SEBI proposes ease of doing business: Major reporting relaxations for stockbrokers

In an effort to make it easier for stockbrokers to conduct business in the securities market, the Securities and Exchange Board of India (Sebi), which oversees the market, proposed more leniencies to reporting requirements

On Friday, in a draft circular, Sebi suggested exempting certain demat accounts from mandatory tagging requirements. The relaxation would apply to demat accounts used exclusively for activities other than stockbroking by brokers who are also primary dealers.

"All demat accounts maintained by stock brokers should be appropriately tagged. Further, this shall not be applicable for the demat account which are used exclusively for activities other than stock broking activities by stock brokers, which are also primary dealers.

The regulator also proposed easing reporting obligations for brokers that function as banks or primary dealers. Under the new framework, such entities would be required to report only those bank accounts that are used specifically for stock broking activities.

"Stock broker which is also bank or primary dealer, shall be required to report to the stock exchanges only those bank accounts that are used for their stock broking activities," Sebi said in its draft circular.

Currently, stock brokers are mandated to maintain properly named and tagged bank and demat accounts, and to report the opening and closure of these accounts to stock exchanges. While certain exemptions were earlier granted to brokers that are banks, Sebi noted the need for further rationalisation.

As part of the proposed changes, the earlier requirement for brokers to report certain demat accounts would be removed. Instead, depositories will directly share details of demat accounts opened or closed by stock brokers with the concerned stock exchanges, based on a mechanism jointly decided by them.

However, Sebi emphasised that stock brokers must continue to ensure all new bank and demat accounts are appropriately named as per the prescribed nomenclature. Details of newly opened bank accounts must be reported to stock exchanges within one week of opening, while closures should also be reported within one week.

Sebi has invited public comments on the draft proposals, with the consultation open until March 6.