The Securities and Exchange Board of India (Sebi) has stepped up supervision
to check fund diversion.
The regulator on Monday outlined the criteria for annual inspection of stockbrokers
of clearing corporations. The move is part of Sebi’s efforts to move towards a risk-based model of supervision
of all stockbrokers.
According to Sebi, the top 25 stockbrokers
in terms of investor complaints and arbitration cases filed by investors would face inspection, irrespective of whether they have been inspected earlier or not. Those with adverse observations in the internal audit reports on high-risk issues such as wrong reporting of margins, transfer of trades, pledging of client securities and dealing with unregistered intermediaries would also be inspected.
“Clearing activity undertaken by stockbrokers
for other stockbrokers
shall be inspected by clearing corporations. Other activities of stockbrokers
shall be inspected by stock exchanges. If stock exchanges and clearing corporations so desire, they can conduct joint inspections of stockbrokers,” Sebi
said in a circular on Monday.
Inspection of stockbrokers
can be done on a random basis. Those not falling understated criteria would be examined at least once in three years, Sebi
These apart, the regulator has asked exchanges to frame an internal policy for selection of stockbrokers
for inspection based on inputs/alerts from risk-based supervision.
Besides, subsidiaries of regional stock exchanges would also have to face inspection every year.