Sebi has also called a meeting of the top brass of the Bombay Stock Exchange (BSE) and the Delhi Stock Exchange (DSE) to discuss the sub-brokers registration issue.
Sebi's efforts at registration of brokers came to a naught with a number of them moving courts in protest against the market regulator's policy of fixing fees on the basis of the brokers turnover.
According to the senior executive director of Sebi, O P Gehrotra, a two-pronged strategy has been launched to find a way to resolve the issue.
Sebi has launched an exercise to prepare a detailed database on the position of the brokers with regards to payment of registration fees and annual fees.
Simultaneously, it will from this week onwards, correspond with all the brokers, about 7,000 in all, asking them to state the reasons for their non-payment.
We realised that there has been a lack of information about the status of the cases pending before us on the issue. We have hence decided to arm ourselves with all the information by setting up a database and also directly approaching the brokers to get a feedback from them, Gehrotra said.
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Once the process is over, Sebi proposes to launch a crackdown on the brokers who are not paying their registration and annual fees.
Sebi is also close to formulating a set of fresh guidelines on the registration of sub-brokers.
Sebi had earlier asked the BSE and the DSE to submit their proposals focusing on ensuring that brokers and sub-brokers both share the risk of defaults with the investors. The regulator will now meet representatives of the two bourses to discuss their proposals.
Giving an investor the option of instituting an arbitration proceeding against the sub-broker at a stock exchange in the event of a default by a sub-broker, forms part of the fresh set of recommendations being considered. The existing code of conduct as spelt out in Section 15 1(c) of the Sebi (brokers and sub-brokers) Regulations of 1992, states: The broker will enter into an agreement with the stockbroker for specifying the scope of his authority and responsibilities.
This does not say and mean anything, and this has never happened. The agreement should be spelt out clearly and should make the sub-broker accountable to the broker and thereby automatically to the stock exchange and Sebi, feels a DSE official.