Securities and Exchange Board of India
DEPUTY GENERAL MANAGER
Market Regulation Department
SEBI/MRD/SE/Cir- 42 /2003
November 19, 2003
The Executive Directors / Managing Director/Administrators
of All Stock Exchanges
Dear Sir / Madam,
Sub: Disclosure of proprietary trading by broker to client
1. With a view to increase the transparency in the dealings between the broker and the client, it has been decided that every broker shall disclose to his client whether he does client based business or proprietary trading as well.
2.1 The broker shall disclose the aforesaid information to his existing clients within a period of one month from the date of this circular.
2.2 Further, the broker shall disclose this information upfront to his new clients at the time of entering into the Know Your Client agreement.
2.3 In case of a broker who at present does not trade on proprietary account, chooses to do so at a later date, he shall be required to disclose this to his clients before carrying out any proprietary trading.
3. The Stock Exchanges are directed to
3.1 make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately, as may be applicable.
3.2 bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and also to disseminate the same on the website.
3.3 communicate to SEBI, the status of the implementation of the provisions of this circular in Section II, item no. 13 of the Monthly Development Report for the month of November 2003.
4. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
V S SUNDARESAN