Assesing the Jobs of a STOCK BROKER Essay

Definition: “Stock Broker’ means a stock-broker who has either made an application for registration or is registered as a stockA­broker in accordance with the rules and regulations made under the Securities and Exchange Board of Indian Act, 1992 (15 of 1992).” (Date of Introduction: 01.07.1994. Notification No.1/94-ST dt. 20.06.1994. )

(Section 65(69) of Finance Act, 1994 as amended) The service provided by the stock broker becomes liable to pay Service Tax subject to the conditions that the A­

(a) Stock Broker should be registered as per SEBI Act, 1972.

(b) Stock should be listed in the Stock Exchange.

(b)The Stock Exchange must be recognized Stock Exchange as per Securities Contract (Regulation) Act, 1956.

(c) The Sale/Purchase should be on behalf of an investor.

(i) shares, scrips, stocks, bonds, debentures, debenture stock, or other marketable securities of a like nature in or of any incorporated company or body corporate;

(ia) derivative;

(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;

(ii) Government securities;

iia) such other instruments as may be declared by the Central Government to be securities; and

(iii) rights or interests in securities.”

Own trading: In case, a broker enters into a transaction on his own account, with an investor who is a non-member on the stock exchange, the service provided will be taxable service, and subject to Service Tax.

Arbitrage: In the case of arbitrage transaction i.e. the transaction between two brokers of different stock exchanges, the service is provided by a broker i.e. the member of a stock exchange even though the investor may be a member of another stock exchange, there being an investor involved in the transaction, the service so provided to the investor will be a taxable service and subject to Service Tax.

(Ministry’s F.No.148/1/94 CX-4 (Pt. I) dt. 31.12.1996)

“Sub-broker” means a sub-broker who has either made an application for registration or is registered as a sub broker in accordance with the rules and regulations made under the Securities and Exchange Board of India Act, 1992.

Source (Role of a Stock Broker

Published on March 2, 2010 by Megha Batra in Investing Comments

Any investor who wants to invest in stocks needs a stock broker. As you cannot make direct investments in stock market, it becomes essential to contact a stock broker, as he is the one who is directly related to stock exchange.

The basic job of a stock broker is to facilitate your transactions and guide you in trading with shares and commodities. He is a professional expert who assists you to understand and plan according to the ups and downs in the risky stock market.

A stock broker allows you to buy and sell stocks and commodities anywhere in the world. In case you are a beginner, it would be really tough for you to understand the world of stocks. In such situation, you require a stock broker. He will help you to make right decisions at the right time, thus managing your invested capital properly. Literally, the term stock broker refers to a person who makes your transactions in stocks and earns his commission on every transaction made by him in the stock market. He is approved and regulated by federal government of the country (depending on the market he works in).

Published on March 2, 2010 by Megha Batra in Investing Comments (1)|1 Liked It

What does a stock broker do in your stock investments?

Any investor who wants to invest in stocks needs a stock broker. As you cannot make direct investments in stock market, it becomes essential to contact a stock broker, as he is the one who is directly related to stock exchange.

The basic job of a stock broker is to facilitate your transactions and guide you in trading with shares and commodities. He is a professional expert who assists you to understand and plan according to the ups and downs in the risky stock market.

A stock broker allows you to buy and sell stocks and commodities anywhere in the world. In case you are a beginner, it would be really tough for you to understand the world of stocks. In such situation, you require a stock broker. He will help you to make right decisions at the right time, thus managing your invested capital properly. Literally, the term stock broker refers to a person who makes your transactions in stocks and earns his commission on every transaction made by him in the stock market. He is approved and regulated by federal government of the country (depending on the market he works in).

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A« Michigan ForeclosuresHow to Trade Forex Using Pivot Point as a Trading System A»Some of the main reasons for hiring a stockbroker are discussed hereunder:

a) A stock broker helps as a guide who recommends you about a particular deal to invest in. Many times he analyzes the market trend and suggests your desired actions accordingly. As he has a lot of knowledge and experience, he is the best person for your capital investment and aims at providing maximum returns on your investment. For beginners, he acts as a nook of complete knowledge about the stock market and its trends.

b) A stock broker is well aware about the upcoming risks and ways to avoid them. He also calculates the possibility to earn profit by investing in a particular stock or commodity. His aim is to minimize risk and maximize profit.

c) A stock broker also performs the job of a manager who manages your portfolio so as to let you understand your financial status. His job covers initial investment, profits and losses and the record of stock trade. This is extremely essential as this is the only way to calculate your profits and losses. Thus, a stock broker tells you whether you are successful or not in the market, i.e., whether you stand in the market.

d) A stock broker assists you in trading anywhere in the whole world. He knows the overseas market trends and can direct you to invest in stocks abroad so as to earn good profits in future.

e) A stockbroker also makes investments on your behalf. All you need is to bank upon him ad leave the rest on him. This is automated investment in which a stock broker deals with your capital investments on your behalf so as to assure positive returns.

f) With the help of online stock brokers, you can contact them easily and most quickly. With the online facility, you can have access to your broker 24/7/365.

