Securities and Exchange Board of India (SEBI)
August 6, 1992
The Presidents/Executive Directors
of all Stock Exchanges.
Inspection of brokers’ books
You would be aware that the Ministry of Finance issued a directive to all stock exchanges in August 1991, instructing inter-alia that the transaction price and brokerage should be shown separately in the contract notes issued by stock brokers. On our follow up in the last month, the stock exchanges have reported to us that they have issued necessary directive to their member brokers. In this connection, please also refer to our letter no. SE/4569 dated 19.6.92, advising you to make a sample scrutiny of the books of your member brokers and report to us whether the aforesaid directive of the Government has been implemented by the member brokers. We have not received any response from your Exchange as yet. Hence you may arrange to inspect the contract notes of your member brokers on a sample basis for a period of the last 2- 4 weeks and send a report to us which should include the following details :
i. the date when the Exchange issued directive to the member brokers to show execution price and the brokerage separately in the contract notes.
ii. the date when the bye-laws and regulations in this respect were amended.
iii. after the inspection of records of the member brokers, the findings of the Exchange indicating whether the aforesaid directive of the Government has been implemented by brokers.
iv. any action taken against the member brokers who have not followed the directive of the Government and the Exchange, and
v. the steps taken/proposed to be taken by the Exchange to ensure that the member brokers show transaction price and the brokerage separately in the contract notes.
Kindly treat the matter as important and arrange to send your report to us positively within a fortnight.
HEAD – SECONDARY MARKET DEPARTMENT – I