Role of SEBI for Stockbroker, Sub-Brokers & Clients

By Angel Broking | Published on 22nd June 2020 | 69

Role of SEBI for Stockbroker, Sub-Brokers & Clients

Indian stock market is a highly regulated sector. SEBI, the market regulator, has placed strict rules and regulations to maintain a high degree of integrity and transparency in every trade that takes place in BSE and NSE exchanges. For all, sub-brokers, stockbrokers and clients, SEBI shares a list of dos and don’t that they are required to adhere. Anyone interested in the equity market for investment, updating themselves with these regulations and bye-laws are crucial to ensure that one doesn’t step outside the line. 

Stockbrokers are privy of critical company and financial data, which are highly confidential. These set of code-of-conduct ensures that they don’t misuse the privilege and maintain a high degree of integrity. The same rule applies to sub-brokers, who mostly deal with clients and have access to clients’ financial information. These set of regulations confirm that no unauthorised and unethical transaction takes place in the exchange. Any misconduct surely will attract a probe from the regulator. 

Rights and obligations of stockbrokers, sub-brokers and clients 

SEBI rules apply to stockbrokers, sub-brokers, and clients alike. These suggest that all the parties involved must maintain clarity in all stages of transactions regarding individual capacities, liabilities, and limitations. Following is a list of general rights and obligations that must be secured before any deal pass through the table. 

  1. The first one suggests that clients must only invest in financial instruments that are approved by the exchange and listed by SEBI
  2. Stockbrokers, sub-brokers and clients are all bound by the rules and bye-laws set by SEBI, governing the market
  3. It is the responsibility of the client to confirm the credibility and capability of the stockbroker before investing through them
  4. Similarly, the stockbroker should also update itself on the financial abilities of the client before undertaking and executing financial transactions on their behalf
  5. Stockbrokers must make clients aware of their nature of the business, policies, limitations, and liabilities, and capacity under which the stockbroker acts
  6. The sub-broker must offer assistance to stockbrokers in completing deals with clients
  7. Clients must undergo ‘Account Opening Process’ and provide all documents requested and familiarise himself/herself with investment guidelines
  8. Stockbrokers must maintain all client-related information but shall not disclose such unless demanded by the law

Role of SEBI in stock market

The Securities and Exchange Board of India came into fruition in 1992 following the requirement to appoint a governing body to monitor and regulate Indian capital market to work in tandem with the global market. The role of SEBI is to watch that the market works systematically and provides investors with transparency to invest with confidence. It is given the power to intervene and run inquiry if any misconduct happens. 

As a regulator, SEBI works in the following capacities. 

  • Issuer of Securities 
  • Protector of Interest of Investors and Traders 
  • Financial Intermediary 

SEBI is also given semi-jurisdictional powers which mean it can conduct hearings and issue judgements in case any unethical and fraudulent activity has taken place. Granting rights and obligations of stockbrokers, sub-brokers, and clients also come under the responsibilities of SEBI. 

Conclusion 

Indian capital market is one of the most organised and regulated sectors, thanks to SEBI. Whether you are an investor or a stockbroker, you must abide by the guidelines set by it or else, you may find yourself in a difficult spot. This is done in order to maintain the integrity of the market and keep investors’ morale high so that they continue to invest with confidence.