SEBI proposes ban on `unauthorised' trading, `buy-sell' tips

31 March 2008

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.