Know how to deal with your Broker or Sub-Broker

Every transaction in the stock exchange is carried out through licensed members called brokers.

To trade in shares, you have to approach a broker However, since most stock exchange brokers deal in very high volumes, they generally do not entertain small investors. These brokers have a network of sub-brokers who provide them with orders.

The general investors should identify a sub-broker for regular trading in shares and place his order for purchase and sale through the sub-broker. The sub-broker will transmit the order to his broker who will then execute it .

SEBI has laid down certain Guidelines for Dealing with Brokers & Sub-brokers

Here are the DOs

Deal only with SEBI-registered brokers/sub-brokers.

Ensure that the broker/sub-broker has a valid SEBI registration certificate.

Ensure that the broker/sub-broker is permitted to transact in the market.

State clearly to the broker/sub-broker who will be placing orders on your behalf

Insist on client registration form to be signed by the broker/sub-broker before commencing operations.

Enter into an agreement with your broker/sub-broker setting out the terms and conditions clearly.

Insist on contract note/ confirmation memo for trades done each day

Insist on bill for every settlement.

Ensure that broker’s name, trade time and number, transaction price and brokerage are shown distinctly on the contract note.

Insist on periodical statement of accounts.

Issue cheques/drafts in trade name of the broker only.

Ensure receipt of payment/ deliveries within 48 hours of payout

In case of disputes, file written complaint to the broker/sub-broker, to the stock exchange of which he is a member and to SEBI within a reasonable time.

In case of sub-broker disputes, inform the main broker about the dispute within a maximum of 6 months.

Familiarise yourself with the rules, regulations and circulars issued by the stock exchanges/SEBI before carrying out any transactions.

Watch out for the DON’Ts

Don’t deal with unregistered broker/sub-broker

Don’t pay more than the approved brokerage to the intermediary.

Don’t undertake deals on behalf of others.

Don’t neglect to set out in writing orders for higher value given earlier over the phone.

Don’t sign blank delivery instruction slip(s) while meeting security pay-in obligation

Don’t accept unsigned/duplicate contract note/confirmation memo

Don’t accept contract note/confirmation memo signed by any unauthorised person.

Don’t delay payment/deliveries of securities to the broker/ sub-broker.

Don’t get carried away by luring advertisements

Don’t be led by market rumours or get into shady transactions

All the best in your Stock market Trading endevour