Stock Broker License

Stock Broker License Registration with SEBI

A stock broker is a financial professional who executes orders in the stock exchange on behalf of its clients. A stockbroker is a registered representative (RR) or an investment advisor. Whenever a stock gets listed on any of the particular stock exchanges, then stockbrokers and traders are free to start trading on it. A stock exchange showcase is a physical location or an institution where activities such as the sale or purchase of stocks are performed. The Securities Exchange Board of India (SEBI) has made specific regulations to govern the stock markets in India.  At Enterslice, we offer comprehensive Stockbroker licensing services and ensure adherence to SEBI regulations. Our professionals are well-versed in the stockbroker licensing landscape and help from the very initial stage of filing the application to ongoing monitoring. We are determined to offer customized solutions, support clients in exploring the complex dynamic stock broker license regulatory landscape, and help secure long-term success in this industry.

Who Is A Stock Broker?

A stock broker is tasked with the task of trading, which includes the sale or purchase in any of the recognized stock exchanges on behalf of his or her clients. The platform where a stock broker does trading is known as the 'Recognized stock exchange'. Although a stock broker must obtain a membership in any recognized stock exchange, he or she can start trading after that. A list of recognized stock exchanges in India, such as

Stockbrokers are required to have a clearing right to become a clearing member or a self-clearing member to start trading, clearing, and settlement. A broker can be a clearing member or can make specific arrangements with another stock broker to perform clearing activities, such as a person having clearing and settlement rights in any of the recognized clearing corporations.

It is not mandatory for a stockbroker who is registered with the board to act as a clearing member to have a separate registration.

List of Clearing Corporations in India

To become a stock broker in India, you need to follow these steps:

1. Submit a New Membership Application to NSE's Membership Services Department.
2. The application undergoes review by Membership Recommendation and Selection Committees.
3. The application was evaluated by the Membership Selection Committee and sent for approval to the Member Compliance Department.
4. Receive the Offer Letter of Provisional Membership upon approval.
5. Submit documents to SEBI for registration, receive SEBI Certificate upon approval, and obtain trading system access.

Qualifications of a Stockbroker:

1. Must be a 21-year-old Indian Citizen.
2. Should have completed Higher Secondary College or 10 + 2.
3. A minimum of 2 years of experience as a partner, authorized assistant, clerk, registered, or apprentice to a Stock Broker.

Some Definitions

In these regulations, unless the context otherwise requires:

(a) “Act” means the Securities and Exchange Board of India Act, 1992.

(aa) “Certificate "refers to a certificate of registration issued by the Board;

(ac) "Change in control" – Refers to any alteration made in legal formation, ownership, or controlling interest.

(i) In the case of a corporate body –

(A)  If shares are listed on any recognised stock exchange, they must be construed with the definition of control in terms of regulations as specified under (h) of Subsection (2) of section 11 of this Act.

(B)  In case shares are not listed, then it shall be construed with reference to the definition of control as specified under sub-section (27) of section 2 of the Companies Act, 2013.

(ii) In a case other than that of a corporate body, it shall be construed as any change in its legal formation or ownership or change in controlling interest. On the other hand, controlling interest means having at least 50% voting rights or ownership.

(ad) "Clearing corporation" is defined as per the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations.

(ae) "Clearing member- refers to a person having clearing and settlement rights in any of the recognized clearing corporations.

(ca) “Professional clearing member” refers to members having clearing and settlement rights without trading rights.

(cb) "Proprietary trading member” refers to a stockbroker trading exclusively on its own accounts or duly permitted by its sectorial regulator.

(cc) "qualified stockbroker" means a stock broker referred to in regulation 18D of these

Regulations;

(b) “Form” is the specified form in Schedule I.

(c) “Inspecting authority” Refers to those individuals duly appointed by the board to exercise powers given under Chapter V of this regulation.

(d) “Regulations” means Securities and Exchange Board of India (Stock Brokers) Regulations, 1992;

(fa) “Self-clearing member” means a member of a clearing corporation who also clears and settles trades on its own account or on behalf of its clients. Such person shall be required to become a member of recognized Clearing Corporation, from the date as specified by the concerned board.

