SEBI (Stock Brokers) Regulations, 1992

Introduction: The SEBI (Stock Brokers) Regulations, 1992, is a set of rules that stockbrokers must follow to register and operate in the securities market.
Registration: To register as a stockbroker, an individual or firm must meet certain conditions, including:
- Holding membership of a stock exchange
- Abiding by the rules and regulations of the stock exchange
- Obtaining prior approval from SEBI for changes in control
- Paying fees charged by SEBI
- Maintaining a minimum net worth
- Taking steps to redress investor grievances
General Obligations and Responsibilities: Stockbrokers have various obligations and responsibilities, including:
- Maintaining books of accounts and records
- Keeping clients' ledgers and general ledgers
- Maintaining journals, cash books, and bank passbooks
- Appointing a compliance officer to monitor compliance with regulations
- Preserving books of account and other records for a minimum period of 5 years
Qualified Stock Brokers: SEBI may designate a stockbroker as a qualified stockbroker based on parameters such as:
- Total number of active clients
- Available total assets of clients
- Trading volumes
- End-of-day margin obligations
- Compliance score and grievance redressal score
- Proprietary trading volumes
Inspection by SEBI: SEBI has the right to inspect the books of account and other records of stockbrokers to ensure compliance with regulations.
Action in case of Default: Stockbrokers who contravene regulations may face actions such as:
- Monetary penalty
- Suspension or cancellation of certificate of registration
- Prosecution under the SEBI Act
Key Terms:
- Stockbroker: An individual or firm that buys and sells securities on behalf of clients.
- SEBI: The Securities and Exchange Board of India, the regulatory body for the securities market in India.
- Compliance Officer: An individual appointed by a stockbroker to monitor compliance with regulations.
- Qualified Stockbroker: A stockbroker designated by SEBI as meeting certain parameters such as size, scale of operations, and governance standards.

SEBI (Stock Brokers) Regulations, 1992 (Part 2)

Introduction: The SEBI (Stock Brokers) Regulations, 1992, outline the rules and guidelines for stockbrokers in India.
Prohibited Activities: Stockbrokers are prohibited from:
- Using client securities or funds for their own purpose or for the purpose of any other client.
- Failing to comply with SEBI directions under the Act or regulations.
- Failing to exercise due skill, care, and diligence.
- Failing to obtain prior approval from SEBI in case of a change in control.
- Failing to meet net worth or capital adequacy norms.
- Extending the use of trading terminals to unauthorized persons or places.
- Committing violations for which no separate penalty is provided.

Early Warning Mechanisms

Purpose: To prevent diversion of client securities.
Threshold: Decided by Stock Exchanges, Depositories, and Clearing Corporations through mutual consultation.
Early Warning Signals: Include:
1. Deterioration in the financial health of the stockbroker or depository participant.
2. Securities pledge transactions by the stockbroker.
3. Increase in investor complaints against the stockbroker.
4. Alerts generated from monthly or weekly submissions under Risk-Based Supervision (RBS).
5. Stockbroker's terminal disabled for a certain number of days.

Preventive Actions

Initiated by Stock Exchanges: May include:
- Blocking a certain percentage of available collaterals.
- Checking securities registers and funds and securities.
- Imposing limits on proprietary trading.
- Conducting a meeting with the stockbroker's designated directors.
- Deactivating trading terminals.
Initiated by Depositories: May include:
- Restricting pledge of client securities.
- Imposing concurrent audit on the depository participant.
- Cessation or restriction on the use of Power of Attorney (POA).

Action under SEBI (Intermediaries) Regulations

Suspension or Cancellation: A stockbroker's certificate of registration may be suspended or cancelled for various reasons, including:
- Ceasing to be a member of a stock exchange.
- Being declared a defaulter.
- Surrendering the certificate of registration.
- Being found not fit and proper.
- Being declared insolvent.

