Stock exchange membership not inheritable, says SC

A Bench comprising Justice Tarun Chatterjee and Justice Dalveer Bhandari, while disposing of a batch of appeals said: "It is abundantly clear that no provision of succession to registration is permissible... Membership of a stock exchange is a privilege and not a matter of right and thus this cannot be claimed as inheritable."

The court accepted the market regulator's contentions that there was no provision in the Sebi Act and its rules and regulations, which recognised the registration of stockbrokers by inheritance and transmission for the purpose of granting fee continuity benefit.

While upholding a Securities Appellate Tribunal order dated May 12, 2006, the court said in a batch of petitions filed against Sebi that appellants including Nikhil K Vakharia, son of Late Kanchanlal K Vakharia, in order to operate in the stock exchange had to obtain a fresh registration from SEBI.

For the first five years, the appellant would be required to pay the quantum of fee linked to the turnover and thereafter at the flat rate of Rs 5,000 in order to keep the registration in force, the bench said.

According to Sebi, the appellant who is son of Late Kanchanlal K Vakharia on transmission can be registered only as a new stock broker with Sebi in accordance with the Act, Regulations and the Sebi (Stockbrokers and Sub-Brokers) Rules, 1992 and subject to payment of registration fee for a new stock-broker as per the schedule fixed in the Regulations.

It may be noted that under the SEBI (Stockbrokers and Sub-Brokers) Regulations, 1992, a fee is required to be paid by the stock brokers.

Broadly, the fee was structured in two distinct phases: In the first five years of operation of a broker, the quantum of the fee is linked to the turnover of the stock broker. Greater the turnover, higher the fee.