(g) “Small investor” means an investor trading securities for a market value not exceeding a specified limit (50 thousand in aggregate). As per the contract note issued by stock broker.

(Stock exchange” means a stock exchange duly recognised by the Central Government or by the Board under section 4 of the Securities Contracts (Regulation) Act, 1956 for the time being.

(gb)" stock broker" means a person having trading rights in any recognised stock exchange

and includes a trading member;

(i) “Underwriter” means a person who is in the underwriting business for an issue of securities.

(j) “Underwriting” means an Agreement to subscribe to or procure a subscription for securities remaining unsubscribed.

(k) “Issue” means an offer of sale or purchase of securities by an entity to or from the general public through a merchant banker.

Registration of Stock Brokers

To become a stock broker, it is necessary to submit Form A via the stock exchange, and the application is forwarded to the Board within a period of 30 days.  Factors considered by the Board for Approval include exchange membership eligibility, infrastructure, and compliance. Upon approval, a registration certificate in Form D is issued, subject to specific conditions like rule adherence, resolution of investor grievances and fee payment. Approval for other exchanges/segments is granted by exchanges upon meeting the regulatory criteria, with notification to the Board. Here is a detailed procedure to obtain a certificate of stock brokers.

Application for Registration

3. (1) No person is allowed to act as a stockbroker without obtaining a certificate of registration from the board. Under this act, no separate registration is needed for a clearing member registered with the board to act or operate as a stockbroker in more than one of the stock exchanges for which he is admitted as a member, subject to the grant of approval by the concerned stock exchange.

Note- A "sub-broker" refers to a person, not a member of a stock exchange, who acts on behalf of a stockbroker to assist investors in transactions involving securities.

(2) An Application for registration of stockbroker must be submitted to the board in accordance to Form A, of Schedule I through the concerned stock exchange of which an applicant is a member or admitted.

(3) Such stock exchange must forward the application form as soon as possible but no later than 30 days from the date of its receipt. 

Note- When forwarding applications in Form A, Stock Exchanges must include additional information as per Annexure-1, along with Undertakings provided by the Applicant for all cases sent for registration. Enclosures include:

1. Registration fees of Rs 50,000, payable online through the SEBI payment gateway.
2. A certified copy of the relevant MOA clause is needed.
3. Certificate from a qualified Chartered Accountant certifying net worth and paid-up capital.
4. Undertaking by the applicant regarding the introduction of fake/forged/stolen shares through any member broker, if applicable, including details and actions taken.

(4) It is mandatory for all registered stockbrokers to act as an underwriter.

Information and Clarification

4. (1) The board may request the applicant or concerned stock exchange to provide any further information or clarification related to trading, settling or dealing and related matters to evaluate the application.

(2) It is mandatory for the applicant or its principal officer to appear before the board for personal representation, if needed.

Consideration of Registration Application

5. The board may consider different factors for the grant of a certificate regarding the securities trading, settling, or dealing, including but not limited to whether the applicant:

• Eligibility for stock exchange membership.
• Possession of necessary infrastructure such as office space, equipment, and staff.
• Past experience in securities trading or dealing.
• History of disciplinary proceedings or enforcement actions.
• Suitability as per criteria specified in schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.
• Financial liabilities under relevant laws.
• Certification requirements.
• Minimum net worth and deposit criteria specified in Schedule VI.

SCHEDULE - I: Application for Registration with SEBI as a Stock Broker

Applicant Details:

• Name of the applicant: Member-Broker.
• Trade name, form of organization (sole proprietorship, partnership, corporate body, etc.), and details of proprietor, partners, directors, etc.
• Educational qualifications of proprietor, partners, directors, etc.

Stock Exchange Details:

• Name of the Stock Exchange of which the applicant is a member broker.
• Date and mode of acquiring membership.
• Details of past business before acquiring membership.

Infrastructure Arrangements:

• Office address, contact details, number of employees, authorized assistants, sub-brokers, etc.
• Details of branch offices.

