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Synopsis

The Supreme Court on Thursday held that a stock broker has to obtain a certificate of registration from SEBI for each of the stock exchange where he operates.

It has been further held that the stock broker has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 (Regulations, 1992) in reference to each certificate of registration from SEBI in terms of the computation prescribed under Circular dated 28th March, 2002 and fee is to be paid as a guiding principle by the stock broker which is in conformity with the scheme of Regulations 1992.

These observations have been made by a division bench of the top court while allowing an appeal filed by SEBI challenging a Delhi High Court judgment whereby, it was held that a single registration with SEBI is sufficient even if the stock broker has various memberships and functions from several stock exchanges.

Court conjointly read the expression “a certificate” as referred to in Section 12(1) of the Securities and Exchange Board of India Act, 1992 read with the scheme of Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Rules, 1992 and Regulations 1992.

After relying on said provisions, the top court allowed SEBI's appeal and set aside the impugned judgment.

A question was also put before court whether in consequence of refusal to grant certificate of registration to a stock broker in relation to one stock exchange, whether this disqualification will give adverse impact on registrations granted in other stock exchanges for the reason that the certificate of registration was granted based on membership of different stock exchanges.

In this regard, Justices Nagarathna and Rastogi noted that in terms of SEBI Circular-SEBI/MIRSD/Master Cir-04/2010 dated 17th March, 2010, it has been notified that such stock exchange shall immediately inform all other stock exchange(s) the details 38 of the defaulter member such as name of the member, the names of the proprietors/partners/ promoters/dominant shareholders, as applicable.

"This may be a mechanism according to which if the stock broker who is a member of the stock exchange commits default, or on being disqualified to continue as a member, consequential actions could be taken against him pursuant to the circular to which a reference has been made...", held the bench.

Case Title: SECURITIES AND EXCHANGE BOARD OF INDIA vs. NATIONAL STOCK EXCHANGE MEMBERS ASSOCIATION AND ANR.