Stock brokers will have to brace for tighter rules while handling clients' money and stocks. The Securities and Exchange Board of India (Sebi) is carrying out a comprehensive review of rules for stock brokers after it recently came across instances of siphoning of funds and securities from investors' accounts.
The policy review — the first such exercise of this magnitude for brokers in the regulator's history — comes in the wake of the regulator receiving hundreds of complaints from investors of Unicon Securities and Kassa Securities, where crores of rupees were siphoned off from clients' accounts.
The new rules, which may be announced soon, will mandate a uniform nomenclature for the stock broking industry while handling their clients' and own funds and securities.
Sebi will put in place "red flag indicators", which will show whether brokers are misusing clients' funds and securities.These indicators would include percentage change in net worth of the broker and his liability to clients among other things.
At present, brokers are required to maintain a certain net worth which varies from exchange to exchange.
"If the net worth falls below the threshold level, it could be a case of financial distress," said a person familiar with the development.
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