Exclusive: SEBI raises concern over authorised persons and renting of prop terminals

Market regulator Securities and Exchange Board of India (SEBI) has raised concerns implicit non-monitoring of Authorised Persons (APs) and misuse of prop trading terminals. According to sources, the contented was raised by apical SEBI officials during the gathering with broker representatives astatine the archetypal day of the Brokers Industry Standards Forum (ISF), which was organised successful Mumbai. Authorised persons are sub-brokers, who are linked to brokers. Prop trading is the trading that brokers bash for their ain investments.

SEBI’s interest has emerged from past complaints and its ain inspections wherever authorised persons person been recovered to beryllium progressive successful pushing unregulated products and moving amerciable advisory businesses. There person been instances wherever trading terminals person been recovered astatine locations antithetic from those reported to the banal exchange. Also, authorised persons person been doing activities that were extracurricular the regulatory scope of SEBI. According to sources, SEBI had discussed a program past year with stakeholders to reappraisal the regulations for authorised persons. SEBI, successful its paper, shared with stakeholders and raised concerns connected assorted issues. “Such summation successful the fig of APs has besides led to the expanding fig of complaints against APs specified arsenic unauthorised trades carried retired by APs oregon assured returns being provided by APs for the sole intent of onboarding clients arsenic good inducing them commercialized successful segments specified arsenic F&O," it read. 

सब-ब्रोकर के कामकाज की निगरानी और प्रॉप ट्रेडिंग के दुरुपयोग पर सेबी की ब्रोकर्स को चेतावनी, लेकिन ISF के कामकाज की तारीफ। पूरी खबर बता रहे हैं ब्रजेश कुमार...@OfficialAnmi @bbfIndia @cpaiindia @BrajeshKMZee @SandeepKrJainTS @ashumadan4 pic.twitter.com/gq3Kgtn0cD

— Zee Business (@ZeeBusiness) September 20, 2024

According to the plan, it was projected to headdress the fig of authorised persons a banal broker tin subordinate with, based connected the clientele of the broker. Also, it was envisaged that brokers would person to restitute/refund the losses incurred to clients due to the fact that of their authorised idiosyncratic activities. Capping connected the magnitude of referral amount/commission and types of referral incentives fixed to authorized persons specified arsenic vouchers/cash backs etc was besides to beryllium curbed, too strict monitoring and inspection mechanisms.

The program is inactive astatine the treatment signifier only, meanwhile, exchanges issued immoderate circulars to woody with the authorized person's related concerns, similar enhanced owed diligence to beryllium done by the Trading Members earlier onboarding, enhanced effectiveness of the supervision and Inspection done revising the criteria for scope of inspection of authorised persons.

Recently SEBI has passed orders against galore brokers aft uncovering assorted lapses during inspections.  However, brokers find it casual to name authorized brokers for the enlargement of concern and scope retired to smaller towns. In the past SEBI has asked exchanges and brokers to heighten the monitoring mechanics but with the increasing fig of authorized persons, they find it hard to inspect each and each authorised person, arsenic galore of them are based successful far-flung areas of the country.
 
Top SEBI officials besides raised the contented of misuse of proprietary trading (Prop trading) terminals, due to the fact that specified terminals are galore times fixed connected rent, which is not allowed arsenic per SEBI regulations. The inclination of renting proprietary trading terminals is prevalent successful a fewer cities due to the fact that users who instrumentality it connected rent are not required to wage lawsuit margins, arsenic their commercialized is done from a broker account. Usually, determination is simply a woody of immoderate benignant of nett sharing oregon fixed monthly rent, for specified terminals.

At assorted points, SEBI had thought of plans to straight intervene utilizing exertion and much argumentation measures, including restricting the thought of prop broker conception but truthful acold it has refrained and wants brokers themselves to woody with the issue. SEBI initially conceived the thought of a instrumentality identifier, which was tested besides internally, this tin assistance regulator and exchanges to way precisely who is doing the trade. There were instances wherever prop terminals were recovered hundreds of kilometers distant and dozens of log- ins are created. Experts wonder, however tin this beryllium called a prop trading with truthful overmuch of log-in ids.  They say, thing is grey and the regulator indispensable look into the issue.
 
SEBI apical absorption has asked broker ISF to look into the substance of authorised persons and prop terminal referred to the Brokers Industry Standards Forum (ISF), a assemblage comprising assorted brokers associations to assistance regulator successful mounting standards for implementation of assorted regulatory directives issued from clip to time.

Over the past year, the Brokers ISF has met 38 times and taken up astir 150 docket items that person been referred to it by the regulatory bodies/ MIIs oregon the subordinate associations/ manufacture bodies.