In order to stop squandering of client funds, the Securities and Exchange Board of India (Sebi) is planning to issue new norms for client-broker agreement in a month’s time.
A client-broker agreement lists terms and conditions relating to order and trade confirmation, contract notes, brokerage, settlement schedules, margin payments and dispute resolution. It also makes it binding on both the client and the broker to follow regulations of the stock exchange (and its clearing corporation) where the broker is registered.
According to sources, the market regulator is planning to introduce colour forms for client registration in a bid to stop brokers from making changes after a client has filled up the form. Currently, there are boxes each for cash derivatives and debt, and investors have to indicate whether they want to trade in the cash market or futures and options (F&O). In some cases, brokers themselves click on the derivatives option without the permission of the client.
According to sources, the new norms will require brokers to make clients’ account “zero balance” every quarter. The broker will also need to have the signature of the client along with balance confirmation at the end of every financial year.
