An entity that purchases and sells financial instruments such as shares, etc, on behalf of customers is called a stockbroker. Such an individual or organisation is merely a representative of his customer and, therefore, charges a fee, called a commission, for provision of his services.
Advisory Services
Beside purchasing and selling securities, stockbrokers are also well informed about the market, and assist and advise customers. No fee is charged for such advice and the broker is not liable for any damages in case the customer chooses to act on the advice.
Important Requirements
- He must be a member of the stock exchange on which he proposes to trade or execute transactions for his customers;
- registration with SEBI (Securities and Exchange Board of India) is compulsory;
- visit the SEBI web site which lists all the registered stockbrokers. Their registrations begin with the letter “INB”;
- he must ensure compliance with the instructions of SEBI and of the stock exchange of which he is a member;
For Investors
Prior to entering into any arrangement with a stockbroker, the investor will have to provide proof of identity and address. Thereafter, an agreement is to be entered into with the broker and the client should also collect a copy of the Risk Disclosure Document which explains the risks of transacting on the stock exchange.
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