𝐅𝐮𝐭𝐮𝐫𝐞 𝐨𝐟 𝐥𝐨𝐚𝐧𝐬 𝐚𝐧𝐝 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬 𝐦𝐚𝐝𝐞 𝐛𝐲 𝐒𝐄𝐁𝐈 𝐫𝐞𝐠𝐢𝐬𝐭𝐞𝐫𝐞𝐝 𝐬𝐭𝐨𝐜𝐤𝐛𝐫𝐨𝐤𝐞𝐫𝐬

We are pleased to share that Mr. Kavish Garach, Senior Associate a/w Mr. Sumit Agrawal, Partner and former SEBI Officer have recently authored an article “𝘉𝘢𝘭𝘢𝘯𝘤𝘪𝘯𝘨 𝘈𝘤𝘵: 𝘗𝘳𝘰𝘱𝘰𝘴𝘦𝘥 𝘙𝘦𝘷𝘪𝘴𝘪𝘰𝘯𝘴 𝘵𝘰 8(1)(𝘍) / 8(3)(𝘍) 𝘢𝘯𝘥 𝘵𝘩𝘦 𝘍𝘶𝘵𝘶𝘳𝘦 𝘰𝘧 𝘚𝘵𝘰𝘤𝘬 𝘉𝘳𝘰𝘬𝘦𝘳 𝘐𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴” on Taxmann Publications / SEBI and Corporate Laws Journal.

This article deep dives into the history and intricate interpretation and application of Rule 8(3)(f) of Securities Contracts (Regulation) Rules, 1957 (SCRR) over the years by SEBI, stock exchanges and the Securities Appellate Tribunal. This rule stipulates that a member of a recognized stock exchange must not engage in any business other than that of securities or commodity derivatives, except as a broker or agent not involving any personal financial liability. Through a detailed examination of legal provisions, regulatory directives, and judicial precedents, the article aims to unravel the complexities surrounding Rule 8(3)(f) and its implications for market participants and regulatory authorities for a broader understanding of the regulatory framework.

Rule 8 of the SCRR sets out the criteria for admission of brokers [𝘙𝘶𝘭𝘦 8(1)(𝘧)] and continuation of membership of brokers [𝘙𝘶𝘭𝘦 8(3)(𝘧)] in recognized stock exchanges.

The Indian Ministry of Finance has also raised concerns on SEBI‘s circular and implementation by NSE India and BSEIndia, arguing that the circular was issued without due consultation and effectively expanded the scope of Rule 8(3)(f) beyond its legislative intent.

Further, the article also analyses the consultation paper dated September 10, 2024 of Department Of Economic Affairs, Government Of India seeking amendment to Rule 8(1)(f) and 8(3)(f) and pointing out the practical difficulties faced by the brokers and also need for further clarifications due to the ambiguity in the definition of ‘investments’, unclear financial liability criteria and inconsistencies with judicial precedents.

A copy of the article published on Taxmann Publications is enclosed.

Any feedback or comment to Regstreet Law Advisors is welcome at info@regstreetlaw.com.

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