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Cap on number of broking outfits being considered

Richa Mishra

NEW DELHI, March 31

A Department of Company Affairs (DCA) appointed committee looking at plugging the regulatory loopholes in the capital markets is likely to recommend cap on the number of broking outfits that can be controlled by a stock broker or a stock broking entity.

"The committee has been dwelling on all the aspects and the general consensus was that there should be a limit to stock broking companies a share broker can have," sources said.

After a lot of deliberations, it was felt that there was no need for a stockbroker to own or control more than a particular number of firms or entities.

Besides, DCA is also considering a proposal to limit the number of investment firms that can be floated by a company or a corporate group. A case in point has been Ketan Parikh and the entities controlled by him.

The DCA had appointed a five-member committee to recommend steps to check companies from indulging in circular trading, negotiated deals and also other irregularities. The committee is also looking into transfer of funds among the group companies as well as the number of investment firms a company can have.

The move to set up a committee had been prompted following a report submitted by the market regulator, Securities and Exchange Board of India (SEBI), before the joint parliamentary committee (JPC) looking after the market scam. The report suggests that the Companies Act as well as the other regulatory acts be amended to check such abuse.

Further, the committee is expected to submit its report shortly. The committee comprises nominees from the Institute of Chartered Accountants of India (ICAI), Securities and Exchange Board of India (SEBI), as well as the DCA, among others.

The DCA has been examining whether appropriate changes can be made in the Companies Act in order to avoid such situations in the future.

The DCA and SEBI are working in close coordination with each other in the ongoing investigations into the security scams, sources said.

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