Key Points- SEBI's Game-Changing Circular: A Comprehensive Guide to Qualified Stock Brokers (QSBs) and Strengthening Investor Trust in the Securities Market

OUR NEW eLEARNING PORTAL CLICK HERE

New Online Mock Test Portal Gurukul On Road

Measures  to  instill trust in  securities  market –Expanding  the  framework  of Qualified Stock Brokers (QSBs) to more stock brokers 

Circular Number: SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/14

Date: March11, 2024  

Exam Prep Guide: NISM-Series-III-A: Securities Intermediaries Compliance (Non-Fund) Exam Preparation Guide with 1400+ Question Bank

Summary:

The Securities and Exchange Board of India (SEBI) has issued a circular on March 11, 2024, addressing measures to instill trust in the securities market by expanding the framework of Qualified Stock Brokers (QSBs) to include more stock brokers. This expansion aims to strengthen compliance, monitoring, and investor protection in the market.

Key Points:

1. Initial Framework (Para 1-2):

   • SEBI previously identified Qualified Stock Brokers (QSBs) based on four parameters, including active clients, total assets, trading volumes, and margin obligations.
   • The first list of QSBs was issued on March 3, 2023.

2. Expanded Framework (Para 3):

   • To enhance investor protection and market trust, SEBI is expanding the QSB framework by considering additional parameters: compliance score, grievance redressal score, and proprietary trading volumes.

3. Revised Parameters (Para 4):

   • The revised parameters for designating a stock broker as QSB include the initial four parameters plus proprietary trading volumes, compliance score, and grievance redressal score.

4. Identification Procedure (Para 4.2):

   • A percentage calculation method is outlined for each parameter to identify QSBs.
   • QSBs are those with a total sum of individual percentages greater than or equal to 6.25% for parameters 4.1.1 to 4.1.5.
   • Compliance and grievance redressal scores have specific thresholds for QSB identification.

5. Annual Calculation and Release (Para 4.3):

   • Values are calculated annually, considering parameters as of December 31st.
   • The revised list of QSBs will be released jointly by stock exchanges in consultation with SEBI.

6. Obligations for Non-QSBs (Para 4.4):

   • Non-QSBs, which were part of the earlier list, must continue to comply with enhanced obligations for an additional 3 financial years or as specified by Market Infrastructure Institutions (MIIs).

7. Voluntary Designation (Para 4.5):

   • A provision is introduced for stockbrokers to voluntarily get designated as QSBs, encouraging compliance and responsibility.

8. Applicability and Implementation (Para 5):

   • The circular's provisions will be implemented in a staggered manner based on risk, with different effective dates for QSBs depending on the parameters used for designation.

9. Amendments to Master Circular (Para 6):

   • The circular introduces amendments to the Master Circular for Stock Brokers dated May 17, 2023, specifically replacing certain paragraphs.

10. Directives to Stock Exchanges (Para 7):

    • Stock exchanges are directed to disseminate the circular to stock brokers, make necessary amendments to bye-laws, rules, and regulations, and issue the revised list of QSBs.

11. Regulatory Authority (Para 8-9):

    • SEBI issues the circular under its regulatory powers to protect investor interests and regulate the securities market.
    • The circular is available on the SEBI website under the category "Circulars."
    • Link: https://www.sebi.gov.in/legal/circulars/mar-2024/measures-to-instill-trust-in-securities-market-expanding-the-framework-of-qualified-stock-brokers-qsbs-to-more-stock-brokers_82149.html