The Hindu Business Line : Dealing in the stock market

You can contact a broker or a sub-broker registered with the Securities and Exchange Board of India for carrying out your transactions pertaining to the capital market.

Who is a broker?

A broker is a member of a recognised stock exchange, who is permitted to do trades on the floor/screen-based trading system(s) of different bourses.

He is enrolled as a member with the stock exchange and is registered with SEBI.

Who is a sub-broker?

A sub-broker is a person who is registered with SEBI as such and is affiliated to a member of a recognised stock exchange.

How do I know if a broker or a sub-broker is registered?

You can confirm it by verifying the registration certificate issued by SEBI.

A broker's registration number begins with the letters `INB' and that of a sub-broker with the letters INS.

For the brokers of derivatives segment, the registration number begins with the letters INF.

There is no sub-broker in the derivatives segment.

Am I required to sign any agreement with the broker or the sub-broker?

Yes. You have to sign the Member-Client agreement Sub-broker-Client Agreement for the purpose of engaging a broker to execute trades on your behalf and furnish details relating to yourself for enabling the member to maintain client registration form.

The Model Agreement between broker-client /sub-broker client and `Know Your Client' Form can be viewed at the SEBI Web site (www .sebi .gov. in).

The Model Agreement has to be executed on non-judicial stamp paper.

The Agreement contains clauses defining the rights and responsibility of client vis-à-vis broker/sub-broker.

The broker/sub-broker can also add further clauses in the Model Agreement as per their requirement.

To ensure more transparency and better investor protection, SEBI is working on a Model Tripartite Agreement between broker/sub-broker and clients (to become applicable in the cash segment shortly, and a separate agreement in the same format would be required for each of the exchanges).

Once the tripartite agreement gets operationalised, the sub-broker-client agreement will not be required.

What is member-client agreement form?

This form is an agreement entered between client and broker in the presence of a witness where the client agrees (is desirous) to trade/invest in the securities listed on the exchange concerned through the broker after being satisfied of the broker's capability to deal in securities.

The member, on the other hand, agrees to be satisfied by the genuineness and financial soundness of the client and making client aware of his (broker's) liability for the business to be conducted.

What is a risk disclosure document?

To acquaint the investors of the various risks involved in trading in the stock market, the members of the exchange are required to sign a risk disclosure document with their clients, informing them of the various risks such as that of volatility, lower liquidity, higher spreads, new announcements, rumours, and so on.

www.sebi.gov.in

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