SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, A Wing, Gr. Floor,
224, Nariman Point, Mumbai 400 021

SMD/DBA-II/POLICY/CIR-1/99
January 12, 1999

To,

The President/ Executive Director/ Managing Director
of All Stock Exchanges.

Dear Sir,

Sub: Consolidation of memberships under the same management.

We have been receiving requests from corporate brokers who have multiple memberships on various Exchanges, desiring to consolidate their memberships in one company. We are given to understand that this gives them certain business advantages as the consolidation/ pooling enables the company to show higher networth.

We have examined the issue and the following decisions have been taken:-

If the transferee /applicant is a SEBI registered corporate broker and acquiring a membership in another Exchange, from a corporate under the same management which is also registered with SEBI as a corporate broker, then as both the entities were registered with SEBI, the transferee company will not apply to SEBI for a fresh registration. Instead the transferee and as well as the transferor will apply to SEBI under Rule 4 (c ) of the SEBI (Stock Brokers and Sub-brokers) Rules and Regulations, 1992 for approval of change in status.

For e.g. ABC &Co., which is a member of X Exchange acquires the membership from XYZ & Co., which is a member of Y Exchange. ABC & Co. and XYZ &Co., will then apply to SEBI for change in status under Rule 4 (c ) of SEBI (Stock Brokers and Sub-brokers) Rules, 1992 only if XYZ & Co., is a corporate broker under the same management.

The application should be forwarded to SEBI with the registration certificate of the transferor member/ corporate and this registration would be cancelled.. SEBI will be issuing a New Registration Number to the applicant/ transferee on the Exchange on which it is acquiring the membership, which would also reflect that it is a multiple member henceforth.

The transferee/ applicant company will have to satisfy all the financial and other norms under the SEBI Act, 1992 and SEBI (Stock Brokers and Sub-brokers) Rules and Regulations, 1992.

The transferee/ applicant company will be required to give an undertaking that it would honour all the rights/ liabilities including any SEBI action to be taken against the transferor company as well as liabilities, in respect of fees under SEBI (Stock Brokers and Sub-brokers) Regulations, 1992, etc..

iv) If consolidation is made in a manner where a new entity comes into existence, it would be treated as case of application by a new entity and SEBI requirements in respect of registration, payment of registration fee etc., will be required to be complied with.For purposes of the above, same management would mean where majority of directors of one company are also majority directors in the other company and the majority shareholding/ controlling stake of both the companies is with the same group.

You are advised to bring this to the notice of your members accordingly and keep the same in view while forwarding the applications to SEBI.

You are also requested to advise your members that if the transferor company does not intend to do any business and thus be a defunct company then it should proceed for winding up.

Yours faithfully,

M.D.PATEL.
EXECUTIVE DIRECTOR

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