CHAPTER – 4.

2
STOCK BROKING
Introduction
 Stock broking in India is now a mature service
sector with all the checks and balances put in
place by the market regulator - SEBl.
 Earlier this service was confined to metros and
to the elite who are in the trade.
 But now the service is available at all locations
even in remote towns because of the use of
technology and the increased interest in stock
market activities.
 Cont…
 Investor complaints against the brokers were
common.
 But now, the current regulatory system has removed
all the inefficient elements in the trade by putting in
place appropriate regulations and evolving a code of
conduct for the market participants.
 Capital adequacy norms ensured that the weak
players get exited from the business. Stock broking
is now a well-regulated professional service in India.
Given the present situation of increased market
volatility, the stock brokers face challenging tasks in
their business.
Stock Broker
 Stock Broker is the interface between buyers and
sellers of securities.
 He function as a member of stock exchange to carry
out trade in securities. It is mandatory that both
stock brokers and sub-brokers have to get
themselves registered with SEBI.
 Broker is intermediaries who arranges buy and sell
securities on behalf of clients.
Sub-Broker
 Sub-Brokers is not a member of recognized stock
exchange. He is an affiliate of stock broker. He act
on behalf of stock broker and assist the clients in
trading of securities.
 A sub-broker can do the business with more than
one broker. However, he/she has to separately
register with the SEBI for each broker.
Code of conduct for stock brokers: -

1. General: The stock brokers should maintain

high standards of honesty, promptitude and
fairness in the conduct of his business.
 They have to exercise skill, care and due
diligence in the conduct of business.
 A stock broker should not indulge in any
manipulative transactions and misrepresent
the equilibrium of the market forces.
 Cont…
2. Duties to investor: A stock broker has the duty to
rake up the order of the customer and execute it.
 He has to deliver the payment for sale of
securities or deliver the securities to the investor
in case of buying of securities.
 The information about execution or non-
execution should be given to the investor
promptly.
 Stock brokers should maintain the confidentiality
of the information pertaining to the investment
transactions of the clients.
 Cont…
3. Stock broker vis-a-vis other stock brokers: A
stock broker carries out transaction on behalf of
his clients. In the process, he has to deal with
other stock brokers who are at the other end of
the transaction.
 A stock broker should cooperate with other
stock brokers in protecting the interests of
investors with regard to their right to dividends,
bonus shares, rights shares, etc.
 SEBI may grant a certificate of registration
subject to the fulfillment of certain conditions
which are as follows:

 He holds the membership of any stock exchange.

 He shall abide by the rules, regulations and bye-
laws of the stock exchange or stock exchanges of
which he is a member.
 In case of any change in the status and
constitution, he shall obtain prior permission of
SEBI to continue to buy, sell or deal in securities
in any stock exchange.
 He shall pay the amount of fees for registration
in the prescribed manner.
 Cont…
 He shall take adequate steps for redressal of
grievances of the investors within one month of
the date of the receipt of the complaint and
keep SEBI informed about the number, nature
and other particulars of the complaints.