Collect annual info on broker conduct: Sebi to bourses

With an aim to keep an eye on brokers' conduct in their dealings, market watchdog the Securities and Exchange Board of India (Sebi) has sought a report from the stock exchanges by month-end on the brokerage firms' non-compliance to various regulations.

The regulator has informed the stock exchange, through a circular dated May 31, that the compliance officer of the concerned stock brokerage firms are required to "immediately and independently report to the board any non-compliance observed by him".

In its bid to assess and monitor the extent of compliance with these provisions, the Sebi has now asked the bourses to obtain an Annual Information Report (AIR) from the compliance officer of stock brokers having over 10,000 active clients.

Those investors or traders who have executed even one single trade during the year 2010-11 in any market segment would be considered as active clients, the regulator said.

The Sebi has further asked the bourses to examine these reports and submit their feedback to the regulator by June 30.

Pursuant to the Sebi direction, the Bombay Stock Exchange today asked its member brokers to submit the AIR by June 24 to its surveillance and supervision department.

The proposed AIR would need to contain information like activities carried out by the brokers in any business other than securities as also the customer complaint about allegations of theft or misappropriation of funds or securities or of forgery against key officials.

Besides, the AIR would also need to contain details like any arrest or conviction of key officials of the brokerage firm on issues involving fraud, misappropriation of funds, forgery counterfeiting and falsification of records and report.

Other matters like refusal of membership to the stock broker or any group firm by any regulator like Sebi, RBI, FMC, Exchanges/Clearing Corporations/ Depository and other regulatory actions would also need to be reported.

The brokers would also need to report any technology failure at their end impacting servicing of more than one fourth of their customers, as also any financial disputes before various government bodies.