Location holds back brokers, dealers

Bombay : In 2020, when the covid pandemic broke out, the market regulator was in favor of permanently allowing brokers, traders and fund managers to work from home. Two years later, the Securities and Exchange Board of India (Sebi) brings back the so-called location restrictions, apparently prompted by the recent high-profile scandal.

The market regulator has issued a circular to brokerages and fund companies that anyone with a trading terminal registration must work from their desk, three people with direct knowledge of the matter said, seeking the ‘anonymity.

“The regulator believes the two-year pandemic-induced work-from-home has caused oversight failures which, in turn, have led to an increase in cases of manipulation,” said one of the three, an official by Sebi.

However, in July 2020, former Sebi chief Ajay Tyagi said, “Security brokers working permanently from home are worth considering. Currently, the home trade has worked without any issues or flaws. Right now, working from home is a temporary relaxation. We will also analyze the disadvantages.”

Following the Sebi circular, the Association of Mutual Funds in India (AMFI) has issued a notice to all fund companies and members, asking them to return to work from their positions. “The flexibility given to employees to work from home, especially those managing critical functions that deal with markets, such as investments, trading, operations, compliance, risk management, etc., can be removed. This can be implemented as soon as possible, but no later than June 10, 2022”, specifies the AMFI in a circular of May 25.

Whenever a stockbroker operates a terminal from a particular location, the location is considered their branch and requires the display of name signs and a stockbroker’s certificate.

The broker is also required to register the location in the trading system. On March 20, 2020, as the pandemic spread, Sebi relaxed this rule and exchanges allowed trading from locations other than those registered.

“The regulator has not extended this exemption and, in fact, issued a directive to brokers in the third week of this month that anyone operating a trading terminal must work from their desk,” the regulator said. second person.

“While traditional brokers were on the verge of calling their entire workforce back from home anyway, this will have a bigger impact on new-era fintech companies that offered working from home as an incentive. to their employees,” said the third person, a senior executive at a brokerage.

Discount brokerage firm Zerodha has 90% of its staff working from home. “The 10% of employees who come into the office include risk, compliance and anyone who has a trading terminal registration and trades on behalf of our client. maybe not much difference since most of our clients prefer to trade on their own through the app,” said a Zerodha executive.

“Since the onset of the covid pandemic, one of the biggest risks and challenges facing almost every organization has been the security of the organization and its customer data. This is all the more difficult for businesses who carry out fintech activities such as brokerage, mutual fund companies and asset management companies (financial intermediaries) that they process customer data and use a trading platform under high supervision of the regulator of the market,” said Raunak Singh, Partner, Avitr Legal.

However, not all employees are happy with the change. “There is resistance from employees who question the return to work policies. Their argument is that if no issues have been raised in the past two years, why aren’t regulators trusting now? At the same time, Sebi will have to check the sensitivity of the data on several layers. Regulated entities and regulators face a problem similar to that of India Inc., where resignations occur because they don’t want to work from their desk,” said Nirmala Menon, Founder of Interweave Consultancy , which works on working life issues.

Singh, however, said: “Given that there is a continued decline in covid cases, and given that many companies have started physical operations at full strength, Sebi’s plan to bring back employees of financial intermediaries at the office might not encounter much resistance. However, for a long-term solution, Sebi should engage with industry associations and chart a middle course to enable work from home for employees without compromising data leakage while maintaining system and enterprise integrity. financial integrity.”

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