BSE enhances supervisory framework for stock brokers

Leading stock exchange BSE has issued detailed guidelines for monitoring the financial strength of stock brokers as well as detect any misutilisation of clients' funds.
The norms come after Sebi last month put in place enhanced supervision framework for stock brokers.
In order to monitor clients' funds lying with brokers, BSE has asked them to submit information, about aggregate fund balances available in all client bank accounts, including the settlement account, maintained by them across stock exchanges, on last trading day of every week to it.
They also need to inform about aggregate value of collateral deposited with clearing corporations in the form of cash and cash equivalents as well as unutilised collateral lying with clearing corporations. Also, they need to inform about aggregate value of non-funded part of the bank guarantee and proprietary margin obligation among others.

These norms are not applicable for stock brokers who are carrying out only proprietary trading or trading for institutional clients, BSE said in a circular.
BSE said that as and when securities are pledged, stock brokers will have to send a statement reflecting the pledge and funding to the clients in a prescribed format.

Further, brokers will have to upload client's funds and securities balance, running account settlement, PAN of Directors, Key Management Personnel and dealers on the BSE system. These norms will be applicable from December 26.
To keep a check on the financial strength of brokers, BSE has asked its members submit details about share capital, surplus, accumulated losses, collaterals and margins from customers, value of loans given to group companies and value of investments in group companies among others in a prescribed format.

Besides, the exchange has made changes in the existing system of internal audit for stock brokers. The brokers will have to submit the internal audit report for the half year ending September 30 and March 31 by November 30 and May 31 respectively.