With the premier stock exchange BSE set to be listed on the NSE post the ongoing IPO, the latter today asked brokers to ensure that their clients follow the 'fit and proper' guidelines of the regulator Sebi.
BSE initial share sale today entered its second day and will close tomorrow.
"Members are required to ensure that their clients who are executing transactions in the securities of the listed exchanges through them are fit and proper as stipulated by the regulations," NSE said in a circular today.
As per Sebi's Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012, no person shall, directly or indirectly, acquire or hold equity shares of a recognised stock exchange or recognised clearing corporation unless he is a 'fit and proper' person.
An individual would be considered 'fit and proper' if he has a financial integrity and good reputation, among others.
The person/entity should not have been convicted by a court for any offence involving moral turpitude or any economic offence or any offence against the securities laws.
Among others, the person/entity should not be barred from accessing the securities market, among others.
A top Sebi official had recently said responsibility of identifying 'fit & proper' investors to acquire shares in stock exchanges had been entrusted to the depositories.
Noting that though it would be impossible to identify 'fit & proper' violations by persons who held only a few shares, the official said the regulator would not hesitate to investigate any complaint in this regard even if the person held only one share.
As per Sebi's 'fit and proper' criteria, any person who acquires over 2 per cent of equity shares of a stock exchange is required to seek approval of Sebi within fifteen days of the acquisition.
Further, a investor who is eligible to acquire or hold more than 5 per cent shares in a bourse will have to obtain Sebi's prior approval.
As per norms, post listing of stock exchanges, the rules with respect to fit and proper will be made part of the contract note.
Meanwhile, the initial public offer of BSE -- the first by a domestic stock exchange in India -- to raise up to Rs 1,243 crore was oversubscribed 1.55 times on the second day of the offer.
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