SEBI : FEES PAYABLE BY STOCK BROKERS

SECURITIES AND EXCHANGE BOARD OF INDIA

GENERAL MANAGER
SECONDARY MARKET DEPARTMENT
The Executive Directors / Managing Directors

SMD/POLICY/Cir -25/19058/2002
September 30, 2002

All Stock Exchange

Dear Sir / Madam,

SUB: FEES PAYABLE BY STOCK BROKERS

Pursuant to the judgement of the Hon’ble Supreme Court, in SEBI Vs BSE Brokers Forum reported in (2001) 3 SCC 482, SEBI amended the SEBI (Stock Brokers and Sub-Brokers) Regulations 1992 on February 20, 2002 in order to incorporate the direction of the Hon’ble Supreme Court to implement the recommendations of R. S. Bhatt Committee. A circular clarifying various issues raised in the representations received from brokers in their individual and representative capacities was issued on March 28, 2002.

Some further issues involving methodology of computation for purpose of levy of turnover fees on certain type of transactions such as compulsory carry forward transactions, reversal transactions pertaining to institutional trades routed through the custodians as also the methodology for computation of fees for the years for which turnover data is not available with the Exchange etc. which were represented by the Exchanges as well as the brokers in their individual as well as representative capacities were examined by SEBI. The said issues are clarified as under :-

1. For those financial years for which the Exchanges do not have authentic total turnover details, the total turnover as certified by auditor in conformity with Annexure –A of circular ref SMD/Policy/Cir-07/2002 dated March 28, 2002, if produced by the members, shall be taken on record for the concerned years without Exchange verification in Annexure –C of circular dated March 28, 2002.

2. If the members are not in a position to furnish auditors certificate, then average total turnover of the members for immediate succeeding two financial years for which turnover data for the entire financial year is available with the Exchange shall be considered as the total turnover of the member for those years for which the turnover data is not available with the Exchange . However, in such cases, the members concerned shall not be eligible to avail of concessional rate of fees as per the SEBI (Stock Brokers & Sub-Brokers) Regulations 1992 amended as on February 20, 2002 based on the certified break-up of turnover of the concerned following years.

1. the Exchange does not have total turnover details of the members for the particular financial year and hence the same as certified by auditor in Annex-C of circular dated March 28, 2002 has been furnished or

2. the Exchange does not have total turnover details of the members for the particular financial year and members also are not in a position to furnish the auditors certificate, hence, average total turnover of the members for immediate succeeding two financial years for which total turnover figures for the entire financial year is available with the Exchange has been furnished.

1. FEE CONTINUITY BENEFIT WHERE THE ERSTWHILE INDIVIDUAL/ PARTNER DIES PRIOR TO COMPLETION OF THREE YEAR PERIOD FROM CONVERSION OF MEMBERSHIP

1. the erstwhile individual/ partner (member partners in case of Exchanges which admit members as partners but do not admit partnership firms as members of the Exchange) was satisfying the conditions laid down in clause 4 of part I of Schedule III above, till his/ her death and

2. the legal heirs of such whole time directors of corporate members satisfy the above conditions till the completion of the remaining period.

1. TRANSFER OF MEMBERSHIP TO 100% SUBSIDIARY, GROUP COMPANY, HOLDING COMPANY, ETC.100% 1. subsidiary company or 2. group company or 3. holding company

1. MERGERS/ AMALGAMATIONS

Where mergers/ amalgamations are carried out as a result of compulsion of law, fees would not have to be paid afresh by the resultant transferee entity provided that majority shareholders of such transferor entity continue to hold majority shareholding in transferee entity. The Exchange would have to enumerate what constitutes “compulsion of law” resulting in such merger/ amalgamations, for consideration of SEBI.

1. DEFINITION OF PUBLIC SECTOR UNDERTAKING (PSU) FOR THE PURPOSE OF REGISTRATION FEES PAYABLE BY STOCK BROKERS ON PSU BONDS

SEBI has been receiving queries from brokers as regards definition of PSU bonds for the purpose of registration fees payable as also whether mutual fund units would become eligible for concessional rate of fees under clause (bb) of para I of Part I of SEBI (Stock Brokers and Sub-Brokers) Regulations 1992.

It is clarified that for the purpose of sub-clause (ii) of clause (bb) of paragraph 1 of Schedule III to SEBI (Stock Brokers and Sub-Brokers) Regulations 1992, bonds issued by Public Sector Undertaking would include bonds issued by companies in which Central or State Government holds 50% or more of the equity capital or is in control of the company.

It is further clarified that transactions in units issued by mutual funds whether public or private would not qualify for concessional rate of fees.

The Exchange/ auditor would have to additionally certify in Annex-C/ Annex-A of circular dated March 28, 2002 respectively to the effect that turnover shown under the category of PSU bonds/ Government securities is in conformity with the definition of PSU bonds given as above.

The revised auditors certificate format and revised format of Exchange certification is enclosed.

All Exchanges are advised to forward the turnover details in conformity with the revised certification format and also bring the revised auditors certification format to the notice of members.

Yours faithfully,

P.K.BINDLISH

Encl : a.a.

REVISED FORMAT OF AUDITORS CERTIFICATE FOR REPORTING TURNOVER

ANNEX – A

Member’s name :