Stock Broker License Registration

Stock Broker License Registration

Introduction

A Stock Broker License is a registered professional who acts as an agent on behalf of their clients and investors to purchase or sell shares or stocks in the secondary market. Stock Brokers have authorized a person who as a result of registration with the authorities has the right to perform such functions. No unregistered person can perform such functions.

A stockbroker is required to have the following qualities:

• Awareness of the market and conditions influencing the stock prices.
• Financial expertise and foresight to make a judgment call for their clients.

They provide these services and are paid through brokerage either for every transaction or for total trade value.

Legal Definition

Stock Broker License As per Securities Contracts (Regulations) Rules, 1957, a stockbroker is a person having trading rights in any of the recognized stock exchange and includes a trading member.

What are the pre-considerations to register as Stock Broker?

Stock Broker License In order to be able to register as a Stock Broker, the applicant is required to submit an application. On receiving such application the board shall take the following into consideration:

1. The applicant must be eligible to become a member of any stock exchange.
2. In order to effectively perform its activities as a Stock Broker License, the applicant must have required infrastructure including adequate office, equipment, and manpower.
3. The applicant must also not be new to the business; it must have some relevant experience in trading of securities.
4. The applicant or any of its partners, directors or employees are or were subject to any disciplinary proceedings under the relevant laws.
5. If the applicant is considered fit and proper as per the specified in Schedule II of the SEBI (Intermediaries) Regulations, 2008
6. If it has any financial liability under SEBI Act, Securities Contracts (Regulation) Act, 1956 or any other relevant rules or regulations.
7. If the certification under SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007 or as may be specified regulation is taken or not.
8. Net worth and deposit requirements specified in Schedule VI are fulfilled by the applicant.
9. The applicant must satisfy all the eligibility criteria mentioned under Rule 8 of Securities Contracts (Regulations) Rules, 1957. This rule specifies the constitution types eligible to apply, minimum director requirement, work experience conditions, etc.

What are the Registration Requirements?

As we have discussed, in order to operate as a  Stock Broker License one is required to obtain registration under SEBI.

However the person is already admitted as a member in one stock exchange, then no separate registration is required under SEBI to operate in more than one stock exchange. But, for this purpose, they are required to ask for approval from such other stock exchanges.

 Fee

Applicant while submitting the application shall submit the fees as mentioned in the Schedule III of the regulations.

However, the Board can grant an extension of 6 months from the date the fees becomes due after sufficient cause is being shown justifying the same.

What will be the Procedure for Registration?

 Stock Broker Registration procedure includes the following steps:

Step1: A duly filled application in Form A provided in Schedule I am required to be submitted to the Stock Exchange where it wishes to be admitted as a member.

Step2: Within 30 days of receiving the application the stock exchange is required to forward the same to the Securities Exchange Board of India^[1].

Step3: After due analysis of the application if the Board is of the opinion that all the conditions mentioned under Regulation 5 are satisfied, the certificate of registration is issued and the stock exchange is intimated of the same effect.

 Step4: If the Board is not satisfied with the contents of the application when such refusal is to be communicated to the applicant and to the stock exchange as well within 30 days from the date of refusal. However, the applicant must be provided an opportunity of being heard.

 Step5: Any applicant with the rejected application has an option to reapply within 30 days from the date of intimation of such rejection, which will be considered by the Board and decision will be communicated.

What will be the Post Registration Requirements?

1. The Stock Broker has acquired Stock Exchange trader membership.
2. All the applicable rules, regulation and bye-laws of the respective stock exchange must be adhered to.
3. If there is any change in control or management, the stockbroker must communicate the same to the Board.
4. All the applicable fees must be paid.
5. All the investor grievances must be addressed to within 1 month from the date of their receipt. And the Board must be communicated to as per requirement.
6. Code of Conduct as specified in Schedule II of the Regulations must be abided by the stockbroker.
7. Net Worth requirement must always be maintained as per Schedule VI of the regulations.