Prosecution

Under Regulation 28: A stockbroker may be liable for prosecution for various violations, including:
- Dealing in securities without registration.
- Market manipulation.
- Insider trading.
- Fraudulent and unfair trade practices.
- Failure to produce books and registers.

Code of Conduct for Brokers

General Principles: Stockbrokers must maintain integrity, exercise due skill and care, and avoid manipulative transactions.
Compliance: Stockbrokers must comply with statutory requirements and avoid malpractices.

SEBI (Stock Brokers) Regulations, 1992 (Part 3)

Duty to the Investor: A stock-broker has several duties to the investor, including:
- Execution of Orders: Faithfully executing orders for buying and selling of securities at the best available market price.
- Issue of Contract Note: Issuing a contract note for all transactions in the form specified by the stock exchange.
- Breach of Trust: Not disclosing or discussing with any other person or making improper use of the details of personal investments and other information of a confidential nature of the client.
- Business and Commission: Not encouraging sales or purchases of securities with the sole object of generating brokerage or commission.
- Fairness to Clients: Disclosing whether acting as a principal or as an agent and ensuring no conflict of interest arises between the stock-broker and the client.
- Investment Advice: Not making a recommendation to acquire, dispose of, or retain any securities unless having reasonable grounds for believing that the recommendation is suitable for the client.
Dealing with other Stock Brokers: A stock-broker has several duties when dealing with other stock-brokers, including:
- Conduct of Dealings: Cooperating with other contracting parties in comparing unmatched transactions.
- Protection of Clients Interests: Extending fullest cooperation to other stock-brokers in protecting the interests of clients regarding their rights to dividends, bonus shares, right shares, and any other right related to such securities.
- Transactions with Stock-Brokers: Carrying out transactions with other stock-brokers and complying with obligations in completing the settlement of transactions with them.
Regulation of Transactions between Clients and Brokers: SEBI has prescribed regulations for transactions between clients and brokers, including:
- Separate Accounts: Keeping money of clients in a separate account and their own money in a separate account.
- Payment of Transactions: Not allowing payment of transactions in which the member broker takes a position as a principal to be made from the clients' accounts.
- Books of Account: Keeping books of account to show and distinguish in connection with the business as a member, including moneys received from or on account of and money paid to or on account of each client.
Client Agreement: A client agreement is necessary for registration of a client, and it should cover details of all issues that clearly define the relationship and the extent of liabilities between the client and the trading/clearing member, including:
- Mandatory Parts: Client agreement, Know Your Client (KYC), and the Risk Disclosure Document (RDD) constitute the mandatory part.
- Areas to be Included: The agreement should include areas such as the relationship and extent of liabilities between the client and the trading/clearing member.

SEBI (Stock Brokers) Regulations, 1992 (Part 4)

Client Agreement: The agreement between the client and the broker should clearly specify the client's responsibility for all investment decisions and their understanding of the risks involved in trading various derivatives contracts. The client shall immediately notify the member of any change in the information provided at the time of opening the account.
Brokerage and Fees: The agreement shall indicate the rate of brokerage/commission/fee charged by the broker for various services provided. The broker shall not charge more than the maximum brokerage permitted by the Exchange/SEBI.
Margin Requirements: The client's liability to pay margins as required by the trading/clearing member or exchange/clearing corporation within the stipulated time should be clearly specified.
Client's Account: The money deposited by the client shall be kept in a separate account by the member, distinct from their own account, and cannot be used by the broker for themselves or any other purpose.
Additional Provisions: The agreement may contain any other additional provisions as considered necessary by the broker/exchange.

Key Documents

Know Your Client (KYC) Form: The broker is required to ensure that the client fills up the KYC form, along with the client agreement and the Risk Disclosure Document.
Risk Disclosure Document (RDD): The broker members are required to sign an RDD with their clients, informing them of the various risks associated with dealing in the securities market.
Uniform Documentary Requirements: SEBI has prescribed uniform formats of the client registration form and broker-client agreement to bring about uniformity in documentary requirements across different segments and exchanges.

