Market regulator Securities and Exchange Board of India has proposed to rein in brokers from inducing speculative activities that far exceed investors' risk appetite.
The market watchdog invited public comments on its proposed guidelines that ask brokers not to encourage excessive trading or speculative activity in clients' accounts disproportionate to their financial position.
"Trading members shall not encourage or induce excessive trading or speculative activity in a client's account which is not in accordance with the objectives, risk appetite and financial situation of the client involved," Sebi said in its draft proposals on improving sales practice by members of the stock exchanges.
The market regulator also proposed that brokers would not execute transactions in own account in securities ahead of making recommendations to their clients on such securities.
This is to ensure that clients are given fair recommendations. Besides, Sebi has asked brokers not to indulge in using funds of their clients for purposes other than those prescribed by Sebi.
The instructions proposed by Sebi hint at the market manipulation many brokers indulge in to serve their purpose.
Some market players are known to be operating through brokers to control market movements.