Financial Details:

• Net worth, paid-up capital, free reserves, liquid assets, and turnover details.
• Copies of the latest audited Balance Sheet and Profit & Loss Account.

Disciplinary History:

• The Exchange took any disciplinary action against the member broker in the last three years.
• Nature of irregularities and actions taken.

Other Details:

• Involvement in exchange governance, committee memberships, pending arbitration cases, court cases, complaints, etc.

Declaration:

• Certification of the accuracy of information provided.
• Recommendation of the Stock Exchange:
• Certification from the Stock Exchange regarding the applicant's membership and any pending disciplinary actions.

SCHEDULE - II: Fees Structure

Registration and annual fees for body corporate and non-body corporate applicants, categorized by type of stockbroker.

Note: Registration fees may be paid in two equal instalments - one along with the application for registration and second on intimation of approval of registration.

Checklist for Examining Applications by Stock Exchanges:

Various criteria are to be considered while examining the application, including completeness, financial stability, disciplinary history, pending cases, recommendations from the stock exchange, etc.

The application process seems comprehensive, covering various aspects such as financial stability, regulatory compliance, and operational infrastructure. Applicants need to provide detailed information and ensure accuracy to facilitate the registration process.

6.   Procedure for Registration

 After reviewing the application and ensuring compliance with the specified conditions, the Board may grant a registration certificate in Form D to the stock broker and notify the relevant stock exchange(s).

7. Procedure for Non-Grant of Registration:

• If an application fails to meet the requirements specified under Regulation 5, the Board may reject it after providing an opportunity for a hearing.
• The decision to refuse registration must be communicated to the applicant and the concerned stock exchange within thirty days, along with the grounds for rejection.
• The applicant may request reconsideration within thirty days of receiving the decision.

8. Payment of Fees

Applicants eligible for registration must pay the specified fees as per Schedule III or Schedule V. The Board may permit delayed payment under sufficient cause within six months of the due date.

Fees to be paid by the Stock Broker: Schedule III

Fees as per Schedule V:

Part B: Charge of Fees

Clause 3: Fee Structure

• Applicability: The fees apply to stock brokers, clearing members, and self-clearing members for their securities transactions, including off-market transactions.
• Calculation: The fee is calculated based on turnover or at a fixed rate, depending on the segment of the transaction.

Segment-wise Fees:

• Cash Segment:00010% of turnover (10 per crore)
• Equity Derivatives Segment:00010% of turnover (10 per crore)
• Currency Derivatives Segment:00010% of turnover (10 per crore)
• Interest Rate Derivatives Segment:00005% of turnover (5 per crore)
• Commodity Derivatives Segment (excluding Agricultural Commodity Derivatives):00010% of turnover (10 per crore)
• Agricultural Commodity Derivatives Segment:00001% of turnover (1 per crore)
• Debt Segment:00002% of turnover (2 per crore)

• Explanation: Turnover includes the value of trades executed and settled contracts, with specific provisions for options contracts.

Clause 4: Annual Fee for Clearing Members/Self-Clearing Members

• Amount: Fixed annual fee of 50,000
• Applicability: Payable by clearing members and self-clearing members for each financial year.
• Payment: Due with the application for registration in the first year and before 1st June of subsequent years.

Clause 4A: Non-refundable Fee for Registration

• Amount: ₹50,000
• Applicability: Payable with the registration application under specified regulations.
• Exception: Reduced fee for applicants dealing in commodity derivatives before the transfer of rights and assets.

Part C: Manner of Payment and Recovery

Clause 5: Collection of Fees by Recognized Stock Exchanges

• Responsibility: Recognized stock exchanges collect fees from stock brokers for various segments and off-market transactions.
• Payment Schedule: Collected fees must be remitted to the Board by the fifth working day of the following month.

Clause 6: Payment of Annual Fee by Stock Brokers as Clearing Members/Self-Clearing Members

• Separate Payment: Stock brokers acting as clearing members or self-clearing members must pay the annual fee separately for each category.
• Payment Method: Direct credit in the bank account through online payment using the SEBI payment gateway.

