Tarun Sharma
Mumbai: The Securities and Exchange board of India (SEBI) is planning to enhance supervision on stock brokers after they defaulted on 20 billion rupees of investor fund.
In a bid to protect investors, SEBI has proposed a mechanism that aims at protecting for client funds, by suggesting an internal audit mechanism that will bring more transparency.
In last one year more than 5 big brokers have defaulted and brokers run away with more than 2000 crores rupees of investor money. Since then SEBI had formed internal committee for enhancing supervision on stock brokers. SEBI internal committee submitted this report on 29th May this year.
In this report SEBI mainly empathizes on to segregation of settlement of proprietary and client obligations. Improving internal audit mechanism, monitoring of financial strength of stock brokers and keeping a check on clients asset that are pledged with the stock brokers, amongst key focus area.
Also the regulator wants that brokers shall clearly segregate between the clients funds and proprietary funds. SEBI has proposed different demat and bank accounts for this segregated accounts. Brokers will be given a year time to complete this norm after implementation.
SEBI clearly mentioned that “No stock broker shall appoint or re-appoint: a) an individual internal auditor for more than one term of five consecutive years and, b) an audit firm as an internal auditor for more than two terms of five consecutive years,”.
Now, capital market regulator has sent the report to brokers association for their comment before 15th September. BSE broker forum and Association of National Exchange member (ANMI) have to send a joint comment on the related issue to SEBI before deadline.