Client Code and Contract Note

Unique Client Code (UCC): The broker shall allot and use a UCC for all clients and maintain their Permanent Account Number (PAN).
Contract Note: The trading member/broker shall issue contract notes in the prescribed format within 24 hours of execution of trades on the exchanges, containing the signature of the authorized person, UCC, and PAN details of the client.
Electronic Contract Note: The contract notes can be issued in electronic form authenticated by digital signatures, but only to clients who have opted to receive them in this format.

Statement of Accounts and Settlement

Settlement of Running Account: The trading member shall settle the running accounts at the choice of the clients on a quarterly and monthly basis, on the dates stipulated by the Stock Exchanges.
Retention of Funds: The trading member may retain funds calculated based on the pay-in obligation of funds outstanding at the end of the day on settlement of the running account.
Client Intimation: Once the trading member settles the running account of funds of a client, an intimation shall be sent to the client by SMS and email, including details about the transfer of funds.

SEBI (Stock Brokers) Regulations, 1992 (Part 5)

Introduction: The SEBI (Stock Brokers) Regulations, 1992, outline the guidelines for stockbrokers in India, including the use of hedging and arbitrage opportunities through decision support tools and algorithms for trading.
Direct Market Access (DMA):
- Definition: DMA allows institutional clients and Foreign Portfolio Investors (FPIs) to directly access the exchange's trading system, enabling faster execution of trades.
- Details: SEBI has permitted stock exchanges to extend DMA facilities to FPIs for participation in Exchange Traded Currency Derivatives (ETCDs) subject to certain conditions.
Algorithmic Trading:
- Definition: Algorithmic trading involves automated route-based trading where decision-making is delegated to a computer model.
- Details: SEBI has specified guidelines for algorithmic trading, including the requirement for stockbrokers to provide the facility only upon prior permission from the stock exchange and to subject their algorithmic trading systems to regular system audits.
Risk Management:
- Price Check: Algo orders shall not be released in breach of the price bands defined by the exchange for a security.
- Quantity Check: Algo orders shall not be released in breach of the quantity limit defined by the exchange for the security.
- Order Value Check: Algo orders shall not be released in breach of the 'value per order' defined by the stock exchanges.
- Cumulative Open Order Value Check: The individual client-level cumulative open order value check may be prescribed by the broker for clients.
- Automated Execution Check: An Algo shall account for all executed, un-executed, and unconfirmed orders placed by it before releasing further orders.
Margin Trading:
- Definition: Margin trading allows investors to buy shares and securities by paying a fraction of the total transaction value, with the broker funding the balance amount.
- Details: SEBI has issued guidelines for margin trading, including the requirement for stockbrokers to comply with conditions such as maintaining separate identification of collaterals and funded stocks, marking them to market on a daily basis, and ensuring maintenance of the specified margin at all times.

SEBI (Stock Brokers) Regulations, 1992 (Part 6)

Introduction: The SEBI (Stock Brokers) Regulations, 1992, outline the rules and guidelines for stockbrokers in India. This section focuses on the regulations related to margin trading facilities, eligibility requirements, and the responsibilities of stockbrokers.
Margin Trading Facility: A stockbroker can provide a margin trading facility to clients, but only if they have a net worth of at least Rs. 3 crore. The stockbroker must submit a half-yearly certificate to the stock exchange, confirming their net worth.

Eligibility Requirements for Stockbrokers to Provide Margin Trading Facility to Clients

Only corporate stockbrokers with a net worth of at least Rs. 3 crore shall be eligible to offer margin trading facilities to their clients.
The net worth for the purpose of margin trading facility shall be as specified in SEBI (Stockbrokers) Regulations, 1992.
The stockbrokers shall submit to the stock exchange a half-yearly certificate, as on 31st March and 30th September of each year, from an auditor confirming the net worth.

