M B Parikh Finstock Ltd Management Discussions.

Business of Brokerage is over-regulated and is subject to a large number of Compliances, which no doubt, protect the interests of investors, as well as, its own interest. Fact Sheet of Compliance requirements reveal.

i. Despatch of contract notes to the clients within 24 hours of trade done.

ii. Transfer of funds/securities to the clients within 24 hours of pay out of fund/securities.

iii. Daily margin reports to Exchanges/clients.

iv Daily confirmation of trades by the Stock Exchanges directly to investors by SMS and E-Mail.

v Sending scanned copies of all Delivery Instruction Slips (DIS) to the Depositories on daily basis.

vi. Recording of clients telephonic orders by trading Members.

vii. Client funding/margin funding reports submitted to NSE/BSE on monthfy basis.

viii. Despatch of demat holding statements to clients by Directing and Depositories. NSDL & CDSL.

ix. Monthly Account statements to clients.

x. Monthly investor grievance report by DP to the Depositories.

xi. Quarterly settlement of funds and Securities of clients.

xii. Half-yearly Internal Audit Report to Exchanges and Depositories.

xiii. Half-yearly Net Worth statements to Exchanges and Depositories.

xiv Annual System Audit Report to Exchanges.

xv Half-yearly Risk Based Supervision Report to Exchanges.

xvi. Annual Returns to Exchanges.

xvii. Inspection by Stock Exchanges, Depositories and SEBI.

It is generally argued that SEBIs apprehension is mainly due to following two counts.

(i) Mis-use of Clients Money

(ii) Mis-use of Clients Securities

We believe that SEBI can act really fast on receipts of investors complaints as that is the stage where problem is first identified. But at the same time, investor is not soft-target to be cheated. Also investors got ample information by way of SMS, E-mail, Alert message from Banker and telephone call on real time basis horn brokers, Exchange and/or Depositors.

The question is can SEBI or Exchange guarantee that there will not be a single case of fraud on investors after such grilling compliances/enhanced supervision?

Is itnot that the present regulations and amendments/additions thereto are counter to PM Modys push for "Ease of Doing Business". This will become a huge determent to the new players and send wrong signals to the Global financial fraternity. Perhaps that is why a number of small brokers are pulling down die shutters.

The industry is facing

(i) Non-Viability of their operations.

(ii) Too many compliances.

(iii) Scared of too many and too high penalties.

(iv) The fear of unknown.

(v) Reduction in business and very low brokerages while the costs are going up.

Despite all fears, as above, opportunities are ample top attract retails clients and move to tyre III Ciities. Also services to investors have to be broad based like collection of Pay-In of funds and Pay-In of shares.

With awakening to enter and make fortune in capital market, outlook is bright. Limited percentage of income tax paying population is in capital Market. Moreover, Mutual Funds and Investment Institutions should consider enrolment of SM sized brokers who can be parted with 0.5% to 1.0% of total trade. Acleanbackground in observing Pay-In and Pay-Out as also NSE/BSE Inspection score should be given weightage for registration.

Internal Audit by NSE approved CA is an adequate control mechanism; apart from a host of requirements of SEBI (i.e. like Margin Funding etc.)

Record Maintenance and Compliance call for a good number of skilled personnel. This adds to costs. Also, though inflation is witnessed in all activities, brokerage is pointing south-ward. It seems for one dealer, one has to have staff of 2 as back-up and compliance. At the same time employees are co-ordinal as most of the staff is skilled, self-disciplined and conscience about the intricacy of duties.

For and on Behalf of the Board of Directors
Mr Mahesh Parikh Mrs. Lalit Dalai
Managing Director Director
(DIN 00212486) (DIN 00013914)
Place: Mumbai
Date: 29th April 2017