Presentation on Brokerage or Brokerage firms in India

1. BROKERAGE
-by Harshad Jain

3. STOCK BROKERS
 A stock broker is a member of a recognized stock
exchange, who buys, sells or deals in securities.
 A certificate of registration from SEBI, is mandatory
to act as a broker.
 SEBI is empowered to impose conditions while
granting the Certificate.

4. AS A MEMBER OF THE STOCK EXCHANGE
 He will have to abide by its rules, regulations and
bye laws,
 Pay the prescribed fee
 Take adequate steps for redressal of investor
grievances within one month of the receipt of the
complaint
 Keep SEBI informed about the number, nature and
other particulars of such complaints.

5. REGISTRATION
 A broker seeking registration with SEBI has to apply
through the stock exchange of which he is a
member.
 The application must be forwarded by the exchange
to SEBI within 30 days from the date of receipt.
 The exchange should also include a statement to
the effect that no complaints/arbitration cases are
pending against the applicant.

6. FOR GRANTING REGISTRATION TO THE
BROKER
 SEBI checks whether or not he is eligible to
be member of a stock exchange
 Has the necessary infrastructure including
manpower to discharge his activities
 Has past experience in the business of
buying, selling or dealing in securities
 And if there exist any disciplinary
proceedings against him by the stock
exchange.

7. PAYMENT OF FEES
 Every registered broker has to pay the SEBI fees
based on annual turnover.
 For annual turnover up to,
Turnover Fees
Up to Rs. 1Cr Rs. 5000/-
In excess of Rs. 1Cr Rs. 5000/- + 0.0001 times the
amount in excess of Rs. 1Cr

8. CODE OF CONDUCT
 Registered stock brokers have to abide by a code
of conduct.
 Must maintain high standards of integrity,
promptness and fairness with due skills, care and
diligence
 Must not indulge in fraudulent and deceptive
transaction
 Must abide to all the provisions of SEBI Act

9. GENERAL OBLIGATIONS AND
RESPONSIBILITIES
 Must maintain following books of accounts and
documents
 Register of transactions
 Client ledger
 General ledger
 Journals
 Cash book
 Bank pass book, etc

10. APPOINTMENT OF A COMPLIANCE OFFICER
 Every stock broker should appoint a compliance
officer to monitor the compliance of SEBI
Act/rules/regulations/notifications/guidelines etc.
 He should immediately and independently report
any non compliance observed by him to the SEBI.

11. NOT TO DEAL WITH UNREGISTERED SUB-BROKER
 A stock broker should not deal with any person as a
sub broker unless he has obtained a certificate of
registration from the SEBI.

12. INSPECTION AND PENALTIES
 SEBI is empowered to inspect the books of
accounts and documents of the stockbroker.
 SEBI can also appoint a qualified auditor to carry
out inspection/investigation into the record.
 A stock broker or sub broker who contravenes any
of the provisions of SEBI Act, rules or Regulations
is liable for penalty.

13. CAPITAL ADEQUACY NORMS
It consists of following components,
 Base Minimum Capital
 Should maintain a deposit with Stock exchange
Stock Exchange Deposit
Mumbai and Kolkata Rs. 5lacs
Delhi and Ahemdabad Rs. 3.5lacs
Other Rs. 2lacs

14. ADDITIONAL/OPTIONAL CAPITAL
 Not less than 8 per cent of the gross outstanding
business in the stock exchange defined as the
aggregate of up to date sales and purchase by
member broker in all the securities put together.

15. CONTINUED..
On the outstanding Business reaching 10
times the base and additional capital, a
broker has responsibility to intimate the
stock exchange.
 If the outstanding business reaches 12.5
times the base and additional capital, the
member should not increase his outstanding
business until additional capital has been
brought into his business and the stock
exchange is satisfied that the member could
be allowed to trade further.

16. CLIENTS AND BROKERS
 All brokers must keep their own money and money
of the clients in separate accounts.
 Brokers have to make payment to their clients /
deliver the securities purchased within two working
days of payout unless the client desires otherwise.

17. CONTINUED…
 They can buy securities for clients only on receipt of
20 per cent margin on the price of the securities
proposed to be purchased.
 The broker must issue the contract note for
purchase/sale of securities to a client within 24
hours of the execution of the contract.

18. SUB BROKERS
 A sub broker acts on behalf of a stock broker as an
agent or otherwise for assisting investors in buying,
selling or dealing in securities through such
brokers, but is not a member of the stock
exchange.
 Sub Brokers wanting to do Business with more than
one broker need to be separately registered with
the SEBI for each broker.

19. TRADING AND CLEARING/ SELF-CLEARING
MEMBERS
 A trading member is a members of a derivative
segment who settles the trade in the clearing
corporation or house through a clearing member.
 A self-clearing member means a member of a
clearing corporation house who may clear and
settle transaction on its own account or on account
of its clients only.

20. FOREIGN BROKER
 A foreign Broker can operate only on behalf of
Registered FIIs.
 He cannot deal in securities on his own account as
principal.