Mumbai: The Securities and Exchange Commission of India (SEBI) has proposed tighter sales norms for market intermediaries and barred traders from executing transactions that are not explicitly authorised by their clients.

SEBI has asked brokers not to recommend shares to investors based on subjective and arbitrary information, as part of the exercise to guard against insider trading.

In a draft circular published on its website, the market regulator has asked traders to make clients aware of the nature and risk of the transaction and not to recommend transactions which may be unsuitable, based on clients' financial status and risk appetite.

"Trading members shall not recommend to their clients securities or derivative contracts on such securities in a concentrated manner, which represents a subjective or arbitrary supply of information", said SEBI's draft policy for improvement in sales practice by the members of stock exchanges.

The guidelines, on which SEBI has invited comments from public by April 15, further said that investors would be required to have a minimum net worth of Rs5 lakh for trading in derivative segments.

A net worth certificate from a chartered accountant or income-tax return can be accepted for this purpose, it said.

Brokers, it added, "shall not executive transactions for own account in securities ahead of making recommendations to their clients in such securities."

The draft also mandates the brokers to ensure that "no research analysts may purchase or sell any security or derivatives of such security in a manner inconsistent with the research analyst's recommendations as reflected in the most recent research published by the member."

It also prohibits brokers from offering favourable research or a specific price target to a company as consideration for the business.

Under the proposed norms, the brokers would also be required to fully disclose his and research analysts' business interest in the concerned company.