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Sebi tells brokers to pay up fees

BS Markets Bureau

After more than a year, the issue of turnover tax by brokers to the Securities and Exchange Board of India - which was settled by the Supreme Court in favour of the market regulator - is likely to rock the market once again.

In a circular that includes clarifications on certain contentious areas, Sebi has issued a directive to all stock exchanges and brokers to pay registration fees to the board. The markets regulator has asked brokers to pay upfront at least 50 per cent of the fees payable and the balance within two years, along with an interest of 15 per cent.

Brokers have also been asked to give an undertaking in the prescribed format for payment of turnover fees and furnish the details of various components of turnover as per the amended regulations duly certified by auditors and confirmed by the exchanges.

Sebi has clarified that turnover shall be computed as an aggregate of sale and purchase price of securities on own account as well as client account and has also clarified jobbing turnover.

Further, Sebi in its circular said, in case of any shortfall in fees after reconciliation, the exchanges shall advise the members concerned to remit the balance fees to Sebi immediately in case the fees paid by the member concerned is less than 50 per cent of the principal fees payable.

The exchanges will have to confirm to Sebi the correct turnover figures of all its members (including inactive and past members who were registered with Sebi) after due verification.

In case the broker holds one registration certificate and more than one card on any exchange, fees will be payable on the registration certificates and not on the number of cards.

The brokers' turnover will be the aggregate turnover of all cards, the circular said. Exempting brokers, who have converted individual or partnership membership cards into corporate entity, they shall be deemed to be in continuation of the old entity, it said.

Wherever new registration is required, whether by virtue of transmission or transfer or any other reason, fresh fees will be payable by the new entity.

Brokers are likely to agitate against the payment of interest on the delayed turnover fees since it may nearly double the liability on brokers.

Sebi should not impose penalty clause of interest payment with retrospective effect, brokers said.

Arguing that the Supreme Court had decided the matter in February 2001, and relevant guidelines were issued by Sebi in March 2002, they said the regulator should not impose interest penalty from December 1998 onwards.

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