Source of Funds

For the purpose of providing the margin trading facility, a stockbroker may use their own funds or borrow funds from scheduled commercial banks and/or NBFCs regulated by RBI.
A stockbroker shall not be permitted to borrow funds from any other source, other than the sources stated above.
The stockbroker shall not use the funds of any client for providing the margin trading facility to another client, even if the same is authorized by the first client.

Leverage and Exposure Limits

At any point in time, the total indebtedness of a stockbroker for the purpose of margin trading shall not exceed 5 times its net worth.
The maximum allowable exposure of the broker towards the margin trading facility shall be within the self-imposed prudential limits and shall not, in any case, exceed the borrowed funds and 50% of his net worth.
While providing the margin trading facility, the broker shall ensure that:
- Exposure to any single client at any point of time shall not exceed 10% of the broker’s maximum allowable exposure.
- Exposure towards stocks and/or units of Equity ETFs purchased under MTF and collateral kept in the form of stocks and/or units of Equity ETFs are well diversified.

Disclosure Requirement

The stockbroker shall disclose to the stock exchanges details on gross exposure towards margin trading facility including name of the client, Category of holding, clients’ Permanent Account Number (PAN), name of the scrips, and if the stockbroker has borrowed funds for the purpose of providing margin trading facility, name of the lender and amount borrowed.
The stock exchanges shall disclose on their websites the scrip wise gross outstanding in margin accounts with all brokers to the market.

Rights and Obligations for Margin Trading

The stock exchanges shall frame a Rights and Obligations document laying down the rights and obligations of stockbrokers and clients for the purpose of a margin trading facility.
The Rights and Obligations document shall be mandatory and binding on the Broker/Trading Member and the clients for executing trade in the Margin Trading framework.

Maintenance of Records

The stockbroker shall maintain separate client-wise ledgers for funds and securities of clients availing margin trading facility.
The stockbroker shall maintain a separate record of details of the funds used and sources of funds for the purpose of margin trading.
The books of accounts, maintained by the broker, with respect to the margin trading facility offered by it, shall be audited on a half-yearly basis.

Other Conditions

A broker shall take adequate care and exercise due diligence before providing a margin trading facility to any client.
Any disputes arising between the client and the stockbroker in connection with the margin trading facility shall have the same treatment as normal trades and should be covered under the investor grievance redressal mechanism, arbitration mechanism of the stock exchange.

Authorised Persons

An Authorised Person is a person, individual, partnership firm, LLP, or body corporate, who is appointed as such by a stock broker and who provides access to the trading platform of a Stock Exchange as an agent of the Stock broker.
The Trading Member and Authorised Person shall enter into a written agreement in the form prescribed by the Exchange.
The Trading Member shall be responsible for all acts of omission and commission of the Authorised Person.

Permitting Underwriting Activities by Stockbrokers

SEBI has amended SEBI (Stockbroker) Regulations 1992, to incorporate provisions related to net-worth, maintenance of records, and other compliances for underwriting activities.
Every stockbroker having a valid certificate of registration would be entitled to act as an underwriter.
Every stockbroker acting as an underwriter shall enter into an agreement that is valid with the body corporate on whose behalf it acts as an underwriter.
The stockbroker shall maintain books of account and documents related to underwriting activities.
The total underwriting obligations under all agreements should not exceed 20 times the net worth.
Every stockbroker acting as an underwriter should subscribe to the securities in 45 days of the receipt of such intimation from the body corporate.

