NEW DELHI: The Delhi High Court today issued notice to stock market regulator SEBI on a petition seeking quashing of its circular mandating all investors to sign an agreement with brokers before investing in capital markets.
An advocate M L Sharma had challenged SEBI's circular issued on August 26, 2004, prohibiting investors to deal in any stock exchange in any trading segment without having client registration.
Sharma had sought quashing of the circular that made it mandatory for signing written contract for client registration in BSE, NSE and other stock exchanges for shares trading.
Contending that SEBI had no jurisdiction to issue such a direction, he said such circular is not a part of any law, bye-law or rules of the market regulator.
Without having such client registration, no investor can buy and sell securities in any stock exchange segment and cannot hold any securities in their demat account, he said.
Sharma further contended that an investor was bound to sign a new agreement when he changed his broker.
The circular has been made out for benefit of brokers and against the interest of the investors as it gives power of attorney to the brokers who can take decisions on behalf of their clients which is objectionable, Sharma said.
However, SEBI's counsel said this arrangement was made in the interest of investors with a purpose to check fraud and scam in the stock markets.
The High Court had earlier directed the petitioner to place a copy of the client registration agreement
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