Stock brokers upset over strict penalties, meet NSE, Sebi officials

A senior official at one of the broker firms said that the penalties have had a severe effect on the brokers as they struggle to survive in the fiercely competitive financial landscape

Brokers are upset with the National Stock Exchange (NSE) on the exchange imposing recurrent penalties, Hindu Businessline (HBL) has reported. Reports say that brokers have been receiving flat penalties ranging from Rs one lakh to Rs five lakh for various issues related to fund allocation, short margin, penalties, upstream-downstream management of client funds, bank balance monitoring, and other reporting requirements.

People aware of the developments said several brokers recently met with the exchange to register their grievances. Apart from this, the Association of National Exchanges Members of India (ANMI), an industry body, has separately written to the NSE regarding the same, the HBL report said.
 

 

Brokers meeting with Sebi

Brokers also met the Securities and Exchange Board of India (Sebi) officials, who assured brokers of addressing the issue. A senior official at one of the broker firms told HBL that the penalties have severely affected the brokers as they struggle to survive in the fiercely competitive financial landscape.

Another broker said there could be genuine IT-related technical glitches that prevent timely uploading of required files, or accurately capture the amounts for margin penalty. Adding to this, the broker said that the timelines for meeting some of the new regulations are very, very short, and there could be delays in meeting them, the broker told HBL. Exchanges and regulators should consider relaxations in all such cases, he said.

Sebi has made it compulsory for all stock brokers to deposit all client funds to clearing corporations as of September 1. Stock brokers can no longer retain clients' funds on an end-of-day basis.

Margin penalty

A margin penalty is the fee charged when a trading account does not have enough funds to cover the required margin. Clearing corporations keep a log of the segment-wise intra-day trading positions of brokers and impose a penalty if there is a margin shortfall, the report added.

"Brokers have made a compelling representation to the NSE (and Sebi), urging a reconsideration of the punitive measures. In response, the NSE is now thinking about a potential respite and considering the possibility of re-evaluating and potentially deferring upstream-downstream penalties for a quarter as the sums involved are significant," one of the brokers cited above told HBL.

Another industry official said that the broker associations had a fruitful discussion with the regulator, which has assured that the issues will be looked into, the HBL report said.