SEBI (Stock Brokers) Regulations, 1992 (Part 7)

Introduction: The SEBI (Stock Brokers) Regulations, 1992, outline the rules and guidelines that stockbrokers must follow to ensure fair and transparent trading practices.
Key Provisions:
- A stockbroker should not make any statement that can misrepresent the services they can perform for their clients or their underwriting commitment.
- Stockbrokers should avoid conflicts of interest and make adequate disclosures of their interests.
- They should establish a mechanism to resolve conflicts of interest and take reasonable steps to resolve them in an equitable manner.
- Stockbrokers should make appropriate disclosures to clients about potential areas of conflict of duties and interest when acting as an underwriter.
- They should not divulge confidential information regarding their issuer company to other parties.
- Stockbrokers should ensure that any change in registration status or penal action by the board is informed promptly to clients.
- They should not render investment advice in publicly accessible media without disclosing their interest in the security.
Prohibited Activities:
- Insider Trading: Stockbrokers or their employees should not indulge in insider trading.
- Unfair Competition: They should not engage in unfair competition that can harm the interests of other underwriters.
- False Market Creation: Stockbrokers should not be a party to creating false markets or rigging prices.
- Manipulation: They should not manipulate prices or pass unpublished price-sensitive information.
Case Studies:
- Karvy Stock Broking Limited (KSBL) versus SEBI (SAT Appeal): This case highlights the importance of stockbrokers adhering to SEBI regulations and ensuring that they do not misuse client securities.
- Reflection Investments versus National Stock Exchange of India Limited (NSE): This case emphasizes the need for stockbrokers to maintain adequate capital and comply with exchange rules to avoid suspension or penalties.

SEBI (Stock Brokers) Regulations, 1992 (Part 8)

Introduction: The section discusses the SEBI (Stock Brokers) Regulations, 1992, and a case where an appellant was suspended due to a shortfall in client funds.
Key Points:
- The appellant was suspended due to a shortfall of Rs. 6.75 crores in client funds.
- The appellant submitted a plan to infuse Rs. 1 crore by January 31, 2020, and an additional Rs. 1 crore each month to reduce the shortfall.
- The appellant was allowed to operate in the cash segment of the Exchange with enhanced supervision.
- The appellant was required to pay a monetary penalty of Rs. 5,47,900/- within one week.
Order:
- The appellant shall pay the monetary penalty within one week.
- The appellant shall infuse Rs. 1 crore by January 31, 2020, to reduce the shortfall to Rs. 5.75 crores.
- The appellant shall recoup the remaining shortfall in two instalments of Rs. 3 crores by February 29, 2020, and Rs. 2.75 crores by March 31, 2020.

SEBI (Portfolio Managers) Regulations, 2020

Introduction to Portfolio Manager: A portfolio manager is a body corporate that advises or directs the management of a portfolio of securities or funds on behalf of a client.
Key Concepts:
- Discretionary Portfolio Manager: A portfolio manager who exercises discretion in investing funds or managing a portfolio.
- Portfolio: The total holdings of securities and goods belonging to a person.
- Principal Officer: An employee responsible for decisions related to portfolio management and operations.
Application for Grant of Certificate:
- An application for a certificate of registration shall be made to SEBI in prescribed forms with a non-refundable application fee.
- SEBI considers factors such as infrastructure, compliance officer, principal officer's qualifications and experience, and net worth requirement.
Conditions of Registration:
- The portfolio manager shall abide by the provisions of the Act and regulations.
- The portfolio manager shall obtain prior approval of SEBI in case of change in control.
- The portfolio manager shall maintain the net worth specified in the regulation.
Applicability of the Regulations:
- The regulations apply to eligible fund managers exclusively for their activities as portfolio managers to eligible investment funds.
- All other provisions of the regulations apply to eligible fund managers unless the context otherwise requires.

SEBI (Stock Brokers) Regulations, 1992 (Part 9)

Definition: The SEBI (Stock Brokers) Regulations, 1992, outline the procedures and guidelines for stock brokers and portfolio managers in India.
Details: The regulations specify the requirements for registration, obligations, and responsibilities of stock brokers and portfolio managers.

