Securities and Exchange Board of India (SEBI) has introduced new website compliance guidelines for stock brokers and depository participants, aiming to enhance transparency and investor protection vide circular dt: February 15, 2023. This circular is effective from August 16, 2023. This move comes in response to instances of fraudulent representations by unregistered brokers, ensuring investors can distinguish between legitimate and fake brokers, and making complaint processes more accessible. SEBI has specified certain information that is required by Stock Brokers and Depository Participants to be published on its website.
The following information is required to be published on the website of a stockbroker and depository participant with effect from August 16, 2023:
i. Basic details of the Stock Broker / Depository Participant such as registration number, registered address of Head Office, and branches, if any.
ii. Names and contact details such as email ids etc. of all key managerial personnel (KMPs) including the compliance officer.
iii. Step-by-step procedures for opening an account, filing a complaint on a designated email id, finding out the status of the complaint, etc.
iv. Details of Authorized Persons.
This information required to be displayed is in addition to information that is already required to be published by the Companies Act, 2013 (if the stock broker/depository participant is being managed under the set up of a company, SEBI (Listing Obligations and Disclosure Requirements), 2015 if the stock broker/depository participant is a listed entity and as specified BSE, SEBI or Depositories otherwise.
SEBI has further stated that the URL to the website of the stockbroker or depository participant shall be reported to the stock exchanges/ depositories within a week of this circular coming into effect.
SEBI has further stated that any modification in the URL shall be reported to stock exchanges/depositories within 3 days of such changes.
Stock Exchanges and Depositories are advised to monitor this compliance and update SEBI in a monthly report to SEBI. Further SEBI has asked to submit a compliance on implementation of this by August 31, 2023.
There have been instances where various miscreants have falsely represented themselves as SEBI registered brokers and have duped gullible investors. This move will help investors identify between fake and genuine brokers. Also, it would help investors identify the process of raising complaints in one place. Till now either investors had to call a toll free or send an email where there was no dedicated mail id. This is a welcome move whereby all relevant information can be made available in one place.
Stock Brokers and Depository Participants shall utilize this to make this their ‘USP’ to further enhance their business. If we see the websites of a few big industry players it is seen that most of the above information is available on their websites. So, it is suggested that as a good practice, all the details as sought by SEBI above shall be kept under a separate tab in such a manner that customers should not find it difficult to find it or trace it It is seen that SEBI is strengthening website disclosure across all market participants.
Conclusion: SEBI’s efforts to bolster website disclosure standards across market participants, as seen through recent initiatives for listed entities, showcase a commitment to investor welfare and market integrity. Stock brokers and depository participants are encouraged to utilize these guidelines as a unique selling point (USP) to enhance their business reputation. By ensuring clear, accessible, and accurate information on their websites, market participants can foster trust among investors and contribute to a more transparent and accountable financial ecosystem.
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