SEBI expands framework for qualified stock brokers

SEBI on Monday expanded its framework for qualified stock brokers (QSBs), setting out three additional parameters for their identification that includes brokers’ compliance score, proprietary trading volumes and grievance redressal mechanism. Brokers can now voluntarily opt to become QSBs.

Current parameters include number of active clients, total assets of clients with the broker, brokers’ trading volumes and end of day margin obligations of all clients of a broker. “To further protect the interest of investors and for building trust in the securities market, it has been decided to extend the framework of QSBs to more stockbrokers,” the regulator said on Monday.

For each stock broker, the percentage of a particular parameter compared to the aggregate of the respective parameter summed across all stock brokers will be be calculated. The values will be calculated annually and the revised list of QSBs will be released jointly by stock exchanges, in consultation with SEBI. Those QSBs which no longer belong to the list, will continue to comply with the enhanced obligations and responsibilities for an additional three financial years or such time as specified by market infrastructure institutions.

The provisions of the circular will come into force in a risk-based, staggered manner to ensure smooth adoption and effective implementation for all QSBs.

SEBI defines QSBs as entities which, by virtue of their size and scale of operations, can impact investors and the securities market.

Shrey Jain, Founder & CEO, SAS Online, a deep discount broker, said, “The new factors that have been added are quite relevant but the calculation and eligibility behind the compliance score and grievance redressal is not very clear. Assigning scores to brokers based on how compliant they are is a step in the right direction.”