SEBI sets criteria for Qualified Stock Broker designation for stock brokers

Circular No. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/24 February 06, 2023

Earlier, SEBI had notified amendment in Stock Brokers Regulations for designating certain stock brokers having regard to their size and scale of operations, likely impact on investors and securities market, as well as governance and service standards as Qualified Stock Brokers (QSBs).

Now, SEBI has notified parameters for such QSBs, enhanced obligations and responsibilities, Procedure for assigning a score to a stock broker, and guidelines on enhanced monitoring, of QSBs which shall be carried out by Market Infrastructure Institutions (MIIs).

The Parameters which shall be considered for designating a stock broker as QSB are as viz. a) the total number of active clients of the stock broker, b) the available total assets of clients with the stock broker, c) the end of day margin obligations of all clients of a stock broker, and d) the trading volumes of the stock broker.

For identification of QSBs, the stock brokers with a total score greater than or equal to five based on the parameters shall be identified as QSBs. The first such list of QSBs shall be prepared on the basis of parameters as on December 31, 2022. Also, the framework may be extended to more stock brokers in due course after considering the additional parameters. The scores shall be calculated on annual basis and the revised list of QSBs shall be released jointly by stock exchanges, in consultation with SEBI.

Also, now QSBs shall carry out a continuous assessment of the threat landscape faced by them and on half yearly basis, conduct a vulnerability assessment to detect security vulnerabilities in their IT environments exposed to the internet. QSB shall also carry out penetration tests on half-yearly basis to conduct an in-depth evaluation of the system’s security posture.

SEBI also prescribed for the governance structure and processes, various committees, Risk management policy and processes, Framework for orderly winding down of its business, Robust cyber security framework and processes, etc.

Click Here To Read The Full Circular