SEBI to come up with client ID system in 3 months

SEBI to come up with client ID system in 3 months
ENS ECONOMIC BUREAU

NEW DELHI, AUGUST 3: The Securities and Exchange Board of India (SEBI) will soon make it mandatory for stock brokers to issue client identification numbers in a bid to check manipulation in the market.

"We will come up with the modalities of client identification numbers within the next three months," SEBI chairman D R Mehta said. So far, the market watchdog has put in place mechanisms to keep track of brokers' transactions but has very little control on individual transactions by investors.

In developed nations, the regulators can keep track of investors through social security numbers, which is still not in practice in India. Although single investors could have more than one client ID number if he transacts through more than one broker, a unique client ID system would be evolved.

"SEBI is preparing the requisite software for brokers to issue client IDs to investors," Mehta said. The client ID numbers would also be useful for the regulator for calculating gross margins of individual investors, he said.

At present, the issue is being handled by SEBI member J R Varma, who has also been entrusted with the task of formulating the guidelines for derivatives trade. "We are looking into the issue of insider trading and guidelines will be prepared soon. There are ways through which we can track transactions undertaken after having access to insider information," Mehta said.

About insider trading, Mehta said the regulator was evolving strategies to trace back transactions undertaken after having access to insider information. "There are ways of finding whether a section of investors had access to information that was not made public," Mehta said.

On guidelines for financial journalists and stock market analysts, he said SEBI would soon convene a meeting of editors this month to discuss the issue. He said it was a sensitive issue since it involved freedom of the press, which Indian press was very possessive about. Though a SEBI committee had recommended issuing guidelines for financial journalists in the past, it was rejected by the SEBI board.

On corporate governance, Mehta said the companies would be asked to furnish more details in their annual results. "The new accounting standard will include consolidated accounts (in case of companies having subsidiaries), segment reporting, company-related transaction and deferred payments," he said.

This would be made mandatory by the end of this fiscal, he added. The Institute of Chartered Accountant of India has already initiated the process of including the above accounting norms in the Generally Accepted Accounting Principles (GAAP) of India.