Oriental For Legal Advice On Sub-Brokers Issue

The deadlock between the Association of NSE Members of India and the Oriental Insurance Company has taken a fresh twist with the insurance company deciding not to clear 21 claims on grounds that these transactions were routed through intermediaries (sub-brokers).

The insurance company has stated that payments in these 21 cases will be made only after taking a legal opinion on the role of sub-brokers in the market place. The insurance company wants a legal opinion on the definition of a sub-broker, and whether the transactions routed through them are legal.

Presently, NSE does not acknowledge transactions routed through sub-brokers because the bye-laws does not recognise the role of any intermediary in transactions. The issue of sub-brokers was taken up at NSE's executive committee meeting held recently.

The exchange officials said that if brokers are willing to undertake the liabilities of the sub-broker, the intermediaries will be allowed to register with the Securities and Exchange Board of India (Sebi). Also, all transactions routed through the registered sub-brokers will be considered genuine.

According to the latest figures available from Oriental Insurance, the company has received a total of 350 claims out of which payments have been made in the case of 70 claims amounting to Rs 4.7 crore. It has now processed 50 more claims, and payments in 10 cases have already been sent to the NSE. It is reliably learnt that the total amount involved in these 10 cases is Rs 47 lakhs. A meeting of NSE members, Oriental Insurance surveyors and Jardine Insurance Consultants, which is the underwriter to the insurance cover, was held recently in which the issue of sub-broker's registration was discussed. The insurance company was very co-operative this time, and it has given us assurance that the pending claims will be sorted out soon, says Vinod Gupta, chairman of NSE Members of India. The insurance company has also decided not to insist for the first information report (FIR) before payments are made in cases where the clarification of sub-brokers is not clear. Instead, the company has decided to ask for the station diary report for clearing pending cases.

The association has also decided to independently approach solicitors to seek opinion on the issue of sub-brokers. The association has also decided to write to Sebi seeking clarification on the issue.

NSE members have expressed concern that while the insurance company has cleared claims worth Rs 47 lakhs, major claims have not been taken up by the company. The highest claim paid by Oriental in the present tranche is of Rs 25 lakhs while the lowest amount paid is Rs 17,000.

However, the members are satisfied that the present crisis is blowing over, and they will now be paying the balance premium amount. Earlier, the association had decided not to pay the balance premium amount to the insurance company as it had failed to clear the claims.

National Stock Exchange members to meet tomorrow

The Association of NSE Members of India has called for a meeting tomorrow to further improve conditions of the underwriting cover provided to its members.

The meeting will be attended by senior NSE officials besides representatives of Oriental Insurance and Jardine Insurance Consultants.

It is learnt that the insurance company has decided to better the terms and conditions for the underwriting cover, the premium payable and various other issues.

It may be recalled that the association had initiated talks with. New India Assurance to get a better underwriting cover for its members.