Enhanced obligations and responsibilities on Qualified Stock Brokers (QSBs)
- SEBI, through various circulars issued from time to time, has given necessary directions/guidelines to stock brokers, to ensure orderly functioning of the securities market and to protect the interest of investors in securities market.
- Over time, there have been significant developments in the securities markets such as advancement in technology, investor penetration and awareness, concentration of activity among few stock brokers and increase in risk including, on account of possibility of cyber-attacks.
- Certain stock brokers, due to various factors like their size, trading volumes and amount of clients’ funds handled by them, have come to occupy a significant position in the Indian securities market which is leading to concentration of activity among few stock brokers. Such stock brokers cater to the needs of large number of investors and therefore, it is imperative for such stock brokers, inter-alia, to adhere to the regulatory guidelines, provide satisfactory services to investors and resolve investor complaints.The failure of such stock brokers has the potential to cause disruption in the services they provide to large number of investors causing widespread impact in the securities market.
- Hence, in order to further strengthen the compliance and monitoring requirements relating to stock brokers and to ensure efficient functioning of securities market, SEBI, vide Gazette Notification dated January 17, 2023, amended the SEBI (Stock Broker) Regulations, 1992 for designating certain stock brokers, having regard to their size and scale of operations, likely impact on investors and securities market, as well as governance and service standards, as Qualified Stock Brokers (QSBs), on the basis of certain parameters and appropriate weightages thereon.
- The stock broker designated as a QSB shall be required to meet enhanced obligations and discharge responsibilities to ensure appropriate governance structure, appropriate risk management policy and processes, scalable infrastructure and appropriate technical capacity, framework for orderly winding down, robust cyber security framework, and investor services including online compliant redressal mechanism.
- This circular details the parameters which shall be considered for designating a stock broker as QSB, enhanced obligations and responsibilities which shall be cast on such QSBs and guidelines on enhanced monitoring of QSBs which shall be carried out by Market Infrastructure Institutions (MIIs).
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