In-person verification of clients mandatory for brokers: NSE

Posted By: Pti
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New Delhi, Feb 15 (PTI) Leading stock exchange NSE hasasked its member brokers to ensure ''in-person'' verification ofall their clients -- a move seen as part of efforts to thwartany shadow-investing by unscrupulous elements in the market.

Besides, the brokers would also have to keep a properrecord of all the collaterals provided by their clients toensure a proper audit trail in times of any investigations,National Stock Exchange (NSE) said in a circular to itsmembers.

National Stock Exchange has made necessary amendments toits Trading Regulations for both capital market andderivatives segments to bring into effect these requirements.

Through another amendment, NSE has also asked all itsmember brokers to get their books audited in every six monthsby an independent entity.

Currently, all the brokers are required to prepare theirannual accounts for each financial year, and furnish the sameto the exchange within six months.

The new norms are said to be aimed at checking violationsby brokers as also unscrupulous investors.

The brokers would also need to "get the complete internalaudit done on an half-yearly basis by an independent qualifiedChartered Accountant, Company Secretary or Cost and ManagementAccountant, who is in practice and does not have any conflictof interest".

The audit report would also need to be reported a timeframe and format as prescribed by the exchange, the circularsaid.

Besides, the brokers would also need to maintain recordsof collateral furnished by their clients to ensure properaudit trail of use of the client''s collateral and otherrelated dealings.

NSE has also tightened the steps taken by brokers whilesigning up new clients.

Currently, the brokers are required to "take reasonablesteps to assess the background, genuineness, financialsoundness of such person and his investment objectives byobtaining from the new client/constituent a ConstituentRegistration Form in a such format as may be prescribed by theExchange from time to time."

Now, prior to registering any clients, the brokers wouldbe "to identify his Constituents and to ensure ''in-person''verification of the Constituents as per guidelines as may beprescribed by the Exchange from time to time."

Also, any Power of Attorney executed by the client infavour of the broker, authorising operation of client''s bankand demat accounts, would be subjected to terms and conditionsprescribed by the Exchange from time to time.

The brokers have also asked the brokers to give, free ofcharge, a copy of all the documents executed by their clientsand get the clients'' acknowledgement on receipt of the same.

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