Securities and Exchange Board of India (Stock Brokers And Sub-Brokers) (Amendment) Regulations, 2003

S.O. No. ______(E). In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to amend the Securities and Exchange Board of India (Stock Brokers And Sub-Brokers) Regulations, 1992, namely:-

1. (i) These regulations may be called the Securities and Exchange Board of India (Stock Brokers And Sub-Brokers) (Amendment) Regulations, 2003.
(ii) They shall come into force on the date of their publication in the Official Gazette.

2. In Securities and Exchange Board of India (Stock Brokers And Sub-Brokers) Regulations, 1992 -

(i) In regulation 11,
(a) in sub-regulation (5), after clause (ii), following sub-clauses shall be inserted, namely :-
“(iii) The applicant has the necessary infrastructure like adequate office space, equipment and manpower to effectively discharge his activities.”
(iv) The applicant shall be a person recognized by the stock exchange as a sub-broker affiliated to a member broker of the stock exchange.

(b) For the existing sub-regulation (6), the following sub-regulation shall be substituted, namely : -
“(6) The stock exchange shall forward the application in Form ‘B’ of such applicant alongwith the recommendation letter in Form ‘C’ issued by the stock broker with whom he is affiliated and also the recognition letter in Form ‘CA’ issued by the stock exchange to the Board within 30 days from the date of the receipt of the application”.
(ii) In regulation 15,
(a) in sub-regulation (1), after clause (c), the following clauses shall be inserted, namely : -

“(d) comply with the rules, regulations and bye-laws of the stock exchange.
(e) not be affiliated to more than one stock broker of one stock exchange.”

(b).In sub-regulation (2), after the words “clauses (h), (i), (j)”, the word and bracket “(k)” shall be omitted.

(iii) After regulation 15, the following regulation shall be inserted, namely :-

“15A Director not to act as sub-broker
No director of a stock broker shall act as a sub broker to the same stock broker.”

(iv) In regulation 17, in sub-regulation (1),
(a) the existing clause (g) shall be substituted with the following, namely :-

“(g) Documents register containing, inter-alia, particulars of securities received and delivered in physical form and the statement of account and other records relating to receipt and delivery of securities provided by the depository participants in respect of dematerialized securities. “
(b). after clause (m), the following clause (n) shall be inserted, namely :-

“(n) An agreement with the sub-broker and with the client of the sub-broker to establish privity of contract between the stock broker and the client of the sub-broker”.

(v) After regulation 18A, the following shall be inserted, namely :-

“ 18B Stock Broker not to deal with unregistered sub-broker.
The stock broker shall not deal with any person as a sub-
broker unless such person has been granted certificate of registration by the Board under sub-regulation (1) of Regulation 12.”


(vi) In Schedule I,
(a) in Form ‘B’, after the words “This is to certify that __________ is a” and before the words “sub-broker affiliated to ________ member broker of this exchange.”, the word “recognized” shall be inserted.

(b) after Form ‘C’, the following Form ‘CA’ shall be inserted, namely : -

“FORM CA

Securities and Exchange Board of India (Stock Brokers and Sub Brokers) Regulations, 1992.
Recognition letter to be issued by the Stock Exchange
To,
The Securities and Exchange Board of India,
___________________________
___________________________
Mumbai.

Dear Sir,

This is to certify that ___________ has been recognized as a sub-broker by this Exchange being a sub-broker affiliated to member broker ___________ of this Exchange.



Place : Authorized Signatory
Date : For and on behalf of ___________Exchange”


(vii) In Schedule II,
(a) Under the head “Code of Conduct for Stock-Brokers”,
(i) in clause (B), in sub-clause (2), after the words “his client”, and before the words “a contract note”, the following words “or client of the sub-broker, as the case may be” shall be inserted.
(ii) After clause (C) a new clause (D) shall be inserted as under:-
“D. (1) A stock broker shall enter into an agreement as specified by the Board with his client.
(2) A stock broker shall also enter into an agreement as specified by the Board with the client of the sub – broker.


(b) Under the head “Code of Conduct for Sub-Brokers”, in clause (B), in sub-clause (1), the following words shall be omitted, namely :-

“and make payment in respect of securities sold and arrange for prompt delivery of securities purchased by clients”.

(c). In clause (B), the existing entire sub-clause (2) shall be substituted with the following, namely : -
“(2) A sub-broker shall render necessary assistance to his client in obtaining the contract note from the stock broker”.

(d) In clause (B), in sub-clause (6), the following words shall be omitted, namely :-
“ and shall issue appropriate purchase / sale note”.

(e) In clause (C), the existing sub-clause (4) shall be substituted with the following, namely : -
“(4) Agreement between sub-broker, client of the sub-broker and main broker : A sub-broker shall enter into a tripartite agreement with his client and with the main stock broker specifying the scope of rights and obligations of the stock broker, sub-broker and such client of the sub-broker.”