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SEBI targets black money

Concerned over inadequate checks on the possible flow of black money into stocks, market regulator Securities and Exchange Board of India (SEBI) has asked brokers to get income details — such as tax returns, salary slips and bank account statements — of investors, not once but every year.

business Updated: Aug 23, 2010 01:12 IST

Concerned over inadequate checks on the possible flow of black money into stocks, market regulator Securities and Exchange Board of India (SEBI) has asked brokers to get income details — such as tax returns, salary slips and bank

Constant vigil

As a first measure, SEBI has asked brokers to bar traders and investors, who do not furnish adequate proof of the source of their funds, from trading in the derivatives market.

Members will be required to collect documentary proof of income from clients, such as Form 16 for salary income, net worth certificate, salary slips, bank account statements for six months etc.

The first move has been made for the derivatives market as the trading volume and turnover is much higher in this segment as compared to the cash market, sources said.

account statements — of investors, not once but every year.

To begin with, SEBI has asked brokers to bar traders and investors, who do not furnish adequate proof of the source of their funds, from trading in the derivatives market.

Sources said the direction would be soon extended to the cash market segment also.

To seek a speedy and more effective compliance from the brokers, SEBI has also directed the stock exchanges to enforce the new requirements.

Sources said SEBI might consider asking the bourses to put a mechanism in place through which the non-compliant brokers and clients could be denied access to the market.

As per a circular from Bombay Stock Exchange to its member brokers, "In respect of clients trading in derivative segments, the member shall collect documentary evidence for financial information."

"The illustrative list of documents to be collected from the clients includes copies of Income Tax Return (ITR) acknowledgement, annual accounts (for institutional clients), Form 16 for salary income, net worth certificate, salary slips, bank account statements for six months, demat account holding statements and asset ownership certificates," it said.

Besides getting these documents at the time of opening an account for the client, the brokers have also been asked to collect fresh documents every year to update financial information.

The first move has been made for the derivatives market as the trading volume and turnover is much higher in this segment as compared to the cash market, sources said.