To stop unauthorised trading practices, it has been made mandatory for the stockbrokers to record their calls with the clients, as an evidence of client placing that order.
“Further, wherever the order instructions are received from clients through the telephone, the stock broker shall mandatorily use telephone recording system to record the instructions and maintain telephone recordings as part of its records.” – SEBI
Evidence of such orders can also be kept in the form of physical record written and signed by the client, email from authorized email ID, logs of internet transactions, SMS logs or any other legally verifiable record.
“When dispute arises, the burden of proof will be on the broker to produce the above records for the disputed trades.” SEBI said in a notification.
This rule will come into effect from 1st January 2018. Earlier, this rule was proposed by SEBI in 2013 but was deferred due to opposition by brokerage associations.
Currently, the regulatory requirements in commodity derivative markets require the brokers to execute the trade only after keeping a proof of the trader placing such order in the form of sound recording. Now, this has been made mandatory for stockbrokers as well, due to considerable proportion of investor complaints about ‘unauthorised trades’ on their account without proper information by their brokers.
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