SEBI proposes tighter sales practices

India's markets regulator has proposed tightening sales practices by market intermediaries and barred traders from executing transactions that are not explicitly authorised by their clients.
The Securities and Exchange Board of India has proposed that traders not recommend transactions which may be unsuitable, based on clients' financial status and risk appetite, it said in a draft circular on its Web site.
It has also asked traders to ensure their clients are made aware of the nature and risk of the transaction, and have sufficient net worth to bear potential losses.
SEBI has also proposed setting a minimum net worth before allowing clients to trade in derivatives. A net worth certificate from a chartered accountant or income-tax return can be accepted for this purpose, it said.
It has also plans to ask traders not to execute transactions on their own account, before making recommendations on these to clients.
"Procedurally, these could create a lot of hassles. It may just make brokers cautious about the business and not push derivative products to clients," said T. S Harihar, vice-president, derivatives at Karvy Stock Broking.
Thanks to (Reuters)


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