Zerodha’s Nithin Kamath hails SCRA rule clarification for stock brokers, “huge” for Rainmatter. Here’s why

Zerodha Founder & CEO Nithin Kamath on Tuesday lauded Indian finance ministry and NSE for clarification of SCRA rules enabling stock brokers to invest their own funds without exchange approvals or restrictions. Calling it huge for Rainmatter, an initiative by Zerodha which supports and invests in Indian startups, Kamath said that Zerodha will now be able to allocate more capital to support domestic startups directly from the brokerage entity.

“Finally, after clarification of SCRA rules by @FinMinIndia and NSE, brokers can now invest their own funds without exchange approvals or restrictions. This is huge for @Rainmatterin. We can now allocate more capital to support Indian startups directly from the brokerage entity,” Kamat tweeted on his official X handle.

The government had in May, amended the Securities Contract (Amendment) Rules to give regulatory clarity and enhance ease of doing business for stock brokers. “Amendment gives regulatory clarity to enhance ease of doing business for brokers,” the finance ministry said.

Through a circular issued on May 16, the Ministry of Finance recently changed certain rules about how stockbrokers can invest their own money. The main point of the change is that when a stockbroker invests his own money, it will generally not be considered as part of their “broking business” subject to certain conditions.

“Provided further that investments made by a member shall not be construed as business except when such investments involve client funds or client securities or relate to arrangements which are in the nature of creating a financial liability on the broker,” the clarification said. The government amended the rules by inserting this provision in Rule 8 of the Securities Contracts (Regulation) Rules, 1957.

This means they won’t have to follow the same strict rules that apply to client-related transactions.However, there are exceptions to this rule. If the investments made by stock brokers involve client money or client securities, or if these investments create a financial risk for their brokerage firm, then these investments will still be treated as part of their business and subject to the usual rules.“Provided further that investments made by a member shall not be construed as business except when such investments involve client funds or client securities or relate to arrangements which are in the nature of creating a financial liability on the broker,” the clarification said.

Also Read: Zerodha’s MTF bet pays off, touches Rs 3,000 crore in 6 months despite a bear market: Nithin Kamath

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