Chief General Manager
Market Intermediaries Regulation
& Supervision Department
MIRSD/MSS/Cir-
30/ 13289/03
To
The Executive Director/Managing Director
All Stock Exchanges
Dear Sir / Madam,
Subject: 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
Rule 4 of the SEBI (Stock-brokers and Sub-brokers)
Rules, 1992 prescribes the conditions for grant of certificate of registration
to a stock-broker. Rule 4 (c) of the said Rules prescribes that in case of any
change in the status and constitution, the stock-broker shall obtain prior
approval of the SEBI to continue to buy, sell or deal in securities in any
stock exchange. In the absence of any general advice to stock exchanges about the circumstances requiring prior approval,
it is observed that different exchanges follow different practices. For a
particular type of change, some exchanges seek approval while some others do
not. In order to clarify the circumstances which require prior approval and
streamline the process of such approvals, this circular is being issued.
2.
The following table enumerates the circumstances which would mean change in
status and constitution under rule 4 (c) of the SEBI (Stock Brokers and
Sub-Brokers) Rules, 1992 and hence would require prior approval of the SEBI:
|
Sl. No. |
Type of Change in
Status and Constitution |
Remarks |
|
A |
Change in
designated / whole time directors |
The fees need to be paid as per
the prevailing policy. |
|
B |
Change in ‘Control’ ‘Control’ would have same
meaning as defined in the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997. |
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, i.e. applications
for fresh registration, wherever required, shall be made to SEBI within six
months. |
|
C |
Conversion
from one form to another (Proprietorship, partnership and corporate) |
|
|
D |
Transfer by way of sale, nomination, or otherwise |
|
|
E |
Consolidation / merger / amalgamation of brokers |
|
|
F |
Surrender of Certificate of registration |
Full fees, along with interest, if any, as on
the date of acceptance of surrender by the Exchange needs to be paid. 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. The exchange would cancel
registration with effect from the same date but after receipt of advice from
SEBI that the surrender has been accepted by SEBI. Until SEBI cancels the
registration and issues No Dues Certificate, the security deposit of the
broker shall not be released to the broker by the exchange. |
3. In all the above cases (
a)
the broker is
not connected with any of the defaulting brokers of any exchange,
b)
no complaint
/ arbitration /disciplinary proceeding is pending against the broker,
c)
no
investigation / inquiry by any exchange is pending against the broker,
d)
as on date of
application, the broker, as a broker of the concerned exchange, has paid fees,
as applicable, to SEBI,
e)
the turnover
details necessary to assess the fee liability of the broker have been provided
to SEBI in the prescribed manner,
f)
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,
g)
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 (including monetary penalties, if any) for
violations, if any, of the provisions of the SEBI Act and the SEBI
(Stock-brokers and Sub-brokers) Rules and Regulations, 1992 that have taken
place before this change in status and constitution,
h)
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,
i)
the incoming
designated / whole time director is eligible to be appointed as director under
the Securities Contracts (Regulation) Act, 1956, and
j)
in case of approval at Sl.
No. F, the surrendering broker has been disabled from trading and the
application for surrender is accompanied by the original certificate of
registration (or indemnity) for cancellation.
4. The exchanges shall obtain fee clearance from
SEBI before taking on record / approving the following changes:
- Change
in shareholding pattern without change in control,
- Issue
and redemption of preference shares, issue of bonus shares, and
- Change
in directors other than designated / whole time directors
5. In order to enable SEBI to determine fee
liability of the broker, the exchange shall provide turnover details of the
broker in the prescribed manner along with the application for prior approval
or fee clearance.
6. Change in name would not amount to change in
status and constitution and hence no approval is required for the same.
However, change in name must be intimated to SEBI within a week of the change
in name along with the original certificate for record.
7. This circular supercedes SEBI circulars /
letters (i) SMD/BAD-II/9657/98 dated April 06, 1998
regarding prior approval for sale of membership, (ii) SMD/DBA-II/AK/10162/02
dated June 06, 2002 regarding Applications for registration / requisite
approvals and (iii) SMD/NDC/ MSS/3998/2003 dated March 11, 2003 regarding
Cancellation of Certificate of Registration and Issue of No Due Certificate.
Yours faithfully,
(M. S.
Sahoo)