‘Bring in securities exposure score, on the lines of CIBIL’

Market participants likely to ask the capital market regulator, the Securities and Exchange Board of India (SEBI), to promote SEBLi (Security Exposure & Borrowing Limit) for providing them with a score, or a measure, for clients having derivative exposure in the equity, currency, bonds and commodity markets on the lines of CIBIL.

CIBIL, or the Credit Information Bureau of India Ltd., provides a score that indicates the credit worthiness of an individual. This measure is a factor for lenders to determine whether or not a loan may be extended to that individual.

SEBI recently introduced a product suitability framework to ensure that individual investors have a safety net when investing in equity derivatives. As per the regulator’s decision, it made brokers responsible for verifying retail investors’ exposure to derivatives market. This has received flak from the broker community.

‘Not our business’

“As long as clients pay margin money and mark-to-market losses in time, there is little justification for brokers to investigate the income earned or tax paid by the customer,” said Alok Churiwala, MD, Churiwala Securities Pvt Ltd. “That should be the onus of the Income Tax department.” According to him, an independent body like CIBIL should be formed to check clients’ creditworthiness. “Let there be an investor exposure score provided by a qualified authority [under] the name of SEBLi,” said Deven Choksey, founder, K.R. Choksey, a leading investment firm.

He added SEBLi should be seen as an agency like CIBIL for providing the exposure score of every investor.

This will make the entire process transparent and it will also give long-term stability to the functioning of the market. Mr. Choksey said the regulator can also do away with the regulation of market-lot as every investor will have a unique score.

Mr. Churiwala, who is also former vice-chairman of BSE Brokers’ Forum said this is an onerous regulation. “Any additional burdensome regulation [has] a cost impact and this should be done by a central, external agency to avoid conflict of interest,” he added.

He added this would also break the broker-client relationship. “This will lead to illegal trades.” Already, brokers are verifying many know-your-client norms such as Aadhaar, PAN and other details. Clients would not be comfortable in disclosing all their financial details to a broker, he said.

An independent agency, like CIBIL, to look into the veracity of financial strengths of investors and traders, was an excellent idea, said Sudip Bandyopadhyay, MD and CEO, Destimoney Securities.

‘Duties more onerous’

“Progressively, the compliance cost and responsibilities on brokers are becoming rigorous and onerous, making the business unviable,” he said, adding, “Police work is not the forte of brokers and unearthing financial details of clients cannot be thrust upon them.”

Under the circumstances, if desired by SEBI, he said, an independent agency should do the job and provide the information to the brokers without any incremental cost to them.