SEBI wants minimum net worth for F&O play
In a move aimed at moderating the entry of retail investors in the stock derivatives market, market regulator SEBI has proposed that investors should have a certain minimum amount of net worth, as a criterion for trading in the segment.
By TNN |
MUMBAI: In a move aimed at moderating the entry of retail investors in the stock derivatives market, market regulator SEBI has proposed that investors should have a certain minimum amount of net worth, as a criterion for trading in the segment. It also reminded the broking community about basic duties to clients to improve transparency in the market.
In a concept note issued on Monday, the capital market regulator said a net worth certificate from a practising chartered accountant or I-T return documents could be used as proofs for data regarding net worth.
SEBI feels there is a need to enhance the regulatory framework and also to create a sense of awareness among investors in this regard. The regulator has proposed further strengthening of the know-your-client (KYC) norms, and the exposure/turnover limit assigned by the trading members to clients should be commensurate with the financial details of the latter as reported in the KYC.
���Trading members may be required to inform the clients (up front at the time of entering into member-client agreement) about work, history and background of their firm,��� the concept note has proposed.
The guidelines, on which SEBI has invited comments from the public by April 15, also wishes to protect the interests of the small investor by asking the broker to be careful while recommending purchase or sale of any security/derivatives contract to a client.
���Trading member shall have reasonable grounds for believing that the recommendation is suitable for such client on the basis of the facts disclosed by such client as to his/her financial position, other security holdings, past investment experience and pattern and investment needs,��� the note further says.
In a concept note issued on Monday, the capital market regulator said a net worth certificate from a practising chartered accountant or I-T return documents could be used as proofs for data regarding net worth.
SEBI feels there is a need to enhance the regulatory framework and also to create a sense of awareness among investors in this regard. The regulator has proposed further strengthening of the know-your-client (KYC) norms, and the exposure/turnover limit assigned by the trading members to clients should be commensurate with the financial details of the latter as reported in the KYC.
���Trading members may be required to inform the clients (up front at the time of entering into member-client agreement) about work, history and background of their firm,��� the concept note has proposed.
The guidelines, on which SEBI has invited comments from the public by April 15, also wishes to protect the interests of the small investor by asking the broker to be careful while recommending purchase or sale of any security/derivatives contract to a client.
���Trading member shall have reasonable grounds for believing that the recommendation is suitable for such client on the basis of the facts disclosed by such client as to his/her financial position, other security holdings, past investment experience and pattern and investment needs,��� the note further says.
ADVERTISEMENT
| | | Also Read |
| | �� | |
| | �� | |
| | �� | |
| | �� | |
| | �� |
Trading members shall also ensure timely execution of such transactions of their clients to ensure best available price for the client, SEBI says. It also added trading members shall ���adequately inform��� clients of the nature and implication of the recommended transactions and the facts or circumstances which the client needs to know in order to make informed purchase or sale decision.
The regulator also wishes to clamp down on conflict of interests in the broker-customer relationship. In this context, it proposes that trading members shall establish and maintain procedures to ensure that sufficient information is recorded and retained about their business and clients for enabling themselves to justify the risk profiling of their clients and the suitability of any advice given.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
