SEBI permits brokers to engage in other activities with riders

Seen as a major policy shift by SEBI (Securities and Exchange Board of India) that allows stock brokers to become one-stop shops for financial services.

SEBI now allows them to offer services regulated by other authorities, such as:

a.   RBI: Banking/Forex services.

b.   IRDAI: Insurance products.

c.    PFRDA: Pension funds.

d.   IBBI: Insolvency and bankruptcy services.

Key Rules:

a.   Dual Oversight: If a broker sells insurance, they must follow IRDAI rules for that sale. SEBI will only oversee the stock market side of their business.

b.   Strict Prohibitions: No "guaranteed" or "fixed" returns schemes.

c.    Designated Compliance Officer

Our view: 

There is no doubt that SEBI's latest move will be welcomed by the industry. Currently, stockbrokers providing other financial services often do so through subsidiaries, associates and sister companies. The amendments will now permit the stockbrokers to provide the services themselves and not rely on other concerns. However, there may be certain unintentional consequences arising from such a move. For instance, complying with requirements from various regulators may lead to duplicity of records and processes. Further, the compliance officer appointed for these purposes may not be well aware of each regulator's requirements, resulting in delayed resolution of customer complaints, and penalties on the stockbroker for non-compliances. 

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Link - https://www.moneycontrol.com/news/business/markets/sebi-notifies-stock-broker-regulations-permits-brokers-to-engage-in-other-activities-with-riders-13764002.html/amp