New Rule Lets Brokers Expand Beyond Stocks and Derivatives

The Ministry of Finance has amened certain provisions of the Securities Contracts (Regulation) Rule, allowing brokers to invest their own surplus funds in businesses in business was barred earlier. For instance, in real estate or non-banking finance companies, so long as there is no liability on the broker making waste investments.

The changes were highlighted by a National Stock Exchange (NSE) Circular on Tuesday. It will let new-age investors tap brokers as a one-stop shop for all needs, while increase the ease of doing business for market intermediaryies.

Dinesh Thakkar, Chairman & Managing Director at Angel One, The Third Larget Retail Broking House in the Country after Groww and Zerodha, Summed Up The Significance of the Amendment: Offering Muliple Services on Endend Integrated platform.

“With the Finance Ministry’s Clarification, Brokers Can Now Deplus Capital Into Businesses Beyond Broking – SO Long as Client Assets Remain Untouched and No Personal Liability is the issue He said.

“This enables us to go beyond distribution-Into manufacturing products that may not be sebi-igulated but are essential to completeing a customer’s finance More, “Thakkar said. “The digitally Savvy Indian Customer is No Longer Looking for Piecemeal Solutions; to build exact that. “

The amendments to provisions of rule 8 of the scrr 1957 Clarify that investment. That create a financial liability for the broker.

‘Business’ implies that brokers have either used their client funds or seconds for such investments or that the investment would impose a personal liability on the broker beyond the Sharehlding in A Firm. To be sure, these rules are meant to ring-fence client funds and prevent brokers from taking on liabilitys which would make impact the Brooking Business, Creating Systemic Risks.

Recalibration of regulatory perimeter

Given the changing nature of Financial services wherein new-age investors prefer platforms that offer a full range of financial services, the amendments are a “Recalibration” of the “Recalibration” Regulatory “For Brookers, Said Sandeep Parekh, Founder of Finsec Law Advisors.

“The new rule is the ministry of finance both class and expands the scope of what a broker can do outside of broking,” Parekh said. “Given the Increasing Bouquet of Services Global Brokers Provide, it was time that the overly strket interpretation by sebi and nse was diluted so that more services could be Jeopardising client interest. “

Prior to the amendments by the Department of Economic Affairs (dea), these rules stated that a broker can only act as an agent, and not a printies and communities; He should not serve eater as a print or employee of any business apart from the afteraid businesses, where he acts only as an agent.

A Principal Reefers to an owner or a person having Substantial ownership within a firm. An agent is a person autorized to act on behalf of another individual or firm.

NSE’s Clarification Circular on 7 January 2022 stated, “… Members are not permitted to engage in any business or activities or activities or transactions, directly or indirectly, in the best Commodity derivative, except as a broker or agent not involving any personal financial liability. “

The circular also barred brokers from investment in businesses

Kotak Securities, A Subsidiary of the Kotak Mahindra Bank, Had Petitioned The Bombay High Court Against The Circular, Which NECSSTED DIVEing Its Stake in a non-banking finning finning It had invested 49% in car financecier kotak mahindra prime, also a subsidiary of its parent bank, well before nse’s category Clarified. The outcome of the case is awake.

A kotak securities official declined to comment as the matter was “sub Juidce”, while Queries emailed to nse remained unanswored untiil press time.