TaxTMI 
TaxTMI 
TaxTMI 
Enhanced obligations and responsibilities on Qualified Stock Brokers (QSBs)
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich is leading to concentration of activity among few stock brokers. Such stock brokers cater to the needs of large number of investors and therefore, it is imperative for such stock brokers, inter-alia, to adhere to the regulatory guidelines, provide satisfactory services to investors and resolve investor complaints. The failure of such stock brokers has the potential to cause disruption in the services they provide to large number of investors causing widespread impact in the securities market. 4. Hence, in order to further strengthen the compliance and monitoring requirements relating to stock brokers and to ensure efficient functioning of securities market, SEBI, vide Gazette Notification dated January 17, 2023, amended the SEBI (Stock Broker) Regulations, 1992 for designating certain stock brokers, having regard to their size and scale of operations, likely impact on investors and securities market, as well as governance and service standards, as Qualified Stock Brokers (QSBs), on the basis of certain parameters and appropriate weightages thereon. 5. The stock broker designated as a QSB shall be required to meet enhanced obligations and discharge responsibilities to ensure a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a) compliance score of the stock broker; b) grievance redressal score of the stock broker; and c) the proprietary trading volumes of the stock broker. 7.5. The scores shall be calculated on annual basis (financial year) and the revised list of QSBs shall be released jointly by stock exchanges, in consultation with SEBI. 7.6. The QSBs which no longer belong to the revised list, shall continue to comply with the enhanced obligations and responsibilities, for an additional period of 3 financial years or such time, as may be specified by SEBI/stock exchanges. 8. Enhanced obligations and responsibilities for QSBs: 8.1. Governance structure and processes: 8.1.1. The Board of Directors (BoD) or analogous body of QSBs shall exercise oversight over incidents/vulnerabilities having an impact on functioning of the QSB in the securities market and investor protection including data security breaches that can affect investor data. 8.1.2. Further, QSBs shall have committees of the Board of Directors (BoD) or analogous body such as Audit Committee (for listed QSBs), Nomination and Remuneration Committee, Risk Management Committee, Information Technology (IT) Committee, Cybersecurity ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....revent recurrence of such risks; b) enable early identification and prevention of risk; c) assess the likely impact of a probable risk event on various aspects of the functioning of the QSB such as impact on investors, financial loss to the QSB, impact on other stakeholders in the market, reputational loss etc. and lay down measures to minimize the impact of such event and d) assign accountability and responsibility of Key Managerial Personnel (KMP) in the organization. Surveillance of client behaviour: 8.2.3. The risk management framework shall have measures for carrying out surveillance of client behaviour through analyzing the pattern of trading done by clients, detection of any unusual activity being done by such clients, reporting the same to stock exchanges and taking necessary measures to prevent any kind of fraudulent activity in the market in terms of the regulatory requirements prescribed by SEBI and MIIs. Ensuring Integrity of Operations: 8.2.4. QSBs shall maintain adequate human resources, systems, processes and procedures for seamless running of operations and protection of investor data. 8.2.5. The staff of the QSBs shall be given the necessary resources ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... taking approval of the stock exchanges; and d) Preventing any significant impact on the market and inconvenience to the investors. 8.4.2. In case of wind down which may happen due to regulatory action, erosion of networth of the QSB etc., such wind down of operations of the QSB will be implemented under the supervision of the stock exchange. 8.5. Robust cyber security framework and processes: 8.5.1. Digitalization and online platforms have given rise to need for effective mitigation of information and cyber risks. SEBI, has specified the framework on cybersecurity and cyber resilience to be followed by all stock brokers. 8.5.2. However, QSBs handle sensitive data of a large number of the investors in the securities market and any cyber-attack on the systems of a QSB can compromise the confidentiality and integrity of such data. 8.5.3. Hence, QSBs shall have additional features in their cyber security framework which would be commensurate with the amount of data handled by them. The cyber security committee of the QSB shall review the framework on half-yearly basis and review the instances of cyber-attacks, if any, and take steps to strengthen the cyber security framework o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on half-yearly basis, in order to conduct an in-depth evaluation of the security posture of the system through simulations of actual attacks on its systems and networks that are exposed to the internet. Business Continuity Plan: 8.5.10. QSB shall put in place a comprehensive Business Continuity Plan (BCP) and such policy shall be reviewed on half-yearly basis to minimize the incidents affecting the business continuity. 8.5.11. QSB shall develop and document mechanisms and standard operating procedures to recover from the cyber-attacks within the stipulated Recovery Time Objective (RTO) of the QSB, various scenarios and standard operating procedures for resuming operations from Disaster Recovery (DR) site of QSB. 8.5.12. The CISO of the QSB shall review the implementation of the BCP and SOP on DR on monthly basis and submit a report to the board of QSBs. 8.5.13. All the provisions applicable to specified stock brokers (as stated in SEBI circular SEBI/HO/MIRSD/TPD-1/P/CIR/2022/160 dated November 25, 2022 regarding Framework to address the 'technical glitches' in Stock Brokers' Electronic Trading Systems) shall also be applicable to the QSBs. Periodic Audit 8.5.14. QSBs shall....