The Securities and Exchange Board of India's `Know Your Client' programme may well turn out to be a bonanza for the dwindling stock of registered sub-broking community. Many of the details asked for by the regulator under the new norm are cumbersome and will turn investors away, feel brokers.

Prominent brokers here told The Financial Express that the new Sebi rule had put the member brokers at a disadvantage vis-a-vis registered sub-brokers. According to them, while the new Sebi norm warrants stringent disclosure of personal details from clients who enter the market through a member broker, the same was not made applicable to a client who invest in the market through a registered sub-broker. It may be recalled that, the market watch dog in its initiative to curb bad delivery problem has barred any unregistered sub-broker from attesting share certificates.

"The net effect of the new rule will be that the clients will prefer a registered sub-broker to a member broker since he can avoid furnishing cumbersome details about his income and wealth," says CJ George, a prominent NSE broker in Kochi.

He also said the new regulation would hit the activity level as it would reduce the supply of undisclosed money into the market. It may be recalled that stock market became a tax haven, following the tax concessions introduced in the `dream budget' presented by P Chidambaram.

TN Menon, a leading market analyst, feels that while the Sebi move will bring discipline to the market, some of the details asked for under the new rule are `excessive' and may turn the investors away from the stock market. He said that the regulatory body should confine its responsibility to "ensuring the integrity of the market and not of the client".

However, CSE president Oommen Issen said the Sebi move was a "right step in the right direction", and would bring more transparency into the market. "I fail to understand why the brokers are afraid of registering their clients as most of the information asked for could be obtained through other channels as well", he said.

Sebi had directed all the bourses to introduce the concept of `Know Your Client' norm asking the member brokers to maintain a database of their clients. Following this, Sebi has developed a uniform of the Client Registration Form and the Broker Client Agreement. The circular made it mandatory for all the broker members to provide details as and when asked by any official body. The last deadline for implementing the norm was May 31.

The eight-page performa, including a client registration form and a member client agreement, demands such details like particular of bank accounts, annual income of the client for the last three years, client income tax number, copy of proof of identity like passport number, copy of income tax return or voter's identity card. Moreover, the client needs to be introduced to the broker by a third party who has to attest the details furnished by the client.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.