MUMBAI, May 26: The Securities and Exchange Board of India (SEBI) has exempted small individual clients of stock brokers from filing their annual income, Income Tax number and market value of portfolio held while entering into the member-client agreement. However, corporate clients will still need to file detailed information while entering into member client agreement with brokers.

This relaxation followed a representation made by brokers to the market regulator that small investors would rather stay out of bourses than give such information.

Senior Executive Director of SEBI, O P Gahrotra, had issued a standard format to the chiefs of stock exchanges on April 11, 1997, making it mandatory for brokers to enter into agreements with their clients as part of the "Know your client" programme, aimed at bringing accountability to clients and brokers n case of bad deliveries.

Though the exemption is given to individual clients having an annual gross turnover (ie. purchases and sales of securities of not more than Rs 5 lakh), the SEBI circular states that the "broker may waive the reporting requirements of annual income, income tax number and portfolio value, in cases where he is personally satisfied about the risk profile of a client".

The requirement of client registration and the member client agreement may be waived for SEBI registered Foreign Institutional Investors (FIIs), Financial Institutions and mutual funds that already have agreements with the brokers, said the SEBI directive.

Reacting to the SEBI order, a leading broker in Mumbai said``although this is an additional work for us, we have no other option but to follow the SEBI order. We are in the process of collecting data from the clients''. The broker also made it clear that the brokers will not be responsible for any incorrect information furnished by the clients in this regard.

On the other hand, National Stock Exchange brokers who have been following the practice of collecting such information from their clients since October 1995, said the new SEBI order would require more information such as passport details, income tax number and photograph.

The experience of NSE brokers also shows that small clients who are reluctant to furnish all details required by the brokers have been keeping away from the market.

The new exemption of Rs 5 lakhs portfolio investment given by SEBI may prompt them to misuse the facility by dealing with more than one broker. ``This will not resolve the problems. Normally we seek business from the best clients only because we cant afford to loose anything from our end in view of the stiff competition in brokerage and drop in business volume''.said another broker.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.