Stockbrokers Must Obtain SEBI Registration And Pay Fee For Every Stock Exchange – Supreme Court

07 May 2024 8:19 AM

By: Admin

On dated 20th March 2023, Supreme Court in a recent Judgement GPSK CAPITAL PRIVATE LIMITED Vs. SEBI, held that a stockbroker not only has to obtain a certificate of registration from SEBI for each of the stock exchanges where he operates but also has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Regulations, 1992 in reference to each certificate of registration.

an appeal filed under Section 15(Z) of the Securities and Exchange Board of India Act, 1992. The appellant company, Mantri Finance Ltd., had claimed exemption from payment of fees for the period for which its erstwhile individual member, Srikant Mantri, had paid fees to the Securities and Exchange Board of India (SEBI). The SEBI had rejected the claim, stating that the appellant did not satisfy the conditions of clause (4) of Schedule III of the SEBI (Stockbrokers and Sub-Brokers) Regulations, 1992. The Securities Appellate Tribunal affirmed the SEBI's order, and the appellant filed an appeal against it. The appeal involved two issues: whether a single registration with SEBI is sufficient for a stockbroker to operate on multiple stock exchanges, and whether the appellant is entitled to fee continuity benefits provided under para 4 of Schedule III. The Tribunal held that a single registration with SEBI is sufficient, but the appellant failed to satisfy the conditions of clause (4) of Schedule III and was not eligible to claim exemption from payment of fees. Both the appellant company and the SEBI filed appeals against the Tribunal's judgment.

Observed and Held

Supreme Court referred to a previous judgment in Securities and Exchange Board of India Vs. National Stock Exchange Members Association and Another, which dealt with the issue of whether a stock broker requires multiple registrations to operate on more than one stock exchange or a single registration will suffice for all the stock exchanges. In which it has been held that a stockbroker not only has to obtain a certificate of registration from SEBI for each of the stock exchanges where he operates but also has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Regulations, 1992 in reference to each certificate of registration.

Supreme Court observed that the issue at hand was whether the appellant company was entitled to fee continuity benefits under Para 4 of Schedule III of the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992. The court noted that the regulation provided an exemption from paying fees for a corporate entity formed by converting an individual or partnership membership card of an exchange, subject to certain conditions.

The court found that the appellant company had failed to fulfill the conditions mentioned in Para 4 of Schedule III, as Srikant Mantri, the person who transferred his membership card to the company, was not a whole-time director but only a director at the time of the transfer. Additionally, the exact date on which he acquired 40% shareholding in the company was not clear. The company was also unable to demonstrate that it had fulfilled the conditions of Para 4 of Schedule III.

As a result, the Supreme Court held that the appeal had no merit and was dismissed without costs.

GPSK CAPITAL PRIVATE LIMITED Vs. SEBI