Professional Documents
Culture Documents
Certain steps or measures are taken by BSE towards the reduction of risks of stock brokers.
Know your client (KYC)
According to know your client scheme the member brokers of the exchange are
required to obtain detailed information of clients prior to commencement of any transactions
with new clients. A similar procedure is also to be followed for existing clients. This information
is to be made available to the exchange authorities whenever called for. In case the member
broker fails to furnish the same, it may result in penalties to the member brokers.
Surveillance / Inspection
Surveillance / Inspection department carries out inspection of the member brokers
records and keep a regular check on the activities of member brokers as well as sub brokers as
regards the compliance of the risk management procedures.
Insurance
The exchange presently has in place insurance policies to protect itself in the
event of losses on account of fire, damage to computer systems and a comprehensive policy that
covers risks faced by the exchange, its member brokers and the clearing houses.
The risks covered under the basic cover of the policy are detailed as below.
Direct financial losses suffered by the member broker on account of physical loss,
destruction, theft or damage to securities and cash.
Uniform Trading hours at all the stock exchanges in the country to check the arbitrage.
Registration of all market players such as brokers, sub brokers, registrars to issues,
merchant bankers, portfolio managers, underwriters, debenture trustees, custodians etc so
as to have access/inspection of their books, records and verification of transactions.
Regulation on insider trading with the object to curb it completely and punish the guilty.
Systematization and computerization in order to reduce the paper work and ensure
transparency in transactions.
Brokers have to notify all transaction to the stock exchanges including off the floor
trades.
Circuit breaker system to check volatility of particular scrip and the exchange.
Funds should be on trust structure and set upon under Indian Trust Act, 1882 with
independent trustees.
Fund to be utilized only for investor claims and not for broker claims.
Trustees to ensure that fund is not deployed in risky instruments or for the benefit
of any member but only in prescribed avenues.
Appointment of administrators
To get rid of bad deliveries, SEBI has decided to appoint administrator to
implement the signature guarantee and certificate authentication programs. The administrators
appointed by SEBI act on behalf regulator in resolving problems arising out of signature
mismatch.
Service centers for investors
SEBI has directed all stock exchanges to constitute service centers for investors to
enable the investors to have a form for recording and counseling of their grievances as well as
access financial and other information of companies on government norms, policies, rules,
regulations, etc.
Investor Education
SEBI has taken steps to educate the investors through various awareness
programmes and publications etc.
Corporate Governance
SEBI has prescribed the corporate governance norms for all listed companies to
ensure transparency and better disclosure practices.