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CS Executive · Capital Market and Securities Laws · Securities Market Intermediaries

Meridian Securities Pvt Ltd wishes to start dealing in securities as a stock-broker on an Indian exchange, but has not yet applied to SEBI. Under the SEBI Act, 1992, what is the legal position?

A stock-broker cannot buy, sell or deal in securities without a certificate of registration from SEBI. Section 12(1) of the SEBI Act requires registration under SEBI regulations. The three-month grace applied only to those already operating when SEBI was established, so a new entrant cannot use it.

  1. AIt may deal freely until SEBI issues a notice of default
  2. BIt may deal only if the stock exchange permits, even without SEBI registration
  3. CIt may deal for three months after incorporation without registration
  4. DIt cannot buy, sell or deal in securities except under a certificate of registration obtained from SEBICorrect

Explanation

Section 12(1) bars a stock-broker from buying, selling or dealing in securities except under, and in accordance with, a certificate of registration from the Board. The three-month window in the proviso applied only to persons operating at the time SEBI was established, not to new entrants. Exchange permission cannot replace SEBI registration.

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