SECURITIES AND EXCHANGE BOARD OF INDIA
DEPUTY GENERAL MANAGER
SECONDARY MARKET DEPARTMENT
SMD/DBA–II/CIR-22/2002
September 12, 2002
To
The Executive Directors/ Managing Directors
Of All Stock Exchanges
Dear Sirs,
Subject –
1. Additional requirements for processing applications of stock brokers for Registration/ Prior approval for sale of membership/ Change of name/ trade name
2. Clarification regarding eligibility for availing fee continuity benefit by corporate entity formed by converting partnership membership card of the Exchange
1. Additional requirements for processing applications of stock brokers
The applications for grant of registration / requisite approvals are processed by SEBI based on information communicated by the Exchange/ members to SEBI. Such information can undergo a change within a very short period of time. It has been observed that in many cases information/ documents enclosed along with the applications are outdated for SEBI to take any cognizance of the same.
In order to improve the standard of information flow so as to enable SEBI to take an informed decision while processing applications, the following norms may be adhered to :-
Form A Additional Information Form Undertakings furnished by the Applicant Prior Approval for Sale of membership Clarification regarding eligibility for availing fee continuity benefit by corporate entity formed by converting partnership membership card of the Exchange
In case of corporate entities formed by converting partnership membership card of the Exchange, Exchanges have sought clarification whether in case of partnership firms where there are two or more partners, it would be sufficient to have one wholetime director in the corporate trading member from the erstwhile partner to avail of the benefit under clause I( 4 ) of Schedule III of SEBI(Stock Brokers and Sub-Brokers) Regulations 1992 .
It is clarified that in order to get benefit of clause I (4) of Schedule III of SEBI (Stock Brokers and Sub-Brokers) Regulations 1992, all erstwhile partner(s) should be wholetime directors in the corporate entity so formed, and the wholetime director shall individually ( in case there is one wholetime director ) or jointly ( in case there are more than one wholetime directors ) have to hold atleast 40% of the paid up equity capital of the corporate entity formed for a period of atleast three years from the date of such conversion.
It is further clarified that in case of Exchanges which do not grant membership to the partnership firms, but permit individual members to form partnerships, each of the erstwhile member partner, now wholetime director of the corporate entity, will have to individually or jointly as above hold atleast 40% of the paid –up capital of the corporate entity so formed for a period of atleast three years from the date of such conversion.
Yours faithfully
PARAG JAIN
Members desirous of selling/transferring their membership rights are required to obtain a prior approval from SEBI as per circular ref : SMD/BAD-II/9657/1998 dated April 6, 1998. The validity of such prior approval would be for a period of six months from the date of issue. You are therefore advised to ensure that applications for registration of transferee in case of sale/transfer of membership should be forwarded to SEBI within six months of the date of issue of prior approval by SEBI. Exchanges would have to apply afresh for prior approval, in cases where the prior approval is more than six months old.
3) Change of Name Applications for Brokers
You are advised to ensure that change of name applications should be accompanied by information from the Exchange as to whether change in name is accompanied by/ associated with change in majority shareholding/ management/ control. Applications not accompanied with such information from the Exchange would be returned to the concerned exchanges.
You are advised to instruct all the member brokers of your exchange to comply with the above instructions and ensure that applications forwarded to SEBI strictly adhere with the above time schedules/ documents failing which the applications would be returned to the concerned Exchange.
Application for Registration of Stock Brokers . You are advised to ensure that the following documents which are forwarded by the Exchanges along with registration applications are not more than three months old from the date of forwarding of the application.
