SUB BROKER

Sub – broker means any person not being a member of stock exchange who acts on behalf of a stock broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock brokers. 

A sub – broker is one who works along with the main broker and is not directly registered with the stock exchange as a member. He acts on behalf of the stock broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock brokers. 

REGISTRATION BY SUB BROKERS:  In case of an Individual:

(a) the applicant is not less than 21 years of age;

(b) the applicant has not been convicted of any offence involving fraud or dishonesty;

(c) the applicant has at least passed 12th Standard equivalent examination from an institution recognized by Government. However, SEBI may relax this criterion on merits having regards to applicants experience;

(d) the applicant is a fit and proper person; 

In case of Partnership or Body Corporate: The partners or directors as the case may be shall comply with the requirements stated above. It is also to be assessed whether the applicant has necessary infrastructure like adequate office space, equipment and manpower to effectively discharge his activities. 

The applicant should be person recognized by the stock exchange as a sub broker affiliated to a member broker of stock exchange. The stock exchange shall forward the application form of such applicants, alongwith recommendation letter issued by stock broker with whom he affiliated alongwith a recognition letter issued by stock exchange to SEBI within 30 days from date of its receipt. 

Any Registration granted by SEBI shall be subject to the following conditions:

(a) he shall abide by rules, regulations and bye laws of stock exchange which are applicable to him;

(b) where the sub broker proposes to change his status or constitution, he shall obtain prior approval SEBI for continuing to act as such after the change;

(c) he shall pay fees charged by SEBI;

(d) he shall take adequate steps for Redressal of grievances, of investor within one month of date of receipt of compliant and keep SEBI informed about the number, nature and other particular of complaints received from such investors; and

(e) he is authorized in writing by a stock broker being a member of a stock exchange for affiliating himself in buying, selling or dealing in securities. 

REGISTRATION OF TRADING & CLEARING MEMBERS:

▪Application for grant of certificate of registration by a clearing member or self clearing member of clearing corporation or clearing house of a derivative exchange shall be made through the concerned clearing corporation or clearing house of which he is a member.

▪The concerned exchange shall forward the application to SEBI as early as possible but not later than 30 days from the date of its receipt.

▪SEBI may require the applicant or concerned stock exchange or clearing house or corporation to furnish such other information or clarification regarding the trading and settlement in derivatives and matter connected thereto, to consider the application for grant of a certificate. 

▪The applicant or its principal officer, if so required shall appear before the SEBI for personal representation. 

SEBI shall take into account following aspects while considering the application, namely:

(i) Whether the applicant is eligible to be admitted as a trading member or a clearing member as the case may be;

(ii) Whether the applicant has necessary infrastructure;

(iii) Whether he is/was subjected to disciplinary procedures under Rules, Regulations and bye laws of any stock exchange;

(iv) whether the applicant has any financial liability which is due and payable to SEBI; 

An applicant who desires to act as a clearing member shall have minimum net worth of Rs. 300 Lakhs and shall deposit at least a sum of Rs. 50 Lakhs or higher amount with a clearing corporation or a clearing house.  

An applicant who desires to act as a self clearing member, in addition shall comply with the requirement of minimum Networth of Rs. 100 Lakhs and shall deposit at least a sum of Rs. 50 lakhs or higher amount with the clearing corporation.  

“ Networth in this context shall mean paid up capital plus free reserves and other securities approved by SEBI (but does not include fixed assets, pledged securities, value of members card, bad deliveries, doubtful debts and advances of more than three months and debts given to associated persons of member), prepaid expenses, losses, intangible assets and 30% value of marketable securities.” 

LIABILITY FOR MONETARY PENALTY:

(i) Failure to file any return or report with SEBI;

(ii) Failure to furnish any information, books or other documents within 15 days of issue of notice by SEBI;

(iii) Failure to maintain books of account or record as per the Act, rules and regulations.

(iv) Failure to redress the grievances of investors within 30 days of receipt of notice from SEBI;

(v) Failure to deliver any security or make payment of amount due to investors within 48 hours of settlement of trade unless the client has agreed in writing otherwise.

(vi) Charging of brokerage in excess of brokerage specified in regulations or bye laws of stock exchange;

(vii) Dealing in securities of a body corporate listed on any stock exchange on his own behalf or on behalf of any other person on the basis of any unpublished price sensitive information;

(viii) Procuring or communicating any unpublished price sensitive information except as required in ordinary course of business or under any law;

(ix) indulging in fraudulent and unfair trade practices relating to securities;

(x) Failure to exercise due skill, care and diligence.

(xi) Failure to satisfy the net worth or capital adequacy norms, if any, specified by SEBI; 

LIABILITY FOR ACTION UNDER ENQUIRY PROCEEDING: A stock broker or sub broker shall be liable for any action as specified in SEBI (intermediary) regulations, 2008  including suspension or cancellation of his certificate of registration as a stock broker or sub broker, if he:

a) Ceases to be a member of stock exchange;

b) Surrenders his certificate of registration to SEBI;

c) has been declared defaulter by a stock exchange and not readmitted as a member within a period of 6 months;

d) has been found to be not a fit and proper person by SEBI;

e) fails to pay the fees specified;

f) fails to comply with the rules, regulations and bye laws of stock exchange of which he is a member;

g) fails to co-operate with the inspecting or investigating authority;

h) fails to pay the penalty imposed by adjudicating officer;

i) indulges in insider trading;

j) indulges in market manipulation of securities or index;

k) fails to comply with the circulars issued by SEBI.