SEBI issues Master Circular for Stockbrokers to increase accessibility by consolidating all relevant circulars

On 09-08-2024, the Securities and Exchange Board of India (‘SEBI’) issued a Master Circular for Stockbrokers to update the Master Circular dated 22-05-2024 and include all relevant circulars that were issued till 09-08-2024.

Key Points:

1. The present Master Circular supersedes the Master Circular for Stockbrokers dated 22-05-2024.

2. The Master Circular has been divided into various headings such as ‘Registration of Stockbrokers’, ‘Supervision and Oversight’, ‘Dealings with Client’, ‘Technology Related Provisions’, ‘Change in Status, Constitution, Control, Affiliation’, ‘Foreign Accounts Tax Compliance Act Related Provisions’, and ‘Investor Grievance Redressal’.

3. Through this Master Circular, the directions/instructions related to stockbrokers mentioned in the following circulars have been rescinded:

   • Circular dated 05-06-2024 — Enhancement of operational efficiency and Risk reduction — Payout of securities directly to client demat account

   • Circular dated 04-07-2024 — Measures to instill confidence in securities market — Broker’s institutional mechanism for prevention and detection of fraud or market abuse

4. Despite the rescission:

   1. Any action taken under the rescinded circulars will be considered to have been taken under the corresponding provisions of this Master Circular.

   2. Any application made to the Board under the rescinded circulars that remain pending would be considered to have been made under the corresponding provisions of this Master Circular.

   3. The previous operation of the rescinded circulars and anything done under them will remain unaffected as if the rescinded circulars have never been rescinded.

5. The changes made through this Master Circular as have been mentioned in Annexure ‘A’ are as follows:

   • Enhancement of operational efficiency and risk reduction (Pay-out of securities directly to client demat account) through circular dated 05-06-2024.

   • Measures to instill confidence in securities market (Broker’s institutional mechanism for prevention and detection of fraud or market abuse) through circular dated 04-07-2024.

   • Para 51.3.6 has been added wherein an option has been given to the broker to send contact notes either in physical mode or through electronic instant messaging services in case ECN has not been delivered or has been rejected by the email id of the client.

   • Modification to enhanced supervision of stockbrokers and depository participants through circular dated 04-07-2024.

   • Provisions related to conciliation proceedings have been incorporated in Annexure 9.

   • Smart Order Routing has been included wherein client-broker agreement has been replaced with ‘Rights and Obligations of Stockbrokers and Clients’.