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A stock broker is an intermediary registered with the Securities and Exchange Board of India (SEBI) and is a member of BSE or NSE or both. They possess a stock broker license, which authorizes them to do trades on stock exchange platforms.
To enhance the market integrity and protect investors in the financial markets, SEBI unveiled updates to its stock broker guidelines under the Securities and Exchange Board of India (Stock Brokers) (Amendment) Regulations 2024. These regulations compel the stock brokers to adopt robust systems for monitoring trading activities and prevent/detect potential fraud and market abuse.
In this blog post, we will discuss the various key amendments under the SEBI Stock Brokers Regulations 2024.
The latest regulations for stock brokers, known as Securities and Exchange Board of India (Stock Brokers) (Amendment) Regulations 2024, have been introduced under the authority of S. 30 of the Securities and Exchange Board of India (SEBI) Act 1992.
They were enforced upon publication in the legal newspaper Official Gazette. The latest amendments introduce a new chapter called Chapter IVA, which focuses on the institutional mechanism for the detection and prevention of market abuse and fraudulent activities. Under this chapter, key terms like “Designated Director,” “fraud,” “employees,” and “market abuse” have been defined to ensure clarity in the regulatory framework.
In order to keep an eye on trading activity and identify any possible fraud or market abuse by customers, staff, or authorized individuals, the SEBI regulations for stock brokers mandates the stock brokers to set up strong surveillance systems and internal controls. In order to keep up with market and regulatory developments, stock brokers must regularly evaluate and update their systems, document their policies and procedures, and define thresholds for alert generation.
Here are the major amendments applicable to all stock brokers registered with the Securities and Exchange Board of India (SEBI):
Chapter IVA - a new chapter under the regulations, has been added in the regulations. They focus on an institutional mechanism for fraud prevention and detection and market abuse.
The new SEBI stock broker guidelines require stock brokers to establish and maintain KYC surveillance systems.
A whistle blower policy must be established by stock brokers and a confidential channel must be provided by them for raising concerns regarding any fraudulent or ethical practices in finance markets. The policy must provide for adequate protection for whistle blowers.
The regulations necessitate stock brokers to submit semi-annual reports that summarize suspicious and fraudulent activities and market abuse.
If any suspicious activity takes place, the same must be reported to stock exchanges within 48 hours of detection of such an activity.
Strong internal control and surveillance procedures must be put in place by senior management and key managerial personnel.
Systems need to be updated frequently to reflect changes in regulations and customized to the complexity of transactions.
In order to identify any fraud or market abuse, surveillance systems should be adequate to track orders, trades, and internal controls.
Workers must notify senior management right away if they become aware of any fraud, market manipulation, or questionable activities.
At least every quarter, the Board of Directors or Audit Committee must review compliance to the new framework.
The SEBI (Stock Brokers) (Amendment) Regulations 2024, are aimed at strengthening the market integrity and protecting the investors in the financial markets. These regulations mandate robust surveillance mechanisms and regular system updates to ensure that the stock brokers operate in a responsible as well as transparent manner.
Aspiring to become a stockbroker but feel overwhelmed by SEBI’s regulatory requirements? Look no further! Our experts at Registrationwala have years of experience in regulatory compliance and licensing, and have assisted hundreds of professionals in obtaining a stock broker license from the Securities and Exchange Board of India (SEBI).
Q1. When were the stock broker regulations of SEBI last amended?
A. The stock brokers regulations of SEBI were last amended on June 28, 2024. These regulations are known as SEBI Stock Brokers (Amendment) Regulations 2024.
Q2. Why have SEBI Stock Brokers (Amendment) Regulations, 2024 been introduced?
A. These regulations have been introduced to uphold the market integrity, prevent fraudulent activities, and detect market abuse by mandating strict surveillance measures and internal controls for stock brokers.
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
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