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Brokers upset over SEBI circular on client code

Our Bureau

CHENNAI, July 27

STOCKBROKERS are upset over a SEBI circular that makes it mandatory for all of them to use unique client codes for all clients. The brokers have been asked to collect and maintain the permanent account number (PAN) allotted by the Income-Tax Department, from their clients.

This circular, which comes into effect from August 1, only creates more work for the brokers without any benefit accruing to them, according to the brokers. Not following the instructions will mean a violation of the SEBI code of conduct and result in th e broker's registration being cancelled, they said.

According to the SEBI order, clients not having PAN have to give a declaration to that effect. The client will, instead, have to furnish passport details. In case a client does not have either a PAN number or a passport, the client should furnish details of the driving licence, and if none of these was available, the voter identity number will have to be provided. These requirements are for clients having order value of Rs 1 lakh or more.

When contacted, Mr J. Venkataramana of Somayajulu & Co Ltd said the consequences of not following the SEBI orders were onerous. Some clients, he said, might not be willing to part with such information. ``They would rather stop trading because of which t he market and the brokers would get affected,'' he said.

The brokers felt that with more such circulars being issued by the SEBI, they were working more as agents of the Government rather than for themselves.

The SEBI order also said that for FIIs (foreign institutional investors) and their sub-accounts, SEBI registration number shall be used till the PAN is allotted. For tax-paying body corporate, the unique registration number issued by the relevant regulat ory authority shall be used till the PAN is allotted. For mutual funds, SEBI would be issuing an ID number for schemes and this number would be used in the schemes along with the mutual funds.

Trading members would be required to furnish the particulars of their clients to the stock exchanges and clearing corporations and they would be updated every quarter.

The trading members would also have to maintain and preserve for seven years a mapping of client IDs used at the time of order entry in the trading system with those unique client IDs along with client name, address and other particulars.