NSE Proposes Stricter Rules For Authorised Persons

The National Stock Exchange (NSE) has proposed a major overhaul of the regulatory framework for Authorised Persons (APs) to strengthen investor protection, improve supervision, and make stock brokers more accountable.

The proposals, released through a consultation paper, aim to introduce stricter eligibility requirements for individuals seeking to become APs, including educational qualifications, work experience, mandatory NISM certifications, and minimum net worth requirements.

Individual APs will be required to maintain a minimum net worth of ₹5 lakh, while partnership firms, LLPs, and body corporates will need a minimum net worth of ₹25 lakh. Additionally, every AP will have to maintain a minimum deposit of ₹1 lakh with the stock broker.

The proposal also introduces tighter compliance requirements for APs, including disclosure of all bank and demat accounts to the broker during onboarding and providing details of their business-related websites and social media handles. Brokers will be required to conduct social media screening of APs and their promoters/directors/partners.

For APs using trading terminals, the exchange has proposed several technology-based safeguards, including geo-tagging of terminals, CCTV surveillance at terminal locations, and face recognition or biometric authentication before terminal access.

The proposed framework places greater responsibility on stock brokers, making them responsible for all acts of omission and commission by their APs and employees. They will be required to conduct regular inspections, surprise audits, and generate offsite alerts to identify unusual trading activity, recurring client complaints, social media violations, and other compliance risks.

The consultation paper also reiterates that APs cannot receive client funds or securities in their own accounts and proposes that stock brokers directly educate AP-sourced clients about the risks and responsibilities associated with trading.

The proposals have been prepared jointly by the exchanges in consultation with the Securities and Exchange Board of India (SEBI) and are open for public comments till August 27.

The move is expected to strengthen the regulatory framework for APs and enhance investor protection in the Indian stock market.

The proposed changes are a significant step towards improving supervision and making stock brokers more accountable for the activities of their authorised representatives.

Overall, the proposed framework aims to promote transparency, accountability, and investor protection in the Indian stock market.

The implementation of these proposals is expected to have a positive impact on the Indian stock market, promoting a safer and more transparent trading environment for investors.