Brokers forced to buy cover
A COMPULSORY centralised insurance scheme for stockbrokers has been introduced by authorities of the Bombay Stock Exchange (BSE), with immediate effect.
In a communique to member brokers, the BSE said the scheme was being introduced to safeguard members from risk and to improve the image of the exchange, thereby increasing investor confidence.
Brokers will not be allowed to trade without taking the suggested insurance cover.
The policy of indemnifying stockbrokers was suggested by the Oriental Insurance Co (OIC) in its conceptual report submitted a few weeks ago.
The policy will cover liabilities arising out of an inability to complete a transaction, the loss of securities and cash, forged documents, employee fraud, computer crime, errors and omissions and legal costs.
The BSE has determined that the mandatory minimum claim limit for each member firm should be 2.5 million rupees (about HK$632,500) for every claim during the first year.
The minimum premium payable by an individual member would be 6,000 rupees, irrespective of the size of his turnover.
Claims above 2.5 million rupees would be borne by the firm.
The member is free to buy excess layers of coverage from the OIC to increase the overall cover limit above 2.5 million rupees.
The additional premium to be paid by brokers would be in proportion to their turnover, on the basis of the amount recorded by the BSE during the period 1993-1994.
A 40 per cent extra premium will have to be paid for extension of the policy, to cover errors and omissions insurance.