Key Concepts

Portfolio Manager: A portfolio manager is an entity that manages funds or portfolios of securities on behalf of clients.
Eligible Investment Fund: An eligible investment fund is a fund that meets certain conditions specified in the regulations, including fulfilling all the conditions specified in subsection (4) of Section 9A of the Income-tax Act, 1961.
Obligations and Responsibilities: Portfolio managers have various obligations and responsibilities, including:
- Complying with the requirements specified under Section 9A of the Income-tax Act, 1961
- Offering discretionary or non-discretionary or advisory services to eligible investment funds
- Operating in accordance with mutually agreed contracts with eligible investment funds
- Providing material disclosures to eligible investment funds
- Segregating funds and securities of each eligible investment fund
- Maintaining and segregating books and accounts pertaining to activities as a portfolio manager
- Appointing a custodian
- Keeping funds of eligible investment funds in scheduled commercial banks
- Maintaining additional records as specified by the Board
- Providing quarterly reports to SEBI
- Ensuring compliance with the PMLA 2002 and rules and regulations made thereunder
- Abiding by the provisions in these regulations and circulars/guidelines issued by SEBI

General Obligations and Responsibilities

Contract with Client and Disclosures: A portfolio manager must enter into an agreement in writing with the client, clearly defining their inter se relationship, and setting out their mutual rights, liabilities, and obligations.
Disclosure Document: The portfolio manager must provide a Disclosure Document to the client, containing information such as:
- Quantum and manner of payment of fees
- Portfolio risks
- Complete disclosures of transactions with related parties
- Details of conflicts of interest
- Performance of the portfolio manager
- Audited financial statements of the portfolio manager
General Responsibilities: A portfolio manager must:
- Individually and independently manage the funds of each client
- Not accept funds or securities worth less than fifty lakh rupees from a client
- Act in a fiduciary capacity with regard to the client's funds
- Segregate each client's holding in securities in separate accounts
- Keep the funds of all clients in a separate account in a Scheduled Commercial Bank
- Transact in securities within the limitation placed by the client
- Not derive any direct or indirect benefit out of the client's funds or securities
- Not borrow funds or securities on behalf of the client
- Ensure proper and timely handling of complaints from clients and take appropriate action immediately

SEBI (Stock Brokers) Regulations, 1992 (Part 10)

Introduction: The SEBI (Stock Brokers) Regulations, 1992, outline the guidelines for portfolio managers to ensure compliance with the regulations and circulars issued by SEBI from time to time.
Key Concepts:
- Portfolio Management: The portfolio manager shall ensure compliance with the Investor Charter specified by SEBI and manage clients' portfolios in accordance with the agreement between the portfolio manager and the client.
- Investment Restrictions: The portfolio manager shall not invest clients' funds in unrated securities of related parties or associates, and shall ensure compliance with prudential limits on investments.
- Investment Options: The portfolio manager may invest in securities listed or traded on a recognized stock exchange, money market instruments, units of Mutual Funds, and other securities specified by SEBI.
- Client Account Management: The portfolio manager shall segregate each client's funds and portfolio of securities, keep them separately from their own funds and securities, and be responsible for the safekeeping of clients' funds and securities.
Regulatory Requirements:
- Books of Accounts: The portfolio manager shall maintain separate client-wise accounts, and the books of account shall be audited yearly by a qualified auditor.
- Reports to Clients: The portfolio manager shall furnish periodic reports to the client, containing details of the portfolio composition, transactions, beneficial interest received, expenses incurred, and risks foreseen.
- Disclosures to SEBI: The portfolio manager shall disclose to SEBI any information required, including particulars regarding portfolio management and changes in previously furnished information.
Important Terms:
- Discretionary Portfolio Manager: A portfolio manager who invests funds of clients in securities listed or traded on a recognized stock exchange, money market instruments, units of Mutual Funds, and other securities specified by SEBI.
- Non-Discretionary or Advisory Services: Services provided by a portfolio manager where the client has the final decision-making authority.
- Co-investment Portfolio Manager: A portfolio manager who invests in unlisted securities of investee companies where Category I and Category II Alternative Investment Funds managed by it make investments.

