SR. EXECUTIVE DIRECTOR
SECONDARY MARKET DEPARTMENT

NO.SMD/OPG/AA/1020/96
March 14, 1996

To,

The Executive Director/President
All Stock Exchanges

Dear Sir,

REGISTRATION OF SUB-BROKER

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As you are aware, sub-brokers are required to obtain certificate of registration from Securities and Exchange Board of India in accordance with regulations made under section 12(1) of SEBI Act, 1992 without which they are not permitted to buy, sell or deal in securities. The applications from sub-brokers were invited in May, 1992 through recognised Stock Exchanges for registration with SEBI. A large number of applications were received and registration granted to approximately 1200 applicants fulfilling the requirements.

It is felt that a large number of sub-brokers still are not registered with SEBI and therefore carrying out their activities without any valid legal sanction. SEBI at its end has started returning all incomplete applications directly to the applicants. Those who were already in the business of sub-broking and had applied for registration before 21st May, 1992 are being advised to re-submit their applications complete in all respects within two months failing which it shall be construed that they are acting as sub-brokers without holding certificates of registration in violation of section 12(1) of SEBI Act, 1992. The applicants who had applied after 21st May, 1992, are being advised to stop the business of sub-broking immediately which can be re-started after they are duly registered with SEBI.

We have devised guidelines for making applications complete in all respects. A copy of the same is being enclosed for your perusal. Co-operation from the Stock Exchanges will help us immensely in registering and regulating this class of capital market intermediaries.

We request you to keep sufficient stock of Form ‘B’ (application form for registration as sub-broker) and Form ‘C'(recommendation letter to be given by the member with whom the sub-broker is affiliated), for free distribution amongst applicants. We are enclosing a copy of these forms. In September, 1993, we had sent a copy of model agreement advising you to circulate the same amongst your members. This agreement between broker and sub-broker specifies the scope of their rights and liabilities. A copy of the same is once again being enclosed with a request that sufficient number of copies may be kept available and supplied to desirous applicants.

We advise you to bring the contents of this letter to the notice of your members by suitable display on your notice board. Applicants who had applied earlier and not heard anything from SEBI may be advised in their own interest to make fresh application complete in all respects in accordance with attached guidelines. Doing business with unregistered sub-broker, in future, will be viewed seriously and penal action taken.

Kindly acknowledge receipt of this letter.

Yours faithfully,
sd/-

O. P. GAHROTRA

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