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Friday, August 6, 2010

SEBI guidelines on Market Access through Authorised Persons under Stock Brokers regulation as amended on 2010

To expand the reach of the markets for exchange traded products, it has been decided to allow SEBI registered stock brokers (including trading members) of stock exchanges to provide access to clients through authorised
persons.

Regulatory Framework for Market Access through Authorised Persons (MIRSD/ DR-1/ Cir- 16 /09 dated 6th November 2009)
1. Who is an “Authorised Person”?
Any person - individual, partnership firm, LLP or body corporate – who is
appointed as such by a stock broker (including trading member) and who
provides access to trading platform of a stock exchange as an agent of the
stock broker.
2. Appointment of Authorised Person

A stock broker may appoint one or more authorised person(s) after obtaining
specific prior approval from the stock exchange concerned for each such person. The approval as well as the appointment shall be for specific segment of the exchange.
3. Procedure for Appointment
a) Stock broker shall select a person in compliance with the criteria laid down
by the Exchange and this framework for appointment as an authorized
person and forward the application of the person to stock exchange for
approval.
b) On receipt of the aforesaid application, the stock exchange
i. may accord approval on satisfying itself that the person is eligible for
appointment as authorized person, or
ii. may refuse approval on satisfying itself that the person is not eligible for
appointment as authorized person.
4. Eligibility Criteria
4.1 An individual is eligible to be appointed as authorised person if he:
a) is a citizen of India;
b) is not less than 18 years of age;
c) has not been convicted of any offence involving fraud or dishonesty;
d) has good reputation and character;
e) has passed at least 10th standard or equivalent examination from an
institution recognized by the Government; and
f) has the certification, as applicable to approved user / sales personnel of
the respective segment, and undertakes to continue to have valid
certification thereafter.
[vide SEBI/Cir/MIRSD/AP/8/2010 dated 23rd July 2010]
(Stock Exchange shall prescribe appropriate certification if no such
certification is prescribed under SEBI Regulations and monitor
compliance.)
4.2 A partnership firm, LLP or a body corporate is eligible to be appointed as
authorized person
a) if all the partners or directors, as the case may be, comply with the
requirements contained in clause 4.1 above.
b) the object clause of the partnership deed or of the Memorandum of
Association contains a clause permitting the person to deal in securities
business.
4.3 The person shall have the necessary infrastructure like adequate office
space, equipment and manpower to effectively discharge the activities on
behalf of the stock broker.

4.4 The approved users and/or sales personnel of Authorised Persons shall have the necessary certification of the respective segments at all points of time. [vide SEBI/Cir/MIRSD/AP/8/2010 dated 23rd July 2010]
5. Conditions of Appointment
The following are the conditions of appointment of an authorised person:
a) The stock broker shall be responsible for all acts of omission and
commission of the authorized person.
b) All acts of omission and commission of the authorized person shall be
deemed to be those of the stock broker.
c) The authorized person shall not receive or pay any money or securities
in its own name or account. All receipts and payments of securities and
funds shall be in the name or account of stock broker.
d) The authorised person shall receive his remuneration - fees, charges,
commission, salary, etc. - for his services only from the stock broker and
he shall not charge any amount from the clients.
e) A person shall not be appointed as authorized person by more than one
stock broker on the same stock exchange.
f) A partner or director of an authorised person shall not be appointed as
an authorised person on the same stock exchange.
g) The stock broker and authorised person shall enter into written
agreement(s) in the form(s) specified by Exchange. The agreement shall
inter-alia cover scope of the activities, responsibilities, confidentiality of
information, commission sharing, termination clause, etc.
6. Withdrawal of Approval
Approval given to an authorised person may be withdrawn by the stock
exchange:
a) on receipt of a request to that effect from the stock broker concerned or
the authorised person, subject to compliance with the requirements
prescribed by the stock exchange, or
b) on being satisfied that the continuation of authorised person is
detrimental to the interest of investors or securities market or the
authorised person at a subsequent date becomes ineligible under clause
4 above.
7. Obligations of Stock Broker
a) The stock broker shall be responsible for all acts of omission and
commission of his authorised person(s) and/or their employees,
including liabilities arising there from.
b) If any trading terminal is provided by the stock broker to an authorised
person, the place where such trading terminal is located shall be treated
as branch office of the stock broker.
c) Stock broker shall display at each branch office additional information
such as particulars of authorised person in charge of that branch, time
lines for dealing through authorised person, etc., as may be specified by
the stock exchange.
d) Stock broker shall notify changes, if any, in the authorised person to all
registered clients of that branch at least thirty days before the change.
e) Stock broker shall conduct periodic inspection of branches assigned to
authorised persons and records of the operations carried out by them.
f) The client shall be registered with stock broker only. The funds and
securities of the clients shall be settled directly between stock broker and
client and all documents like contract note, statement of funds and
securities would be issued to client by stock broker. Authorised person
may provide administrative assistance in procurement of documents and
settlement, but shall not issue any document to client in its own name.
No fund/securities of clients shall go to account of authorized person.
g) On noticing irregularities, if any, in the operations of authorised person,
stock broker shall seek withdrawal of approval, withhold all moneys due
to authorised person till resolution of investor problems, alert investors in
the location where authorised person operates, file a complaint with the
police, and take all measures required to protect the interest of investors
and market.
8. Obligations of Exchange
a) The stock exchange shall maintain a database of all the authorised
persons which shall include the following:
I. PAN Number of authorised person and in case of partnership or body
corporate, PAN Number of all the partners or directors as the case
may be.
II. Details of the broker with whom the authorised person is registered.
III. Locations of branch assigned to authorised person(s).
IV. Number of terminals and their details, given to each authorised person.
V. Withdrawal of approval of authorised person.
VI. Change in status or constitution of authorised person.
VII. Disciplinary action taken by the Exchange against the authorised
person.
All the above details, except I above, shall be made available on web site of
the stock exchange.
b) While conducting the inspection of the stock broker, the stock exchange
shall also conduct inspection of branches where the terminals of
authorised persons are located and records of the operations carried out
by them.
c) Dispute between a client and an authorised person shall be treated as
dispute between the client and the stock broker and the same shall be
redressed by the stock exchange accordingly.
d) In case of withdrawal of approval of authorised person due to
disciplinary action, the stock exchange shall issue a press release and
disseminate the names of such authorised persons on its website citing
the reason for cancellation.

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