Registration, role & functions of Stock brokers and sub-brokers are governed by SEBI (STOCK BROKERS AND SUB-BROKERS) RULES, 1992.The aforesaid regulations defines respectively that

• "stock broker" means a member of a stock exchange;

• "sub-broker" means any person not being a member of a stock exchange who acts on behalf of a stock-broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock-brokers;

No stock-broker or sub-broker shall buy, sell, deal in securities, unless he holds a certificate granted by the Board under the regulations.

To be eligible for grant of such a registration a Stock Broker-

1. he holds the membership of any stock exchange;

2. he shall abide by the rules, regulations and bye-laws of the stock exchange or stock exchanges of which he is a member;

3. in case of any change in the status and constitution, the stock broker shall obtain prior permission of the Board to continue to buy, sell or deal in securities in any stock exchange;

4. he shall pay the amount of fees for registration in the manner provided in the regulations; and

5. he shall take adequate steps for redressal of grievances of the investors within one month of the date of the receipt of the complaint and keep the Board informed about the number, nature and other particulars of the complaints received from such investors.

The Board shall take into account for considering the grant of a certificate all matters relating to buying, selling, or dealing in securities and in particular the following, namely, whether the stock broker

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

2. has the necessary infrastructure like adequate office space, equipments and man power to effectively discharge his activities;

3. has any past experience in the business of buying, selling or dealing in securities;

4. is subjected to disciplinary proceedings under the rules, regulations and bye-laws of a stock exchange with respect to his business as a stock-broker involving either himself or any of his partners, directors or employees;

5. is a fit and proper person

Every stock-broker shall keep and maintain the following books of accounts, records and documents namely; -

1. Register of transactions (Sauda Book);

2. Clients ledger;

3. General ledger;

4. Journals;

5. Cash book;

6. Bank pass book;

7. Documents register should include particulars of shares and securities received and delivered;

8. Members' contract books showing details of all contracts entered into by him with other members of the same exchange or counterfoils or duplicates of memos of confirmation issued to such other member;

9. Counterfoils or duplicates of contract notes issued to clients;

10. Written consent of clients in respect of contracts entered into as principals;

11. Margin deposit book;

12. Registers of accounts of sub- brokers;

13. an agreement with a sub- broker specifying the scope of authority and responsibilities of the Stock-Broker and such sub- broker.

Where it appears to the Board so to do, it may appoint one or more persons as inspecting authority to undertake inspection of the books of accounts, other records and documents of the stock- brokers

The stock-broker holding a certificate shall at all times abide by the Code of Conduct as specified hereunder.

1. Integrity:
   A stock-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business.

2. Exercise Of Due Skill And Care: A stock-broker, shall act with due skill, care and diligence in the conduct of all his business.

3. Manipulation:
   A stock-broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains.

4. Malpractices:
   A stock-broker shall not create false market either singly or in concert with others or indulge in any act detrimental to the investors interest or which leads to interference with the fair and smooth functioning of the market. A stock-broker shall not involve himself in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness.

5. Compliance With Statutory Requirements:
   A stock-broker shall abide by all the provisions of the Act and the rules, regulations issued by the Government, the Board and the stock exchange from time to time as may be applicable to him.

1. Execution Of Orders:
   A stock-broker, in his dealings with the clients and the general investing public, shall faithfully execute the orders for buying and selling of securities at the best available market price and not refuse to deal with a Small Investor merely on the ground of the volume of business involved. A stock-broker shall promptly inform his client about the execution or non-execution of an order, and make prompt payment in respect of securities sold and arrange for prompt delivery of securities purchased by clients.

2. Issue Of Contract Note:
   A stock-broker shall issue without delay to his client a contract note for all transactions in the form specified by the stock exchange.

3. Breach Of Trus: A stock-broker shall not disclose or discuss with any other person or make improper use of the details of personal investments and other information of a confidential nature of the client which he comes to know in his business relationship.

4. Business And Commission:

   1. A stock-broker shall not encourage sales or purchases of securities with the sole object of generating brokerage or commission.

   2. A stock-broker shall not furnish false or misleading quotations or give any other false or misleading advice or information to the clients with a view of inducing him to do business in particular securities and enabling himself to earn brokerage or commission thereby.

5. Business Of Defaulting Client:
   A stock-broker shall not deal or transact business knowingly, directly or indirectly or execute an order for a client who has failed to carry out his commitments in relation to securities with another stock-broker.

6. Fairness To Clients:
   A stock-broker, when dealing with a client, shall disclose whether he is acting as a principal or as an agent and shall ensure at the same time, that no conflict of interest arises between him and the client. In the event of a conflict of interest, he shall inform the client accordingly and shall not seek to gain a direct or indirect personal advantage from the situation and shall not consider clients' interest inferior to his own.

7. Investment Advice:
   A stock-broker shall not make a recommendation to any client who might be expected to rely thereon to acquire, dispose of, retain any securities unless he has reasonable grounds for believing that the recommendation is suitable for such a client upon the basis of the facts, if disclosed by such a client as to his own security holdings, financial situation and objectives of such investment. The stock-broker should seek such information from clients, wherever he feels it is appropriate to do so.

   (7A) Investment Advice in publicly accessible medi -

   1. A stock broker or any of his employees shall not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real - time or non real-time, unless a disclosure of his interest including the interest of his dependent family members and the employer including their long or short position in the said security has been made, while rendering such advice.

   2. In case, an employee of the stock broker is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice.

8. Competence Of Stock Broker:
   A stock-broker should have adequately trained staff and arrangements to render fair, prompt and competent services to his clients.

1. Conduct Of Dealings: A stock-broker shall co-operate with the other contracting party in comparing unmatched transactions. A stock-broker shall not knowingly and wilfully deliver documents which constitute bad delivery and shall co-operate with other contracting party for prompt replacement of documents which are declared as bad delivery.

2. Protection Of Clients Interests:
   A stock-broker shall extend fullest co-operation to other stock-brokers in protecting the interests of his clients regarding their rights to dividends, bonus shares, right shares and any other right related to such securities.

3. Transactions With Stock-Brokers:
   A stock-broker shall carry out his transactions with other stock-brokers and shall comply with his obligations in completing the settlement of transactions with them.

4. Advertisement And Publicity:
   A stock-broker shall not advertise his business publicly unless permitted by the stock exchange.

5. Inducement Of Clients:
   A stock-broker shall not resort to unfair means of inducing clients from other stock- brokers.

6. False Or Misleading Returns
   A stock-broker shall not neglect or fail or refuse to submit the required returns and not make any false or misleading statement on any returns required to be submitted to the Board and the stock exchange.