Measures to instil confidence in securities market – Brokers’ Institutional mechanism for prevention and detection of fraud or market abuse
Summary
SEBI mandates stock brokers to establish an institutional mechanism for preventing and detecting fraud or market abuse under the Broker Regulations. The implementation of these measures follows a risk-based, staggered timeline determined by the number of active UCCs, with Qualified Stock Brokers having an earlier deadline. Stock Exchanges are directed to disseminate the circular, amend their bye-laws, and monitor compliance status.
Text
stock brokers shall comply with the following obligations / mechanisms as laid down in Chapter IVA of the Broker Regulations: 1.1. Systems for surveillance of trading activities and internal controls 1.2. Obligations of the stock broker and its employees 1.3. Escalation and reporting mechanisms 1.4. Whistle Blower Policy
The standards for implementation of the same including operational modalities shall be formulated by the Broker’s Industry Standards Forum (ISF), in consultation with SEBI.
The provisions of this circular shall come into force in a risk-based, staggered manner to ensure smooth adoption and effective implementation for all the stock brokers by providing enough time for stock brokers, based on their size, for making necessary changes.
Based on the above, the effective date for implementation for different stock brokers has been prescribed in the table below: > 50,000 UCCs - January 01, 2025; 2,001 to 50,000 UCCs - April 01, 2025; upto 2,000 UCCs - April 01, 2026
In case of Qualified Stock Brokers (QSBs)... the effective date for implementation of the circular for QSBs (irrespective of number of UCCs) is August 01, 2024.
bring the provisions of this circular to the notice of stock brokers and also disseminate the same on their websites
make amendments to the relevant bye-laws, rules and regulations for the implementation of the above provisions
issue a joint notice clearly indicating the date of applicability of the circular to various stock brokers based on the criteria mentioned above
notify the obligation/requirement on the stock brokers to follow the standards adopted by the ISF, in consultation with SEBI.
communicate to SEBI, the status of the implementation of the provisions of this circular in their monthly development report.
This circular is issued in exercise of powers conferred under Section 11(1) of Chapter IV of the Securities and Exchange Board of India Act, 1992, read with Regulation 30 of Chapter VII of SEBI (Stock Brokers) Regulations, 1992 and Regulation 51 of Chapter IX of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018
Source: SecMarx — Measures to instil confidence in securities market – Brokers’ Institutional mechanism for prevention and detection of fraud or market abuse. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.