Fifteen stockbrokers have been designated as Qualified Stock Brokers (QSB) and will be subject to increased obligations and responsibilities, according to stock exchanges in a joint statement issued on Friday. The move is in line with directives from the Securities and Exchange Board of India (SEBI). The QSBs on the list are Zerodha, Angel One, 5paisa Capital, HDFC Securities, ICICI Securities, IIFL Securities, Jainam Broking, Kotak Securities, Motilal Oswal Financial Services, NextBillion Technology, Nuvama Wealth and Investment, Sharekhan, Anand Rathi Share and Stock Brokers, RKSV Securities, and Globe Capital Market.
The stock brokers, who are systemically important due to their size, trading volumes, and handling of client funds, will be required to meet enhanced obligations and discharge additional responsibilities. This is to further strengthen the compliance and monitoring requirements because of the concentration of dealings in the hands of such brokers. The exchanges will carry out enhanced monitoring of the QSBs from July 1, 2023.
According to the circular issued by SEBI on February 6, QSBs are required to carry out surveillance of client behavior by analyzing their trading patterns and detecting unusual activity. These analytics will have to be reported to the exchanges to prevent fraudulent activities. The market regulator also floated a consultation paper on defining the responsibilities of senior management in broking firms for ensuring trade surveillance. It recommended the establishment of a whistleblower policy and channels for raising concerns about suspected unfair practices or regulatory violations at the stockbroking level.
The QSBs will have additional responsibilities regarding financial stability, audit, related-party transactions, cyber security, and risk management, among others. These stock brokers will also have to disclose additional information under these obligations. The move is expected to bring greater transparency and accountability to the stockbroking industry.
These surveillance and control systems will be used to detect, prevent, or report fraud or market abuse by clients, promoters, employees, or analogous persons. The exchanges will have a better understanding of QSBs’ operations and will be able to identify and address potential risks more effectively.
The circular issued by SEBI covers big broking outfits that are systemically important, and the regulator had approved the decision in its last board meeting held in December. The QSBs will be subject to enhanced monitoring, and the exchanges will have greater powers to enforce compliance and take action against any violation of regulations.
The designation of QSBs is a significant development for the stockbroking industry in India. It is expected to bring greater transparency and accountability to the sector and ensure that clients’ interests are protected. The enhanced obligations and responsibilities will ensure that the stockbrokers are subject to greater scrutiny, and the exchanges will have better control over their operations. The move is a step in the right direction towards ensuring the integrity of the securities market and protecting investors’ interests.