SEBI (Stock Brokers) Regulations, 1992 (Part 11)

Certificate Details: The certificate granted to a portfolio manager, names of clients whose portfolio he has managed, and particulars relating to the net worth requirement.
Compliance Officer: Every portfolio manager must appoint a compliance officer responsible for monitoring compliance with SEBI regulations and redressing investor grievances.
Grievance Redressal Mechanism: Portfolio managers must redress investor grievances within 21 calendar days from the date of receipt of the grievance.
Code of Conduct: The code of conduct for portfolio managers is specified in Schedule III of the SEBI PMS Regulation, emphasizing high standards of integrity, fairness, and transparency in dealings with clients.

Key Concepts

Appointment of Compliance Officer: The compliance officer should not be the principal officer or an employee of the portfolio manager, except in the case of a Co-investment Portfolio Manager.
Compliance Officer's Role: The compliance officer must immediately and independently report any non-compliance observed to SEBI.
Grievance Redressal: SEBI may recognize a body corporate for handling and monitoring the grievance redressal process.
Code of Conduct Provisions: Provisions include observing high standards of integrity and fairness, deploying client money promptly, rendering high standards of service, exercising due diligence, and avoiding conflicts of interest.

SEBI Guidelines for Portfolio Managers

Fees and Charges: No upfront fees can be charged, and charges for transactions are capped at 20% per associate per service.
Direct Onboarding of Clients: Portfolio managers must disclose the option for direct onboarding and not levy any charges except statutory charges.
Nomenclature 'Investment Approach': Description of investment approach must include investment objective, types of securities, basis of selection, allocation of portfolio, benchmark, tenure, risks, and other salient features.
Periodic Reporting: Portfolio managers must submit certificates of net worth and compliance with PMS regulations to SEBI.
Reporting of Performance: Firm-level performance data must be audited annually and reported to SEBI.
Disclosure Documents: Material changes, such as change in control or fees, must be disclosed in the disclosure documents.

Case Study: SEBI v/s P N Vijay Financial Services

Allegations: Lack of agreement with the stockbroker, no control over client funds and securities, non-compliance with KYC requirements, incomplete disclosures in the Disclosure Document, and not exercising high standards of service.
Findings: Violations of provisions of the PMS Regulations, including lack of control over client funds and securities, deficiencies in KYC forms and PMS agreements, and incomplete disclosures in the Disclosure Document.

SEBI (Stock Brokers) Regulations, 1992 (Part 12)

Introduction: The SEBI (Stock Brokers) Regulations, 1992, outline the rules and guidelines for stockbrokers in India.
Key Provisions:
- Disclosure Requirements: Stockbrokers must disclose certain information to their clients, including fees and charge structures.
- Client Undertaking: Stockbrokers must obtain an undertaking from clients that they have understood the fees and charge structure.
- Service Disclosure: Stockbrokers must clearly disclose the type of services they provide to clients.
- Complaint Redressal: Stockbrokers must have a mechanism in place for redressing client complaints.
Violations and Penalties:
- Non-Disclosure: Failure to disclose required information can result in penalties, such as a fine of Rs 5 lakhs.
- Incorrect Disclosure: Providing incorrect or incomplete disclosure can also result in penalties.
Review Questions:
1. Is the Stockbroker required to pre-intimate SEBI about shifting the location where it keeps its books of account?
  - Answer: (a) Yes
2. A stockbroker when dealing with a client must disclose whether it is acting as a principal /agent.
  - Answer: (a) True
3. The portfolio manager shall take adequate steps for the redressal of grievances of the investors.
  - Answer: (a) True
4. The portfolio manager shall disclose a change in the identity of the Principal Officer to the SEBI and the clients within _______working days of effecting the change.
  - Answer: (d) 21