Latest news with #SecuritiesContracts(Regulation)Rules
Business Standard
20-05-2025
- Business
- Business Standard
Amendment in Securities Contracts Rules to offer regulatory clarity to enhance ease of doing business for brokers
The Department of Economic Affairs (DEA), Ministry of Finance, amended Rule 8 of the Securities Contracts (Regulation) Rules (SCRR), 1957. The amendment gives regulatory clarity to enhance ease of doing business for brokers. After taking note of the concerns raised by various stakeholders over certain provisions in the said Rules, the DEA had released a Consultation Paper in September, 2024, inviting stakeholder comments. Given the growth in the scale and interconnectedness of the financial sector and the evolution of nature of business of brokers with time, the DEA felt it necessary to review the appropriateness of safeguards embedded in the Rules so that the intent of the Rules is served without constraining activities of the stakeholders. The amendment has been carried out after due consideration of feedback from the stakeholder and is part of the broader emphasis of the Government to provide regulatory clarity and enhance ease of doing business in the financial sector. It will ensure that market intermediaries continue to support the development of India's capital markets in a transparent and well-regulated manner.
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Business Standard
19-05-2025
- Business
- Business Standard
Govt gives stockbrokers flexibility in group companies' investments
In a major relief to stock brokers, the Ministry of Finance on Monday provided the long-awaited clarification on investments and fund-based activities by a broker under the Securities Contracts (Regulation) Rules (SCRR). The amendment allows more flexibility on investments and opens up more avenues, said brokers. The Rule 8 of SCRR prohibits brokers from engaging in any business other than that of securities or commodity derivatives, except as a broker or agent in any other business but not involving any personal financial liability. The main intent behind the restriction was to prohibit brokers from investing client's money in other businesses and safeguard the client's funds. However, it was noted that the term 'any business' was not clearly defined by the Rule and was subject to interpretation. With the amendments issued on Monday, the government has provided clarity. 'The amendment says that stock brokers can invest from their own net worth or borrowed funds in group companies that are not engaged in securities business, provided the liability is limited to the extent of the investment. It applies to all investments, not only group companies, so it is an excellent amendment,' said Dhiraj Relli, managing director (MD) and chief executive officer (CEO), HDFC Securities. The Department of Economic Affairs (DEA) had undertaken consultations with stakeholders between September and October 2024. In the consultation paper, it was noted that prohibiting investments by a broker, including in group companies, places 'unreasonable fetters' on its ability to use its retained earnings as per its 'commercial prudence'. '..Investments made by a member shall, at all times, not be construed as business except when such investments involve client funds or client securities, or relate to arrangements which are in the nature of creating a financial liability on the broker,' stated the amendment issued on Monday. According to the consultation paper, around 100 brokers at the National Stock Exchange (NSE) and four at the BSE were found to be in non-compliance after the exchanges clarified the list of prohibitions in January 2022. 'Given the growth in the scale and interconnectedness of the financial sector and the evolution of nature of business of brokers with time, the DEA felt it necessary to review the appropriateness of safeguards embedded in the Rules so that the intent of the Rules is served without constraining activities of the stakeholders,' stated the ministry. The norms by Securities and Exchange Board of India (Sebi) governing stock brokers already have prescribed minimum net-worth requirements for brokers. It excludes investments made by them in group companies and considers investments in marketable securities at a discount of 30 per cent.
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Business Standard
19-05-2025
- Business
- Business Standard
Govt provides stock brokers flexibility in investments in group firms
In a major relief to stock brokers, the Ministry of Finance on Monday issued long-awaited clarification on investments and fund-based activities by brokers under the Securities Contracts (Regulation) Rules (SCRR). The amendment to Rule 8 grants brokers greater flexibility in their investments and opens up more avenues, according to market participants. Rule 8 of the SCRR prohibits brokers from engaging in any business other than that of securities or commodity derivatives—except as a broker or agent in another business that does not involve personal financial liability. The primary intent of this restriction was to prevent brokers from using client funds to invest in unrelated businesses, thereby safeguarding investors' money. 'The amendment says that stock brokers can invest from their own net worth or borrowed funds in group companies that are not engaged in the securities business, provided the liability is limited to the extent of the investment. It applies to all investments, not just in group companies—so it is an excellent amendment,' said Dhiraj Relli, Managing Director and Chief Executive Officer, HDFC Securities. The Department of Economic Affairs (DEA) had held consultations with stakeholders between September and October 2024. In its consultation paper, the DEA noted that prohibiting broker investments, including in group firms, imposed 'unreasonable fetters' on the ability to use retained earnings based on commercial judgement. '...Investments made by a member shall, at all times, not be construed as business, except when such investments involve client funds or client securities, or relate to arrangements which are in the nature of creating a financial liability on the broker,' stated the amendment. As per the consultation paper, around 100 brokers on the National Stock Exchange (NSE) and four on the BSE were found to be non-compliant after the exchanges issued clarifications on the list of prohibited activities in January 2022. 'Given the growth in scale and interconnectedness of the financial sector, and the evolving nature of brokerage business, the DEA felt it was necessary to revisit the safeguards in the Rules to ensure they serve their intended purpose without unnecessarily constraining stakeholder activities,' the ministry noted. Existing norms prescribed by the Securities and Exchange Board of India (Sebi) already require brokers to meet minimum net-worth criteria. These norms exclude investments in group companies from net-worth calculations and discount investments in marketable securities by 30 per cent.
