Fin min paper proposes changes to qualifications for stock brokers

--Fin min invites comments on paper on security contract rule changes

 

MUMBAI - The finance ministry has proposed a review of the provision in the Securities Contracts (Regulation) Rules, 1957, that bars stock brokers from undertaking any business outside the main line of stockbroking activity. The Department of Economic Affairs under the finance ministry released a consultation paper today seeking comments from the public and market participants by Oct 10.

 

The ministry has proposed that there needs to be a clear definition and explanation of the term 'any business' in the rule that prohibits stock brokers to engage as a principal or employee in any business other than that of securities or commodity derivatives except as an agent in businesses that do not involve any personal financial liability.

 

This bar in the rules acts as a safeguard for investors and aids in upholding market integrity. It also ring-fences the funds of the investor clients of a stock broker from other activities undertaken by the broker.

 

The finance ministry has proposed in the paper that the rule on prohibition of non-broking activities be clarified and an indicative list be specified. The paper highlights some of the issues requiring clarity. It proposes clarity on whether investment by a stock broker of his proprietary or own funds in excess of the net worth in group or other companies that are not in securities market business be treated as "business."

 

It also asks that if a stock broker has majority or substantial stakes in such companies does it mean it is in non-stock broking business, particularly since safeguards on related party transactions are already specified under the Companies Act, 2013.

 

The paper also seeks clarity on whether a stock broker being on the board of a group company as a non-executive director and not holding any key managerial personnel post in that company be still construed as being in non-stock broking business.   End

 

Reported by Rajesh Gajra

Edited by Vandana Hingorani

 

 

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