Letter No. MIRSD-1/INFG/36424/2011, dated 29-11-2011
1. Please refer to your letter dated March 15, 2011 and subsequent clarifications resting with your letter/e-mail dated October 25, 2011 in the captioned matter.
2. In your letters under reference you have, inter alia, stated that:
(a) BPL is a SEBI registered stock broker (SEBI Regn. Nos. INB/F/E230637836, INB/F/E011110237, INE260637836, INE270637833; Depository participant (IN-DP-CDSL-240-2004 & IN-DP-NSDL-128-2000) and a Portfolio Manager INP000000985.
(b) For the purpose of inviting fixed deposits from public, you have contended that you are not required to register yourselves as NBFC with RBI as you are not falling in the definition of NBFC as per RBI Act.
(c) The No Action Letter is sought by you under para 5 of the Scheme as to whether the company can accept such deposits from public under SEBI Rules and Regulations.
3. Our view on the issue raised in your letter under reference is as follows:
(a) RBI has exempted stock brokers registered with SEBI from registering itself as NBFC, upon compliance of certain conditions including that it shall not hold or accept public deposits as defined in paragraph 2(1)(xii) of the Notification No. DFC.118/DG(SPT)-98 dated January 31,1998.
(b) As per Rule 8(1)(f) and 8(3)(f) of Securities Contracts Regulation Rules, 1957, a stock broker cannot engaged as a principal or employee in any business other than securities business except as a broker or agent not involving any personal financial liability.
(c) It may be noted that NBFC activities are not related to securities business and also involve personal financial liability. Thus a stock broker cannot become NBFC and carry on NBFC activities as it involves undertaking business other than securities business and also involves personal financial liability.
(d) Considering the facts as stated above/ it is felt that your proposal to accept public deposits may not be in compliance with the provisions of SCRR.
(e) Based on your correspondence with RBI in the matter of Acceptance of Public deposits, RBI vide letter, dated May 30, 2011 and July 14, 2011 has also clarified that ‘a company can do Non Banking Financial Institution (NBFI) activities including acceptance of public deposits only after obtaining the certificate of registration from RBI under section 45-IA of Reserve Bank of India Act, 1934 with a specific approval to accept public deposits. As BPL is not registered with RBI as Non-Banking Financial Company (NBFC), it cannot accept public deposits’.
4. This position is based on the representation made to the Department in your aforesaid letters under reference. Different facts or condition might require different results. This letter does not express a decision of the Board on the question referred.
5. You may note that the above views are expressed only with respect to the clarification sought on the provisions referred by you in your aforesaid letter and do not affect the applicability of any other law or Regulations administered by SEBI or any other authority.
