In order to minimise unauthorised trading by stockbrokers using their client's trading account, the SEBI has directed the BSE and the NSE to send details of cash and derivative segment transactions to all investors through SMS and email alerts at the end of every trading day.
A set of guidelines put out on the stock market regulator's Web site has directed stock exchanges to provide a platform to stockbrokers where client details could be uploaded. These include the name, address, mobile number and e-mail id unique to every client. Common mobile numbers and e-mail ids are acceptable only if the broker receives a written request from the client for his family — defined as self, spouse, dependent children and dependent parents.
“The move would enhance the reliability of the alerts given to investors and provide economy of effort to SEBI as it would have to deal only with exchanges on this issue,” said a SEBI official.
Officials from both exchanges confirmed that the regulator had been in discussion with exchanges, investor associations and market intermediaries on this issue for the last year and it would not be difficult for the exchanges to implement this.
The NSE web site has a trade verification module where an investor may register and receive updates on the trades executed in his account for the last 10 days via SMS and email.
The SEBI has asked exchanges to verify the details uploaded by stockbrokers by sending SMS, email and letters to the correspondence address.
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On receiving confirmation from the investor, exchanges would send transaction details generated based on the permanent account number directly to them.
Exchanges will report discrepancies on data uploads to stockbrokers; and have been advised to use a portion of the listing fees meant for providing services to the investing public to meet expenses for offering this facility.
Brokers said that they are not always at fault as it is made out to be in the circular. “Why is it that most litigations on unauthorised trading by stockbrokers come up only when the market falls?” asked an NSE broker.
“There have been instances of clients making such allegations seven days after execution of the transaction. In fact, we have been asking exchanges to do this even if we had to bear the expenses as this would bring down the number of litigations drastically.”
The stock market regulator has directed exchanges to put in place necessary infrastructure and implement the SMS and e-mail alert facility within four months from August 2.
Exchanges have also been advised to instruct all intermediaries concerned, disseminate the circular through their websites and develop a monitoring mechanism through half yearly internal audit and inspections.
The regulator has also asked exchanges to give wide publicity to this facility, amend rules and report implementation status in their monthly reports.