Sebi eases broker norms for exiting bourses

09 Jul 2014


The Securities and Exchange Board of India (Sebi) has proposed to make it easier for non-operational exchanges in recovering outstanding dues from their defaulting broker members, in order to facilitate and expedite the exit of such bourses.

As of now there are about 2,600 brokers with outstanding dues owed to these non-operational exchanges.

Existing Sebi norms make it difficult for bourses to voluntary surrender recognition if brokers fail to clear their dues.

In case such dues are not met with, the exchanges are liable to pay on behalf of the defaulting stock brokers.

Sebi has now proposed that the fee liabilities on the exchanges ''may be frozen, as on particular cut-off dates'' for brokers who had stopped trading many years back on the exchanges or whose cards had been auctioned subsequent to disciplinary action or who had been declared defaulter by exchanges.

According to Sebi, the cut-off dates for freezing the calculation of fees and interest could be the 'last trading date' or the 'date of auction' of membership card or the 'date of declaration of default' of the broker, as the case may be.

Sebi said if any liability still remains due on the part of the broker then it would be paid by the stock exchanges.

However, if Sebi is convinced that it is difficult for the stock exchange to pay the liability at a given stage and the process of de-recognition would be unduly delayed, the bourse may be allowed to exit subject to some conditions.

Such exits would be allowed on an undertaking by the bourses that they shall pay the dues from the proceeds of the sale of their assets within a period permitted by Sebi, the brokers with pending dues would not get any share from the assets of the bourse till their dues are paid to the market regulator.

Besides, the exchanges would have to ensure that names of defaulting brokers be posted on Sebi's website and that such entities are not authorised to trade in the markets till their dues are paid.

Sebi's decision to ease exit norms comes after the exchanges expressed their inability to comply with the provisions due to lack of sufficient deposit from brokers to pay dues or brokers were not traceable.

Currently, 2,591 brokers owe Rs42 crore to 10 bourses that have applied to Sebi for a voluntary exit.

The 10 bourses include Cochin Stock Exchange, Bangalore Stock Exchange, Ludhiana Stock Exchange, Madras Stock Exchange, Delhi Stock Exchange and Jaipur Stock Exchange.

Other than the exchanges that have applied for voluntary exit, SEBI has initiated compulsory de-recognition of seven bourses, including Magadh Stock Exchange, Vadodara Stock Exchange and Ahmedabad Stock Exchange. (Also see: SEBI suspends 3 directors of Ahmedabad Stock Exchange).

The seven bourses have pending dues worth Rs83.41 crore with SEBI.

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