Source: ET
Context:
The Securities and Exchange Board of India (Sebi) is set to overhaul stock broker regulations, some of which have remained largely unchanged for over three decades. The move aims to strengthen risk management, data protection, and market resilience, according to Sebi Chairman Tuhin Kanta Pandey.
Key Highlights:
- Timeline for Reform:
- Sebi intends to finalize changes by December 2025, following a discussion paper released in August 2025.
- The paper proposed updates including new definitions for algorithmic and proprietary trading and rationalization of broker norms.
- Focus Areas:
- Risk Management & Data Protection: Modernizing rules to align with current market and technological standards.
- Infrastructure Stability: Sebi is examining technical glitches at the Multi Commodity Exchange (MCX), which caused trading disruptions last week.
- MCX had moved to a TCS-developed trading engine in October 2023, replacing 63 Moons Technologies.
- Pandey emphasized that repeated outages require root-cause analysis and corrective measures.
- Investor Relief Measures:
- Sebi plans to allow physical shareholders who purchased securities prior to FY20 but could not complete transfers to now lodge and transfer them in their name.
- This step aims to ease operational hurdles for long-term investors.
- Angel One Settlement:
- Angel One settled a ₹34 lakh disclosure violation case with Sebi.
- The show-cause notice in April alleged non-compliance with securities disclosure norms.
What are Stock Broker Regulations?
Stock Broker Regulations are a set of rules and guidelines framed by the Securities and Exchange Board of India (SEBI) introduced in the early 1990s to govern the registration, conduct, responsibilities, and operations of stock brokers and sub-brokers who facilitate buying and selling of securities on stock exchanges.
Legal Framework
The key framework is the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, which:
- Define who qualifies as a stock broker and sub-broker.
- Specify eligibility, registration, and compliance requirements.
- Lay down the code of conduct and disciplinary procedures for violations.
Objectives of the Regulations
- Investor Protection: Safeguard client funds and securities against misuse.
- Market Integrity: Ensure fair, transparent, and efficient trading.
- Accountability: Enforce strict compliance, audits, and record-keeping.
- Risk Management: Reduce systemic risks through margin, capital, and reporting norms.
- Transparency: Mandate proper disclosures and grievance redressal mechanisms.
Key Provisions (Under the 1992 Regulations)
- Registration Requirement: Every broker and sub-broker must be registered with SEBI and the stock exchange.
- Capital Adequacy: Brokers must maintain minimum net worth and deposit requirements.
- Client Protection:
- Maintain separate accounts for client funds and own funds.
- Issue contract notes after every transaction.
- Code of Conduct: Enforces integrity, diligence, and fair dealing.
- Audit & Reporting: Periodic submission of financial and compliance reports to SEBI/exchanges.
- Grievance Redressal: Investor complaints handled through SEBI’s SCORES platform and exchange mechanisms.