Mint
19-05-2025
- Business
- Mint
Centre tweaks provision to ease compliance for brokers
New Delhi: The government has eased compliance for stock and commodity market brokers by providing clarity on investments that do not involve client money. The Department of Economic Affairs (DEA), ministry of finance has amended Rule 8 of the Securities Contracts (Regulation) Rules, 1957 to clarify that any investments made by a member (broker) shall not be treated as business activity, unless such investments involve client funds or securities or result in a financial liability for the broker, according to a notification on Monday. Rule 8 of the Securities Contracts (Regulation) Rules, 1957 (SCRR) restricts brokers from engaging, as a principal or employee, in any business other than securities or commodity derivatives. However, according to the rule, they may act as brokers or agents in other businesses, provided such roles do not entail personal financial liability. 'This (change) opens the room for brokers to easily utilise their own funds for a variety of purposes, to buy assets, etc., which was a time-consuming affair earlier,' said Rajesh Palviya, SVP, Axis Securities. 'One of the reasons for the government easing the rules is the stringent norms for client margin funding, among others,' said Palviya. 'Under this, the broker has to collect an upfront 20% margin from clients who wish to trade stocks on an intraday basis. As room for misutilisation of client funds is already tightened, there was a thinking this rule too should be eased.' The industry had concerns over the interpretation of Rule 8, which prescribes eligibility criteria for membership in stock exchanges. 'After taking note of the concerns raised by various stakeholders over certain provisions in the said Rules, the DEA had released a Consultation Paper in September 2024, inviting stakeholder comments,' the ministry said in its statement. 'Given the growth in the scale and interconnectedness of the financial sector and the evolution of nature of business of brokers with time, the DEA felt it necessary to review the appropriateness of safeguards embedded in the Rules so that the intent of the Rules is served without constraining activities of the stakeholders,' it added. The amendment, issued through a gazette notification, follows stakeholder consultations and aligns with the government's broader drive to simplify financial sector regulations. 'The amendment has been carried out after due consideration of feedback from the stakeholders and is part of the broader emphasis of the Government to provide regulatory clarity and enhance ease of doing business in the financial sector," the finance ministry statement said. 'It will ensure that market intermediaries continue to support the development of India's capital markets in a transparent and well-regulated manner.' By updating the rule, the government aims to reduce compliance burdens and facilitate the smooth functioning of market intermediaries, while maintaining transparency and investor protection. The reform is seen as part of India's ongoing efforts to modernize its capital market ecosystem and attract greater participation.
India Gazette
19-05-2025
- Business
- India Gazette
Department of Economic Affairs amends rules giving regulatory clarity to enhance ease of doing business for brokers
ANI 19 May 2025, 19:58 GMT+10 New Delhi [India], May 19 (ANI): The Department of Economic Affairs (DEA), Ministry of Finance, amended Rule 8 of the Securities Contracts (Regulation) Rules (SCRR), 1957, via Gazette Notification G.S.R. 318(E). According to the Ministry of Finance, the amendment gives regulatory clarity to enhance the ease of doing business for brokers. After taking note of the concerns raised by various stakeholders over certain provisions in the said Rules, the Department had released a Consultation Paper in September 2024, inviting stakeholder comments. Given the growth in the scale and interconnectedness of the financial sector and the evolution of brokers' business nature over time, the Department felt it necessary to review the appropriateness of safeguards embedded in the Rules so that the intent of the Rules is served without constraining the activities of the stakeholders. The finance ministry said that the amendment has been carried out after due consideration of feedback from the stakeholder and is part of the broader emphasis of the Government to provide regulatory clarity and enhance ease of doing business in the financial sector. 'It will ensure that market intermediaries continue to support the development of India's capital markets in a transparent and well-regulated manner,' the finance ministry added. (ANI)
