Sebi Eases Norms on Brokers' Dues for Exiting Bourses

To facilitate and expedite the exit of non-operational bourses, the Securities and Exchange Board of India (Sebi) has proposed to make it easier for such exchanges with regard to outstanding dues from their defaulting brokers whose number stands at nearly 2,600.

As per Sebi norms, one of the conditions for voluntary surrender of recognition of a bourse is that the dues of the stock brokers to the market regulator should be cleared by the stock exchange in case the brokers fail to pay their dues. In case such dues are not met with, the bourses are liable to pay on behalf of the defaulting stock brokers. 

At present, 10 bourses which have applied with the market watchdog for a voluntary exit have Rs 42 crore worth of pending dues by a total of 2,591 brokers.

The 10 bourses include Cochin Stock Exchange, Bangalore Stock Exchange, Ludhiana Stock Exchange, Madras Stock Exchange, Delhi Stock Exchange and Jaipur Stock Exchange.

After taking into account various issues, Sebi has proposed that fee liabilities on the exchanges "may be frozen, as on particular cut-off dates" for brokers who had stopped trading many years back on the exchanges or whose cards had been auctioned subsequent to disciplinary action or who had been declared defaulter by exchanges.

According to Sebi, the cut-off dates for freezing the calculation of fees and interest could be the 'last trading date' or the 'date of auction' of membership card or the 'date of declaration of default' of the broker, as the case may be. Sebi said if any liability still remains due on part of the broker then it would be paid by the stock exchanges.

However, if Sebi is convinced that it is difficult for the stock exchange to pay the liability at a given stage and the process of derecognition would be unduly delayed, the bourse may be allowed to exit subject to some conditions. Such exits would be allowed on undertaking by the bourses that they shall pay the dues from the proceeds of sale of their assets within a period permitted by Sebi, the brokers with pending dues would not get share from the assets of the bourse till their dues are paid to the market regulator.

Besides, the exchanges would have to ensure that names of defaulting brokers be posted on Sebi's website and that such entities would not authorised to trade in the markets till their dues are paid.

The proposed norms come after exchanges expressed their inability to comply with Sebi provisions due to lack of sufficient deposit from brokers to pay the dues and on account that various brokers were not traceable, among others.

Other than exchanges which have applied for voluntary exit, Sebi has initiated compulsory de-recognition of seven bourses, including Magadh Stock Exchange, Vadodara Stock Exchange and Ahmedabad Stock Exchange. The seven bourses have pending dues worth Rs 83.41 crore with Sebi.