The move, mooted in November last year, has been based on SEBI's experience with two brokers of the Kanpur Stock Exchange. In this particular case, despite the market regulator's investigations highlighting the brokers' involvement in price rigging of some non specified stocks, they could not be penalised since they had already sold off their cards. SEBI had sent an internal notice to all the stock exchanges in November 1998.

``While the investigations were still on, these brokers sold off their membership rights. Under such circumstances even if the regulator proves that the brokers are guilty of price rigging or other such activities, they cannot be penalised since theyhave already moved out of the ambit of both the exchange and SEBI,'' explained a senior official of SEBI.

Interestingly, the source also highlighted that in the absence of adequate infrastructure, the regulator needs a longer time to finalise the investigation. ``During this time, the brokers can be debarred from trading. However due to the lacunae in the byelaws, it provides an easy exit route to the brokers,'' explained the SEBI source.

According to sources at the Bombay Stock Exchange, following SEBI's intimation, the governing board of the exchange has decided to keep on hold three applications received during the last quarter of the year. Sources explained that since two of the members who have applied for sale have not been operating through their cards for over two years, the exchange has decided to ask the brokers to first get the clearance from SEBI.