Stock Broker Should Obtain A Certificate Of Registration From SEBI For Each Of The Stock Exchange Where He Operates : Supreme Court

The Supreme Court held that a stock broker should obtain a certificate of registration from SEBI for each of the stock exchange where he operates.

The bench of Justices Ajay Rastogi and BV Nagarathna disagreed with the Delhi High Court judgment that a single registration with Securities and Exchange Board of India( "SEBI") is sufficient even if the stock broker has various memberships and functions from several stock exchanges.

Securities and Exchange Board of India had approached the Apex Court challenging the judgment of the Delhi High Court. The following issues were raised in the appeal (i) Whether under the Act 1992, a stock broker has to obtain a certificate of registration from SEBI for each of the stock exchanges where he operates or whether a single certificate of registration from SEBI is sufficient and the same would enable him to trade in all other stock exchanges? (1)Whether the ad valorem fee to be paid for an initial period of five years will recur with every such registration?

Section 12 of the SEBI Act deals with the Registration of stock brokers, sub-brokers, share transfer agents, etc. It reads as follows: (1) No stock broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to 17 an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market shall buy, sell or deal in securities except under, and in accordance with the conditions of a certificate of registration obtained from the Board in accordance with the (regulations) made under the Act.

SEBI contended that the High Court was primarily influenced by the expression 'a certificate' in Section 12. It was contended that the same term can be used for singular or plural expression and the High Court has completely overlooked the scheme of Regulations, 1992. Agreeing with this contention, the bench observed:

"The High Court, in our view, appears to be influenced by the expression 'a certificate of registration' referred to under Section 12(1) of the Act, 1992 but has failed to notice that the 32 expression 'a certificate' is not in reference to any number and it can be considered that the words in the singular shall include plural as well, and has failed to notice that certificate of registration has to be obtained from the Board in accordance with the regulations framed in exercise of power under Section 30 of the Act 1992...

Thus, in our considered view, the conjoint reading of the expression "a certificate" as referred to in Section 12(1) of the Act read with the scheme of Rules, 1992 and Regulations 1992, leads to an inevitable conclusion that the stock broker not only has to obtain a certificate of registration from SEBI for each of  the stock exchange where he operates, at the same time, has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Regulations, 1992 in reference to each certificate of registration from SEBI in terms of the computation prescribed under Circular dated 28th March, 2002 and fee is to be paid as a guiding principle by the stock broker which is in conformity with the scheme of Regulations 1992."

Case details

Securities and Exchange Board of India vs National Stock Exchange Members Association | 2022 LiveLaw (SC) 840 | CA 435 OF 2007 | 13 October 2022 | Justices Ajay Rastogi and BV Nagarathna

Headnotes

Securities and Exchange Board of India Act, 1992 ; Section 12(1) - Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 - Stock broker not only has to obtain a certificate of registration from SEBI for each of the stock exchange where he operates, at the same time, has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Regulations, 1992 in reference to each certificate of registration from SEBI in terms of the computation prescribed under Circular dated 28th March, 2002 and fee is to be paid as a guiding principle by the stock broker which is in conformity with the scheme of Regulations 1992 - After the expiry of five financial years from the date of initial registration, in reference to the stock exchange, the fee has to be deposited for the purpose of sixth financial year to keep his registration in force. (Para 47-48)

Interpretation of Statutes - Purposive Construction - A statute has to be construed according to the intent that makes it and it is always the duty of the Court to act upon the true intention of the legislature. If a statutory provision is open to more than one interpretation, it is always desirable of the Court to choose the interpretation which represents the true intention of the legislature. (Para 43-46)

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