Clarification to Circular on Prevention of Unauthorised Trading by Stock Brokers
Summary
This circular clarifies operational requirements for stock brokers regarding the maintenance of records and evidence for client orders. It mandates that brokers retain specified records for a minimum period, currently three years, or until dispute resolution if applicable. Stock Exchanges are directed to disseminate these provisions, amend their bye-laws, and report implementation status to SEBI.
Text
Brokers shall execute trades only after keeping evidence of client order placement and must use telephone recording systems where instructions are received via telephone.
Brokers are required to maintain records for a minimum period of three years, or as notified from time to time, and till final resolution of any dispute.
If SEBI desires specific records to be preserved, such records shall be kept till further intimation by SEBI.
The burden of proof lies on the broker to produce records for disputed trades; in exceptional cases like technical failure, brokers must justify reasons and provide other evidences such as post-trade confirmations.
Stock Exchanges must bring the provisions to the notice of Stock Brokers and disseminate them on their websites.
Stock Exchanges must make necessary amendments to relevant bye-laws, rules, and regulations for implementing the directions.
Stock Exchanges must communicate the status of implementation to SEBI in their Monthly Development Reports.
This circular is issued under Section 11(1) of the SEBI Act, 1992 to protect investor interests and regulate the securities market.
Source: SecMarx — Clarification to Circular on Prevention of Unauthorised Trading by Stock Brokers. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.