Change in Status and Constitution of the Stock Brokers in Cash and Derivatives Segments of the Exchanges under Rule 4 (c) of the SEBI (Stock Brokers and Sub-Brokers) Rules, 1992
Summary
This circular clarifies the circumstances requiring prior SEBI approval for changes in the status and constitution of stock brokers under Rule 4(c) of the SEBI (Stock Brokers and Sub-Brokers) Rules, 1992. It mandates that stock exchanges forward approved applications to SEBI within one week, accompanied by specific confirmations regarding the broker's compliance and liabilities. The document also outlines fee payment requirements, turnover reporting obligations, and explicitly exempts mere name changes from the prior approval requirement.
Text
In order to clarify the circumstances which require prior approval and streamline the process of such approvals, this circular is being issued.
The following table enumerates the circumstances which would mean change in status and constitution under rule 4 (c)... and hence would require prior approval of the SEBI: Change in designated / whole time directors; Change in ‘Control’; Conversion from one form to another; Transfer by way of sale, nomination, or otherwise; Consolidation / merger / amalgamation of brokers; Surrender of Certificate of registration.
‘Control’ would have same meaning as defined in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
The fees need to be paid as per the prevailing policy.
Full fees along with interest, if any, as on the date of application for approval needs to be paid. These prior approvals would have a validity of six months from the date of issue...
If application for surrender is accepted by SEBI, registration would be cancelled by SEBI with effect from the date of acceptance of surrender by the exchange... Until SEBI cancels the registration and issues No Dues Certificate, the security deposit of the broker shall not be released...
In all the above cases (Para 2), the exchange must approve the application of the broker and forward the same, within a week of its approval, to SEBI for prior approval along with a confirmation...
Confirmation on the following: the broker is not connected with any of the defaulting brokers... no complaint / arbitration /disciplinary proceeding is pending... no investigation / inquiry... is pending... has paid fees... turnover details... have been provided...
in case of approvals at Sl. C, D, and E, the outgoing broker has submitted an undertaking to the exchange that it / he would be liable for the fees that may accrue from the date of application for prior approval till the date of change in status
in case of approvals at Sl. C, D, E and F, the outgoing broker has submitted an undertaking to the exchange that it / he would be liable for all liabilities/obligations... for violations... that have taken place before this change in status and constitution
in case of approvals at Sl. C, D, E and F, the outgoing broker has submitted an undertaking to the exchange that it / he has no sub-brokers on the concerned exchange and he / it is not a sub-broker of the subsidiary of the concerned exchange
the incoming designated / whole time director is eligible to be appointed as director under the Securities Contracts (Regulation) Act, 1956
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Source: SecMarx — Change in Status and Constitution of the Stock Brokers in Cash and Derivatives Segments of the Exchanges under Rule 4 (c) of the SEBI (Stock Brokers and Sub-Brokers) Rules, 1992. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.