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Securities and Exchange Board of India vs. National Stock Exchange Members Association & Anr.

Civil Appeal · 2022 INSC 1076Decided 13 Oct 2022
Civil Appeal No. 435 of 2007
Ajay Rastogi · B.V. Nagarathna

Background

SEBI requires stock brokers to pay registration fees, historically calculated per stock exchange membership under Schedule III of its 1992 Regulations. A stock broker who held memberships on multiple stock exchanges argued that a single SEBI registration should suffice, and that it should not have to pay separate registration fees for each exchange it operated on. The Delhi High Court's Division Bench agreed with the broker and struck down the relevant part of SEBI's 2002 circular requiring exchange-wise fees. SEBI appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that although a stock broker may hold one certificate of registration from SEBI, that registration is tied to and issued in relation to each stock exchange of which the broker is a member, since each exchange has its own admission process, bye-laws and regulatory oversight. Relying on its earlier decision in BSE Brokers' Forum v. SEBI, the Court held that the fee structure under Schedule III, which charges fees with reference to each stock exchange membership, is valid and consistent with the scheme of the 1992 Regulations. It therefore set aside the High Court's judgment and restored SEBI's circular, and by the same reasoning allowed the two connected appeals as well.

Lesson Learnt

A single regulatory registration (here, with SEBI) does not automatically exempt a regulated entity from exchange-specific or membership-specific fee obligations when the underlying regulations tie fees to each individual membership or affiliation, not merely to the umbrella registration.

Official source (sci.gov.in)View Judgment (PDF)

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