New Delhi: A group of BSE brokers has opposed regulator Sebi's move of raising entry bar by mandating higher financial parameters on market intermediaries, saying it will lead to indirect cartelisation and weed out smaller players.
In a letter written to Securities and Exchange Board of India (Sebi), the BSE Brokers Forum has requested the regulator to consider its view before arriving at the final decision as it would have wider repercussion on the intermediaries.
"This issue had come up for discussion on a few occasions in the past during our interactions with Sebi and exchanges. However, according to our information, no substantive discussions were held so far among all the stakeholders, and a final decision was not arrived at," the letter noted.
"As this issue is having a wider repercussion on the intermediaries, the forum has requested Sebi to consider its viewpoint before arriving at a final decision."
Increasing the entry bar by levying higher financial parameters on stock brokers is "a conspiracy of indirect cartelisation by a select few" and which may not necessarily be in the interest of investors, who will be left with limited choice, Siddharth Shah, chairman of the forum, reasoned.
Echoing his point, Alok Churiwala, vice-chairman, said the rationale that higher net worth is required against brokers misusing clients' fund is "nothing but a scheme to eliminate marginal players".
"The forum is entirely with the capital markets regulator for the strictest action against any manipulation with any broker -be it big or small, proprietary or institutional for misuse of clients' funds," he said.
"But eliminating competition by raising entry norms would go against the grain of vibrant capital market."
Currently, the minimum net worth for brokers varies between Rs 25 lakh and Rs 3 crore. In 2014, the regulator had raised the minimum net worth requirement for asset management companies to Rs 50 crore, from the Rs 10 crore earlier. They have been given three years to comply with this.