Directive on Prohibition of Brokerage Fee Collection by Merchant Bankers

No.- SECI/CMMRCDI/MS/230/2004/41

June 07, 2010

Directive

Merchant bankers have been issued necessary registration certificates by the Securities and Exchange Commission to conduct specified activities under the Securities and Exchange Commission (Market Banker and Portfolio Manager) Regulations, 1996. Among these activities, merchant bankers do not have the authority to conduct stock brokerage operations or to collect any brokerage commission or any form of money on their behalf from clients in that sector. However, based on information and data submitted by merchant bankers from time to time, the Commission has observed with concern that a portion of the brokerage commission payable to certified stock brokers engaged in buying and selling shares for clients through stock exchanges is being illegally and irregularly collected by merchant bankers on a sharing basis, which is contrary to Rules 29(3) and 35(2) of the said Regulations. That is, merchant bankers cannot collect money from clients in any manner exceeding the actual amount payable to brokers and retain it as their own income.

In the interest of the capital market and investors generally, and to ensure that various policies and regulations of the capital market are respected and complied with, the following directive is hereby issued to all concerned.

By Order of the Securities and Exchange Commission,

Krokasana Chowdhury
Executive Director