Agenda

• Introduction about client and broker

• Types of broker
• Nature of Work
• Regulation for brokers
• Eligibility Criteria for Membership
• Conceptual framework between client and broker
• Admission Procedure for New Membership
• Role & function of brokers
• Responsibility of broker
• Worker ethics for broker
• Process of order execution
Introduction

• A stock broker is an intermediary who arranges

to buy and sell securities on the behalf of clients
(the buyer and the seller).

• According to SEBI (Stock Brokers and Sub-

Brokers) Regulations, 1992, a stockbroker is
member of a stock exchange and requires to hold
a certificate of registration from SEBI in order to
buy, sell or deal in securities.
Types of brokers

Broker

Full Service Discount Brokers

Broker

Discretionary
Advisory
Management
Full Service Broker

• Advisory

▫ Expensive

▫ Have to maintain good relationship and contact

▫ Provide financial consultant and financial advisory

services

▫ Range of products to buy E.g. bonds, MF, ETF,

CD, etc.
• Discretionary Management

▫ Expensive

▫ Have to maintain good relationship

▫ Take complete control over the investment

▫ Takes investment decision on behalf of customers

and provide only periodical statement to the
customers
Discount Brokers

▫ Low cost

▫ Only buying and selling of securities

▫ No range of services

▫ No assistance
 Nature of work

• Securities sales representatives

• Securities traders

• Securities brokers

• Securities analysts

• Broker firms
 Regulation for brokers

SEBI checks out that the applicant….

1. Is eligible to be admitted as a member of a stock exchange

2. Has the necessary infrastructure like adequate office space,

equipment and manpower to effectively discharge his activities

3. Has past experience in the business of buying, selling or securities

4. Could pay the amount of fees for registration in the prescribed

manner
 The persons eligible to become broker are:

1. Individuals;

2. Partnership firms registered under the Indian

Partnership Act, 1932;

3. Institutions, including subsidiaries of banks

engaged in financial Services;

4. Body corporate including companies as defined

in the Companies Act,1956.
 THE CONCEPTUAL FRAMEWORK
BETWEEN CLIENT AND BROKER

The broker-client conceptual framework contains two

distinct phases. The first is known as the information-
gathering phase and the latter, the formal relationship
phase.
 CLIENT - BROKER CONCEPTUAL FRAMEWORK

FORMAL
INFORMATION
TRADING
GATHERING
RELATIONSHIP
PHASE
PHASE

PRE-
MARKTEKING
RELATIONSHIP
STAGE
STAGE
PRE-RELATIONSHIP STAGE

Like other professional services, new clients

are obtained principally by referrals
or recommendations from an existing client or
by personal initiation or networking. This
stage is also described as the pre-relationship
phase.
MARKTEKING STAGE
This stage can appear very informal, and the
prospective client organisation is referred to as a
‘prospect’. The initial programme design is
discussed with the prospect. Factors include
business type, size of the organisation and its
risk profile. The ‘prospect’ financial and
operational information's are reviewed.
Amongst these information are gross profit,
turnover and wage roll projections.
FORMAL TRADING RELATIONSHIP STAGE
The formal relationship is seen to commence at
this stage. This is termed "the development
stage." The development stage includes the time
period of the first two to six months of the
developing relationship between the insurance
broker and its respective client. Here the broker
is given specific instructions to proceed with the
tendered proposal and it is at this point that any
indicative changes to the programme and
premium financing arrangements are agreed.
Admission procedure for new membership
 Roles & functions of broker

• Main roles broker perform

▫ Buying and selling of shares and other securities

▫ Providing advisory services

▫ Provide margin

▫ Brokering other securities

• Broker-Clients function

• Client Registration Documents

 Co-Contract documents

 Know Your Client (KYC) document

 Member Constituent Agreement (MCA) document

• Contract note

• Unique Client Code (UCC) allotment

• Segregation of Bank Accounts

• Segregation of DEMAT (Beneficiary) Accounts

 Responsibility of broker

• Security

• Transaction Cost

• Deposit and Withdrawal

• Trading Platform

• Customer Service

• News about market

 Worker ethics for broker

• Duty of Fair Dealing

• Duty of Best Execution

• Customer Confirmation

• Restrictions on Insider Trading

• Duty of Loyalty

• Authorization for Trading

 Process of order execution
Stock exchange

Broker

Client

DMAT of
Pull account of broker
investor
Quiz – Time
Q. Broker acts as Advisor.

A. True.

Q. It is possible that a broker can trade on behalf

of the customer without customer’s consent.

A. False.
Q. SEBI provides a certificate of registration to the
Trading Members of NSE .

A. True

Q. Client refers to Issuer only.

A. False.

Q. An individual cannot become a broker, only a

firm can.

A. False.
Thank you