Conditions of Registration

Any registration duly granted by the board under regulation 6 is subject to comply with the following conditions specified below-

(a) The stockbroker must hold membership in any stock exchange.

(b) Stockbrokers must adhere to the rules, regulations, and bylaws of the relevant stock exchange.

(c) Prior approval from the Board is mandatory if the stock broker intends to change control.

(d) Payment of fees charged by the Board must be made in accordance with regulations.

(e) Adequate steps must be taken to address investor grievances within twenty-one calendar days of receiving a complaint, and the Board must be informed as necessary.

(f) Compliance with the Code of Conduct specified in Schedule II is mandatory.

(g) Maintenance of the minimum net worth as specified in Schedule VI is required.

(h) Stock brokers acting as underwriters must enter into a valid agreement with the relevant corporate body and comply with regulations pertaining to underwriting activities.

(i) Stockbrokers may only act as underwriters using their own prescribed net worth or funds.

The Approval for operation in other stock exchanges or segments of stock exchanges is subject to specific regulations and procedures outlined by the Board and relevant stock exchanges.

Minimum net worth as specified in Schedule VI

In Currency Derivative Segment, Self-Clearing Member and Clearing Member shall have minimum net worth of ₹5 crore and ₹10 crore, respectively.

Registration of Clearing Members

Registration of clearing members is itself an important process duly governed by the regulatory framework under the SEBI (Securities and Exchange Board of India).

1. Application for Registration (10A):

• No person is entitled to act as a clearing member. Prior to engaging in any kind of clearing activity, individuals or entities are required to obtain a certificate of registration from SEBI.
• A stockbroker who is already registered can act as a clearing member in a clearing corporation without having a separate registration, subject to the approval or grant given by relevant corporation.
• Clearing members who wish to operate in certain segments of any stock exchange’s clearing corporation must apply to the concerned stock exchange as per the procedures laid down by SEBI.
• The stock exchange grants approval for operation in specific segments after ensuring compliance with SEBI regulations and eligibility criteria, informing the SEBI of such approvals.

2. Application Process and Form Submission (10B):

• Applicants seeking registration as clearing members need to submit an application in duly prescribed Form AD of Schedule I via the clearing corporations where they are enrolled as members.
• Such clearing corporation will forward the application to the board within a specified time frame, which shall not exceed the tenure of 30 days from receipt.

3. Payment of Fees (10C):

• Applicants eligible for registration are required to pay the required fees as specified in Schedule III or Schedule V.
• SEBI has the power to allow, under certain circumstances, permit applicants to pay fees before the expiry of six months from the due date upon showing sufficient cause.

4. Approval for Operation in Other Clearing Corporations or Segments (10D):

• Clearing members who wish to operate in other clearing corporations or segments must apply to the concerned clearing corporation.
• In a similar manner, a stockbroker who wishes to operate in clearing corporations or other segments must apply with the relevant clearing corporation.
• The clearing corporation grants approval for operation after ensuring compliance with SEBI regulations and relevant eligibility criteria, and further inform the SEBI about such approvals.

5. Clearing Corporation for Commodity Derivatives (10E):

• In the context of clearing and settlement of trades in commodity derivatives, the term "clearing corporation" refers to a commodity derivatives exchange until the establishment of a separate clearing corporation for the same purpose.

General Obligations and Responsibilities of Stock Broker

17. Maintenance of Books and Records

Every Stock Broker must maintain several books of account, records, and documents as per regulations, including:

• Register of transactions (Sauda Book)
• Clients ledger
• General ledger
• Journals
• Cash book
• Bank passbook
• Documents register for physical and dematerialized securities
• Member’s contract books
• Counterfoils or duplicates of contract notes issued to clients
• Written consent of clients for contracts
• Margin deposit book
• Client account opening form (specified format)

2. Intimation to the regulatory authority regarding the location of maintained books is mandatory.

3. Stock Brokers must furnish copies of audited balance sheets and profit and loss accounts to the regulatory authority within six months from the close of each accounting period.