Read more: https://bizcovering.com/investing/role-of-a-stock-broker/#ixzz12PWK9BRC

A stockbroker is a professional who buys and sells shares and other listed securities through the book at those responsible for equity investors. As the law passed in the United States has the general representation of securities examination or the Series 7 exam for working as a stockbroker. Brokers providing various services to their customers.

Execution only – this service, only the broker market in the direction of investors. This is the basic and most frequent use of mediators.

Advisory – In this service the broker not only buy and sell client’s instructions recommend, but to buy the investor in the stock market and sell the shares.

Discretionary use – This is the most complete service, a broker provides. In this case, the broker’s discretion for investment decisions of the investor must take.

These are the basic services provided by stock brokers are available and completely dependent on what services you are writing to you. For example, if you have a simple analysis of the cattle market can and regularly on events and stock market shares in which you invest, you should observe the brokers have no buying and selling done by one instruction. It will save not only the costs of service, but also to give full confidence in the stock market.

If you’re relatively new equity investments, or if they have sufficient knowledge of equities analysis, or do not have the time or resources to do thorough research on the stock market, the board is more effective for you. It will bring not only your sales management but also with effective tips and guidance for the market equity investments. Although it is a bit ‘more expensive, but can significantly gain from the technical knowledge and experience of brokers and its research and analysis team.

The full-service broker is the preferred solution for those who do not have the time or knowledge of their portfolio. In this case, the broker makes all the decisions to invest in the stock market. This is the most expensive Broking Service, but then you do not need to waste time on your stock market investments.

Exactly how different kinds Service Broker There are several categories of securities intermediaries as well. While choosing your broker, it is advisable to ensure the well-known companies such as trading stocks That You earn ITS solid infrastructure, analysis and experience to select the stock market. This also applies when choosing your business online trading, online trading is the implementation in your name.

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Role of an Indian Stock Broker

In India, stock exchanges were almost self regulatory till 1988,

supervised by Ministry of Finance under the Securities Contracts

Regulation Act (SCRA). However, the stock exchanges

were not discharging their self-regulatory role as well as a result

of which malpractices crept into trading, adversely affecting

investor’s interests. SEBI has been setup to ensure that the

stock exchanges discharge their self-regulatory role properly.

Ever since SEBI began to monitor brokers, stock broking is

emerging as a professional advisory service, in tune with the

requirements of a mature, sophisticated, screen based, ring-less,

automated stock exchanges in the country in sharp contrast to

traditional, closed character as inherited family business.

So we will discuss, the Indian Stock Broking system here. The

stock broking activity consists of various intermediaries. Let us

discuss them one by one.

Stock Brokers

Stockbroker is a member of a recognized stock exchange who

buys, sells or deals in securities. To work as a stockbroker

registration with SEBI is mandatory. SEBI is empowered to

impose conditions while granting the certificate of registration.

Registration : A broker seeking registration with SEBI, has to

apply through the stock exchange of which he is member. For

registering SEBI checks – eligibility of the applicant to become

the member of stock exchange, has the necessary infrastructure

to effectively discharge his duties, past experience etc.

Every registered stockbroker is required to pay annual fee @ Rs.

5,000 for turn over up to Rs. 1 crore and 0.01% of turnover

exceeding Rs. 1 crore. For calculating turnover underwriting and

collection of deposits are not taken into account for the

purpose of calculating the turnover. The authenticity of the

annual turnover is to be certified by the stock exchange concerned.

Capital adequacy norms for brokers : An absolute minimum

of Rs. 5 lakh as a deposit with the exchange is to be maintained

by the members of the BSE & CSE and Rs. 3.5 lakh for DSE

and ASE irrespective of volume of business. In case of other

SE the minimum requirement is Rs. 2 lakhs. The security

deposit kept by the members in the SE forms part of the base

minimum capital; 25% of the base minimum capital is to be

maintained in case with the exchange. Another 25% remains in

the form of a long term fixed deposit with a bank on which the

SE is given free lien. The remaining requirement is being

maintained in the form of securities with a 30% margin. The

securities should be in the name of the member and are

pledged in favor of SE.

