The Securities and Exchange Board of India (Sebi) is tightening the noose around money laundering. The regulator today asked stock brokers to maintain a record of funds received through pre-funded instruments such as pay orders and demand draft and electronic fund transfers. This mainly happens in case of third-party payments received by brokers.
“It is observed that stock brokers are unable to maintain an audit trail of the funds received through pre-funded instruments and electronic transfers. In such payment cases, the name of the client and the bank account number are not mentioned on such instruments. This results in the flow of third-party funds, unidentified money, which affects the integrity of the securities market,” Sebi said in a circular today.
Sebi said brokers would have to maintain records if the value of pre-funded instruments was Rs 50,000 or more. “Brokers may accept the instruments only if the same are accompanied by the name of the bank account holder and the number of the bank account debited for the purpose, duly certified by the issuing bank,” Sebi said.
The details should include: a certificate from the issuing bank on its letterhead or on plain paper with the seal of the issuing bank; a certified copy of the requisition slip (a portion of which is retained by the bank) to issue the instrument; a certified copy of the passbook/bank statement for the account debited to issue the instrument; authentication of the bank account debited and the name of the account holder by the issuing bank on the reverse of the instrument.
Sebi also asked stock exchanges to issue the necessary instructions to bring the provisions of this circular to the notice of their constituents and develop a monitoring mechanism through internal audits and inspections.
