Brokers resist SEBI move to enhance control

Counter point: Some welcome the change, suggesting brokers would find it difficult to misuse client funds.

Counter point: Some welcome the change, suggesting brokers would find it difficult to misuse client funds.  


Changing frequency of data upload to weekly, from monthly, defeats purpose, says broker association

The move by the Securities and Exchange Board of India (SEBI) to enhance the supervision of market participants is facing fresh resistance from stock brokers who are trying to stall the regulator’s attempts to monitor any possible misuse of client funds by the broking community.

Brokers are currently required to upload information related to client funds lying with them on a monthly basis. SEBI wants this to be done weekly, from April 1.

This includes a wide array of important information such as the aggregate value of client fund balance, collateral, credit & debit balances in all the client accounts and value of margins utilised, among other data.

The Association of National Exchanges Members of India (ANMI), which is the umbrella body of brokers, has written to SEBI to continue with the existing system

“ANMI is of the strong view that current system of uploading data by monthly is [running] smoothly to the satisfaction of exchanges and also the regulator,” stated the ANMI letter addressed to SEBI chairman Ajay Tyagi.

“This monthly uploading is sufficient for monitoring purposes by the authorities concerned... we submit that weekly uploading, that too within [three] days of the closing of the week will lead to frequent uploading and the main purpose of monitoring will become more difficult,” it added.

The Hindu has reviewed a copy of the letter.

‘Instances of misuse’

The regulator is in favour of enhanced oversight of market participants as it wants to minimise possible misuse of client funds by brokers as there have been instances in the past, where client money had allegedly been used by the stock broker for his own proprietary purposes.

“... uploading of that data by the stock broker to the stock exchanges shall be on weekly basis i.e. stock brokers shall submit the data as on last trading day of every week on or before the next three trading days,” said a SEBI circular issued in September last year.

“While it would certainly add to the compliance requirements, which are already quite stringent, the move will make it difficult for brokers to misuse client money,” said a domestic broker on conditions of anonymity as a final decision on the matter is yet to be taken.

“The arbitration and investor grievance redressal mechanism set by the exchanges regularly sees cases wherein clients say that the money lying in their account was allegedly misused by brokers,” he added.

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Printable version | Jan 27, 2020 5:15:58 AM |

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