Additional capital related to Volume of Business : The

additional or optional capital required from a member should,

at any point of time, be such that together with the base

minimum capital it is not less than 8% of the gross outstanding

business in the exchange defined as the aggregate of

up-to-date sales and purchases by a member broker in all the

securities put together.

Duty to the Investor : The duties of a broker to the investor

are

i. He should be faithful to the clients in his dealings with

them and execute orders as per the instructions.

ii. He should issue to his clients a contract note without any

delay for all transactions in the form specified by the SE.

iii. To avoid breach of trust, he should not disclose or discuss

with any other person details of investment and transaction

of clients.

iv. He should not mislead clients merely to generate business.

v. He should avoid dealing with a client who is a defaulter in

his dealings with other brokers.

vi. When dealing with a client, he is required to disclose

whether he is acting as a principal or as an agent.

vii. He should not give investment advice to any client unless

sought by him.

viii. A stockbroker should have adequately trained staff and

arrangements to render fair, prompt and competent services

to his clients.

ix. He should extend full cooperation to other brokers in

protecting the interest of his clients regarding their rights to

dividends, bonus shares, rights issues and any other rights

related to such securities.

Sub Brokers

A sub-broker acts on behalf of a stockbroker as an agent or

otherwise for assisting investors in buying, selling or dealing in

securities through such brokers but he is not a member of a

stock exchange. To act as a sub-broker, registration with SEBI is

required. It grants a certificate of registration to a sub-broker

subject to the conditions that (a) he has to pay the prescribed

fee, (b) he takes adequate steps for redressal of investor

grievances within one month of the receipt of the complaint

and keeps SEBI informed about the number, nature and other

particulars of the complaints (c) he is authorized in writing by a

broker for affiliation in buying, selling or dealing in securities.

Registration of Sub-brokers : According to SEBI regulations

currently in force, a sub-broker is required to submit along with

the application (a) recommendation from a stockbroker with

whom he will be affiliated and (b) two references, including one

from his banker. The individual applicant should not be less

than 21 years of age, has not been convicted in any offence

involving fraud or dishonesty and has passed the equivalent of

at least 12th standard from a recognized institution.

The annual fee payable by a sub-broker is Rs. 1000 for an initial

period of five years. After the expiry of five years, an annual fee

of Rs. 500 is payable as long as the certificate remains in force.

Duty to the investors : A sub-broker, in his dealings with the

clients and the general investing public, should faithfully execute

the orders for buying and selling of securities at the best

available market price and promptly inform his clients about the

execution of an order and make payment in respect of securities

sold and arrange for prompt delivery of securities purchased.

He should issue promptly to his clients (a) purchase or sale

notes for all the transactions entered into by him with his

clients, or through the principal broker (b) scrip-wise details. He

should not furnish misleading information to his clients to

generate business. He should not recommend his clients any

scrip / security unless the client has asked for the advice.

Foreign Brokers

Foreign institutional investors (FIIs) now play a significant role

in the stock markets. With a view to helping the FIIs to follow

the procedures and encourage them to invest in India, SEBI has

issued a different set of guidelines:

Registration with SEBI : It is mandatory for a foreign broker

to get registered with SEBI in order to do business in India.

While applying for registration, a foreign broker has to disclose

to SEBI name(s) and registration number(s) of the stock

exchanges where he is registered in the capacity of a broker

dealer together with an undertaking that he would operate and

assist only on behalf of the registered FIIs and would not deal

in securities on his own account as principal in India. On advice

from SEBI, the RBI would accord approval to him to open (a)

a foreign currency denominated bank account and a rupee

account with a designated bank branch and (b) multiple

custodian accounts with the approved custodian of all registered

FIIs whom he may be assisting or on whose behalf he

would be placing orders with a member of Indian stock

exchanges.

Transaction in Accounts : The foreign currency denominated

accounts of registered foreign brokers would be credited with

inward remittance brought in by him and inward remittance to

make initial payment against the purchase contracts on behalf

of registered FIIs. The rupee account will be credited with the

commissions / brokerages earned by him in India. Initial

payment on account of purchase contract on behalf of

registered FIIs would be made through Rupee account.

Reimbursement of this initial payment would be made by the

designated bank/custodian of the registered FII.

The brokers are allowed to freely repatriate commission/

brokerage earned in India after transferring them to the foreign

currency denominated account subject to payment of taxes on

the basis of conversion of rupees to foreign currency at the

prevailing market rates.

Source : MANAGEMENT OF FINANCIAL SERVICES

LESSON 38:

STOCK BROKING: AN INTRODUCTION AND SEBI GUIDELINES