Regulatory Compliances on Dalal St
– Mostly smaller brokerage firms finding it difficult to stay
– Some of them merged their business with a large brokerage firms
– Some surrendered their membership to BSE and NSE
– As of April 30, 2022, NSE received 665 complaints against 98 trading members
– ISC resolved 235 complaints and 57 complaints are not maintainable, while 373 complaints are still pending
Mumbai: Bloodbath is on among the stockbrokers at both the stock exchanges, National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), in the country.It is despite the fact that investor population has almost doubled in India during past couple of years due to the spread of Covid-19.
On BSE, as many as 54 brokers surrendered their membership in FY20-21 and 44 in FY21-22, taking the total for the past two years to 98. On NSE, 39 stockbrokers surrendered membership in FY20-21 and 43 more in FY21-22, bringing the total to 82 brokers during the past two years. Talking to Bizz Buzz, noted stockbroker Ratan Binani says, “SEBI has set quite stringent norms for brokers, particularly post-Karvy episode. Brokerage fee has come down to as low as 0.10 per cent from a whopping fee of 0.50 per cent until a couple of years ago. Moreover, the competition is getting stiff day-by-on the online brokeragespace.”
Most of these are smaller brokerage firms that are finding it difficult to stay in business due to increasing regulatory compliances. Some of the smaller brokers have merged their business with a large brokerage and then surrendered their membership to BSE and NSE.
Recently, four brokers—Indo Asian Securities Pvt Ltd, New Age Wealth Management, Pee Dee Kapur Stock & Securities Ltd and Satish Ashok Sabnis—have surrendered their membership to NSE. However, there is no further information about this or other brokers who are no longer members of NSE.
In March 2019, Sebi levied a penalty of Rs3 lakh on Pee Dee Kapur Stock &Securities for irregularities in client agreements and indulging in unauthorised margin funding by the broker.
When a broker decides to surrender or resign from membership of a bourse, he has to follow a specific procedure. This is because all his clients need to migrate their trading and demat accounts to another broker along with the release of any power of attorney (PoA) they may have signed or funds and securities held by the firm. So, the exchange requires an exiting broker to obtain a no-objection certificate (NOC) from various departments of the exchange, which is done after ensuring that no money or securities are outstanding of clients.
After completing all procedures, the broker’s application is sent to the Securities and Exchange Board of India (SEBI), which decides whether to approve or reject it, says an official from the Exchange.
NSE holds back a certain percentage from the deposit of the broker member until the formalities are completed.
As of April 30, 2022, NSE received 665 complaints against 98 trading members. Out of these, the exchange and its investor services cell (ISC) resolved 235 complaints. According to NSE data, 57 complaints are not maintainable, while 373 out of 665 complaints are still pending. In seven cases, the clients have filed for arbitration.
However, all these cases are also pending. NSE took penal action against 19 broker members by issuing orders for monetary penalties. Last month, Sunness Capital became the 32nd defaulter broker since May 2019, to be expelled by the NSE.