Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) (Second Amendment) Regulations, 2003 - F.No. SEBI/LAD/20795/2003 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 20 th November, 2011 F.No. SEBI/LAD/20795/2003.- In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to amend the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, namely:- 1. (i) These regulations may be called the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) (Second Amendment) Regulations, 2003. (ii) They shall come into force on the date of their publication in the Official Gazette. 2. In Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992- (a) for regulation 23 the following shall be substituted, namely,- The Board shall after consideration of inspection or investigation report take such action as it may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulation, 2002, Chapter VIA of the Act or section 24 of the Act. (b) for regulation 25, the following regulations shall be substituted, namely:- 25. Liability for contravention of the Act, rules or the regulations.- A stock broker or a sub-broker who contravenes any of the provisions of the Act, rules or regulations framed thereunder shall be liable for any one or more of the following actions- (i) Monetary penalty under Chapter VIA of the Act. (ii) Penalties as specified under Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulation, 2002 including suspension or cancellation of certificate of registration as a stock broker or a sub-broker. (iii) Prosecution under section 24 of the Act. 26. Liability for monetary penalty.- A stock broker or a sub-broker shall be liable for monetary penalty in respect of the following violations, namely- (i) Failure to file any return or report with the Board. (ii) Failure to furnish any information, books or other documents within 15 days of issue of notice by the Board. (iii) Failure to maintain books of account or records as per the Act, rules or regulations framed thereunder. (iv) Failure to redress the grievances of investors within 30 days of receipts of notice from the Board. (v) Failure to issue contract notes in the form and manner specified by the Stock Exchange of which such broker is a member. (vi) Failure to deliver any security or make payment of the amount due to the investor within 48 hours of the settlement of trade unless the client has agreed in writing otherwise. (vii) Charging of brokerage which is in excess of brokerage specified in the regulations or the bye laws of the stock exchange. (viii) Dealing in securities of a body corporate listed on any stock exchange on his own behalf or on behalf of any other person on the basis of any unpublished price sensitive information. (ix) Procuring or communicating any unpublished price sensitive information except as required in the ordinary course of business or under any law. (x) Counselling any person to deal in securities of any body corporate on the basis of unpublished price sensitive information. (xi) Indulging in fraudulent and unfair trade practices relating to securities. (xii) Execution of trade without entering into agreement with the client under the Act, rules or regulations framed thereunder or failure to maintain client registration form or commission of any irregularities in maintaining the client agreement. (xiii) Failure to segregate his own funds or securities from the client s funds or securities or using the securities or funds of the client for his own purpose or for purpose of any other client. (xiv) Acting as an unregistered sub-broker or dealing with unregistered sub-brokers. (xv) Failure to comply with directions issued by the Board under the Act or the regulations framed thereunder. (xvi) Failure to exercise due skill, care and diligence. (xvii) Failure to seek prior permission of the Board in case of any change in its status and constitution. (xviii) Failure to satisfy the net worth or capital adequacy norms, if any, specified by the Board. (xix) Extending use of trading terminal to any unauthorized person or place. (xx) Violations for which no separate penalty has been provided under these regulations. 27. Liability for action under the Enquiry Proceeding Regulations.- A stock broker or a sub-broker shall be liable for any action as specified in the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulation, 2002 including suspension or cancellation of his certificate of registration as a stock broker or a sub-broker, as the case may be, if he- (i) ceases to be a member of a stock exchange; or (ii) has been declared defaulter by a stock exchange and not readmitted as a member within a period of six months; or (iii) surrender his certificate of registration to the Board; or (iv) has been found to be not a fit and proper person by the Board under these or any other regulations; or (v) has been declared insolvent or order for winding up has been passed in the case of a broker or sub-broker being a company registered under the Companies Act, 1956; or (vi) or any of the partners or any whole-time director in case a broker or sub-broker is a company registered under the Companies Act, 1956 has been convicted by a court of competent jurisdiction for an offence involving moral turpitude; or (vii) fails to pay fee as per Schedule III of these regulations; or (viii) fails to comply with the rules, regulations and bye laws of the stock exchange of which he is a member; or (ix) fails to co-operate with the inspecting or investigating authority; or (x) fails to abide by any award of the Ombudsman or decision of the Board under the Securities and Exchange Board of India (Ombudsman) Regulations, 2003; or (xi) fails to pay the penalty imposed by the Adjudicating Officer; or (xii) indulges in market manipulation of securities or index; or (xiii) indulges in insider trading in violation of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992; or (xiv) violates Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003; or (xv) commits violation of any of the provisions for which monetary penalty or other penalties could be imposed; or (xvi) fails to comply with the circulars issued by the Board; or (xvii) commits violations specified in regulation 26 which in the opinion of the Board are of a grievous nature. 28. Liability for prosecution.- A stock broker or a sub-broker shall be liable for prosecution under section 24 of the Act for any of the following violations, namely :- (i) Dealing in securities without obtaining certificate of registration from the Board as a stock broker or a sub-broker. (ii) Dealing in securities or providing trading floor or assisting in trading outside the recognized stock exchange in violation of provisions of the Securities Contract (Regulation) Act, 1956 or rules made or notifications issued thereunder. (iii) Market manipulation of securities or index. (iv) Indulging in insider trading in violation of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992. (v) Violating the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. (vi) Failure without reasonable cause- (a) to produce to the investigating authority or any person authorized by him in this behalf, any books, registers, records or other documents which are in his custody or power; or (b) to appear before the investigating authority personally or to answer any question which is put to him by the investigating authority; or (c) to sign the notes of any examination taken down by the investigating authority. (vii) Failure to pay penalty imposed by the adjudicating officer or failure to comply with any of his directions or orders. GYANENDRA NATH BAJPAI, Chairman [ADVT.III/IV/69-ZB/2003/Exty.] Footnote :- 1. Securities and Exchange Board of India (Stock Brokers And Sub-Brokers) Regulations, 1992, the principal Regulations, was published in the Gazette of India on October 23, 1992 vide GSR No. 780 (E). 2. It was subsequently amended on : (a) November 28, 1995 by SEBI (Payment of Fees) (Amendment) Regulations, 1995 vide S.O. No. 939 (E). (b) January 5, 1998 by SEB' (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 1998 vide S.O. No. 13 (E). (c) January 21, 1998 by SEBI (Stock Brokers and Sub-Brokers) (Second Amendment) Regulations, 1998 vide S.O. No. 75 (E). (d) December 16,.1998 by SEBI (Stock Brokers and Sub-Brokers) (Third Amendment) Regulations, 1998 vide S.O. No. 1078 (E). (e) July 6, 1999 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 1999 vide S.O. No. 541 (E). (f) March 14, 2000 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2000 vide S.O. No. 234 (E). (g) March 28, 2000 by SEBI (Appeal to Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O. No. 278 (E) (h) August 30, 2000 by SEBI (Stock Brokers and Sub-Brokers) (Second Amendment) Regulations, 2000 vide S.O. No. 787 (E). (l) May 29, 2001 by SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide S.O. No. 476(E). (j) November 15, 2001 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2001 vide S.O. No. 1128 (E). (k) February 20, 2002 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2002 vide S.O. No. 220 (E). (I) September 27, 2002 by SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide SO. No. 1045 (E). (m) September 23, 2003 by SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003 vide S.O. No. 1095 (E).