4. In case of delay, reasons must be communicated along with the expected timeframe for submission.

Obligations for Underwriters

• Underwriters must maintain additional records, including agreements, subscription details, and financial records.
• Agreements with clients should specify underwriting obligations, subscription timelines, and commission details.
• Direct or indirect benefits from underwriting other than agreed commissions or brokerages are prohibited.
• Total underwriting obligations must not exceed twenty times the net worth.
• Subscription to securities pursuant to agreements must be done within 45 days of intimation.

Maintenance of Records

• Stock Brokers are required to preserve all books of account and records for a minimum period of five years under regulation 17.

Appointment of Compliance Officer

• Every stock broker must appoint a compliance officer responsible for ensuring adherence to regulatory requirements and addressing investors' grievances.
• The compliance officer is obligated to report any observed non-compliance directly to the regulatory authority.

Enhanced Obligations for Qualified Stock Brokers

• Stock Brokers designated as qualified must meet enhanced obligations based on various parameters such as active clients, trading volumes, and compliance scores.
• Enhanced obligations include governance structure, risk management policies, infrastructure scalability, cyber security framework, and investor services.
• These obligations and responsibilities are crucial for maintaining transparency, protecting investor interests, and ensuring the integrity of the securities market.

Code of Conduct for Stock Brokers

A. General:

• Integrity: Stockbrokers must maintain high integrity, promptitude, and fairness in their business dealings.
• Exercise of due skill and care: Stockbrokers should act with skill, care, and diligence in their business.
• Manipulation: Stock brokers must avoid manipulative, fraudulent, or deceptive transactions or spreading rumours to distort market equilibrium for personal gains.
• Malpractices: Stockbrokers should not create false markets or engage in excessive speculative business beyond reasonable levels.
• Compliance with statutory requirements: Stockbrokers must abide by all relevant laws, regulations, and provisions.

B. Duty to the Investor:

• Execution of Orders: Stockbrokers must faithfully execute orders at the best market prices and promptly inform clients about order execution or non-execution.
• Issue of Contract Note: Stockbrokers must issue contract notes promptly for all transactions.
• Breach of Trust: Stockbrokers must not disclose or misuse clients' confidential information.
• Business and Commission: Stockbrokers should not encourage transactions solely for generating brokerage and should provide accurate advice to clients.
• Business of Defaulting Clients: Stockbrokers should not transact business with clients who have failed to fulfil their commitments elsewhere.
• Fairness to Clients: Stockbrokers should disclose conflicts of interest and prioritize clients' interests over personal gain.
• Investment Advice: Stockbrokers must provide suitable investment advice based on client information and disclose any conflicts of interest.

C. Stock-Brokers vis-a-vis Other Stock-Brokers:

• Conduct of Dealings: Stockbrokers must cooperate with other parties to resolve unmatched transactions.
• Protection of Clients' Interests: Stockbrokers must cooperate to protect clients' rights regarding securities.
• Transactions with Stock-Brokers: Stockbrokers should fulfil obligations to complete transactions with other brokers.
• Inducement of Clients: Unfair means of attracting clients from other brokers are prohibited.
• False or Misleading Returns: Stockbrokers must submit accurate returns and avoid misleading statements.

Our Regulatory Compliance Service

At Enterslice, our experts offer regulatory compliance services for stock broker licensing and adhere to statutory requirements. We work closely with clients and offer a proactive approach to compliance management, helping clients to adhere to the regulatory changes and adapt strategy accordingly. Our professionals are well-versed and have in-depth knowledge and understanding of SEBI regulation, and we provide appropriate guidance to meet our potential client's unique requirements and circumstances. Being associated with us, businesses are more likely to gain valuable insights, knowledge, and experience, which empowers them to explore the complex SEBI regulatory challenges with more confidence. Our approach towards regulatory compliance helps clients get comprehensive support to achieve and maintain compliance, safeguard their reputation, and secure long-term success in the stock broking industry landscape. We at Enterslice act as trusted advisors, and clients can easily keep their focus on core business operations with the fact that their compliance obligations are in safe hands.

