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Sebi stiffens rule on unauthorised trades

Brokers hail the move but share concerns over increased time and cost of compliance

BS Reporter  |  Mumbai 

Sebi

To curb 'unauthorised trades,' the Securities and Exchange Board of (Sebi) has directed brokers to maintain evidence of clients placing orders with them.

Such trades are defined as buy or sell orders placed by a broker on behalf of a client without the latter's directive or authorisation. The regulator said the evidence may be a physical record from the client, a telephone recording, e-mail from a registered mail address, a log for internet transactions, record of mobile messages or any other "legally verifiable record".

"When a dispute arises, the burden of proof will be on the broker to produce the above records for the disputed trades," goes a circular.

Many clients allow their brokers access to their accounts and let them trade on their behalf. This leads to a lot of ambiguous trades. says it receives several complaints from regarding unauthorised trade.

"in the past has taken several steps to tackle the menace...in spite of measures taken, a considerable proportion of investor complaints is of the nature of unauthorised trades," goes the circular.

Brokers say they are not always at fault. "Often clients allow us to operate their accounts. However, if they incur losses, they try to dispute the trade and file a complaint with The latest directive will help both the broking community and However, the time and cost of compliance will increase," said an official with a domestic brokerage.

In the current framework, brokers in commodity derivative are required to keep evidence of a client placing an order. There is no such requirement in the equity, equity derivative and currency derivative segments.

says this latest directive will "further strengthen regulatory provisions against unauthorised trades and harmonise the requirements across markets".
POSSIBLE EVIDENCE

A physical record signed by client
A telephonic recording
E-mail authorizing the trade a registered address
Log for internet transactions
Record of mobile messages
Any other “legally verifiable record”

First Published: Wed, September 27 2017. 00:27 IST
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