SEBI Prescribes Most Important Terms and Conditions (MITC) for Broker-Client Relationship

November 14, 2023

The Securities and Exchange Board of India (SEBI) has issued a circular, SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/180 dated November 13, 2023, regarding the formalization of the broker-client relationship. This circular prescribes uniform documents that brokers must provide to clients, free of charge, to ensure clarity and understanding of the critical aspects of their relationship.

Key Highlights:

1. Uniform Documents: SEBI has prescribed the following uniform documents for formalizing the broker-client relationship, as per clause 20 of the "Master Circular on stock brokers" dated May 17, 2023:

• Account opening form

• Rights and obligations

• Risk disclosure documents

• Guidance note

• Policies and procedures

• Tariff sheet

1. Most Important Terms and Conditions (MITC): To focus on critical aspects of the broker-client relationship and ensure ease of understanding for clients, brokers must inform a standard MITC, which clients are required to acknowledge.

2. Implementation Standards: Brokers’ Industry Standards Forum (ISF), under the aegis of stock exchanges, will publish the form, nature of communication, documentation, and detailed standards for the implementation of MITC on or before January 01, 2024. In case of any delay or inability by the ISF, SEBI may publish standards at its discretion.

3. Implementation Dates:

• For onboarding of new clients, compliance by market participants shall be by April 01, 2024.

• For existing clients, MITC shall be informed via email or any other suitable mode of communication by June 01, 2024.

1. Stock Exchange Directives: Stock exchanges are directed to bring the provisions of this circular to the notice of stock brokers, make amendments to relevant bye-laws, rules, and regulations, publish implementation standards on their websites, and communicate the status of implementation to SEBI in their monthly development report.