We help in Application Preparation and Submission:

At Enterslice, our experts specialise in providing proper guidance to clients through the complex process of stock broker application preparation and further submission. We work closely with clients and provide assistance in all aspects of documentation, ensure completeness and accuracy from the very initial stage of filing out of Form A as per Schedule I and collect necessary certificates, undertakings, and other relevant documents as per SEBI stockbroker checklist to obtain Stock broker license. We help clients and ensure that each and every applicant getting a stock broker license is compliant with the SEBI regulatory requirements and minimize the risks, delays, or rejections of applications. Our proactive, dedicated approach ensures clients that their application process for a Stock broker license is duly taken care of by capable experts. We intend to streamline the application process, save our clients valuable time and effort, and provide them with a smooth submission experience. From start to finish of the stock broker license application, we are here to facilitate your success in securing regulatory approval with ease.

Support in Infrastructure Assessment and Setup:

Our experts at Enterslice, utilizing innovative technology and in-depth expertise, support clients in infrastructure assessment and setup to commence the stockbroking operations. We work closely with the client and help them evaluate their infrastructure needs and ensure their alignment is as per SEBI's criteria. We offer appropriate advice on suitable office space and help in the acquisition of necessary equipment to commence business as a stock broker.

We work closely with the client to assess their unique requirements and provide solutions to optimize their efficiency and compliance. We help the client to develop strategies and plans to create an infrastructure framework which not only meets the SEBI standards but also provides growth and scalability for client brokerage operations. Utilizing our comprehensive support, clients can easily explore the complexity of infrastructure setup in a manner that secures sustainable success in the Indian stock broker industry landscape.

Our Financial Compliance Support:

We offer financial compliance support for client businesses to ensure that their organisation can easily meet SEBI's regulatory norms. We work closely with our potential clients to evaluate their financial standing and provide comprehensive support to ensure alignment with SEBI's norms and guidelines. Our professional experts at Enterslice provide assistance in compiling and presenting the necessary financial documents, which include audited balance sheets and profits and loss accounts. We are determined to offer clarity and transparency in client business and help them demonstrate full compliance with SEBI's stock broker license rules. Moreover, clients are more likely to explore complex financial compliance and develop trust and credibility within the regulatory landscape.

We help in Fee Calculation and Payment Guidance:

We understand the importance of financial accuracy and compliance with regulatory norms.  At Enterslice, we provide proper fee calculation and payment guidance. We work closely with the client and understand their unique requirements to provide specific guidance as per their needs and objectives. Our experts are well-versed in the complexity of fee structure and payment rules. Moreover, our proactive approach ensures that clients are informed and empowered throughout the entire process. We are more likely to offer clear explanations and valuable insights and provide guidance on complex stock broker licensing regulations and requirements. Utilizing our expertise, clients can easily explore complex fee calculations and payments with more confidence and efficiency.

Our Representation and Communication Handling:

At Enterslice, our experts offer representation and communication support to clients through the entire process of interaction with regulatory bodies, such as SEBI, RBI, etc. We work closely with you and help you explore the complexity of the application process on your behalf, manage all the communication channels, and ensure clarity and efficiency throughout each and every step of securing a stock broker license in India. Whether it is related to drafting, responding to SEBI inquiries, or appearing for personal representation before SEBI. Our experts will handle all these concerns. You can easily rest assured that all the queries and SEBI requests for any other information will be addressed from our end in a timely manner. We are more likely to ensure transparency and safeguard your interest throughout the entire stockbroker licensing process.

Our Ongoing Compliance Monitoring:

We offer ongoing regulatory compliance monitoring services to ensure that you stay compliant with the SEBI's stock broker regulations and protect your business operations from potential risks and penalties. We work closely with you and provide assistance to maintain and accurately update books and records, which is important for regulatory transparency and accountability. Our proactive approach helps you to adhere to SEBI's Code of Conduct for Stock Brokers and moral practices and develop transparency within your organisation. We help you stay at the forefront of SEBI regulatory norms in the financial market landscape.