Status and functions of the licensed stockbroker under stock exchange regulation

Abstract

The scope of this thesis is to better understand the status of the stockbroker as a professional, whose various functions are so fundamental for investment purposes. This thesis outlines the stockbroker-client relationship emerging during the Information Stage and during the execution of the transaction stage. During this procedure, the stockbroker assumes both advisory and agency roles as shall be examined in Chapter 2 of this thesis. The latter chapter, indicates the requirements and qualifications needed for registration of a stockbroker. In this thesis under Chapter 3, the author looks into the firm concept and its permitted business as specified under the bye-laws. Chapter 4 serves to explain thoroughly the Code of Conduct as established by the Council of the Malta Stock Exchange (MSE) which outlines the obligations to be pursued by the members of the Stock Exchange. Thus, stockbrokers are obliged to use the prudence and diligence required from them, in performing their statutory duties. The extent of their duties and responsibilities is better illustrated through local and foreign judicial interpretations. This thesis analyzes the relevant provisions of Maltese law with regard to the liability of the stockbroker. The provisions which regulate the liability of a professional are those falling under the general provisions of the Civil Code relating to torts. With regard to the potential criminal liability of the stockbroker, this thesis indicates the possible financial crimes in terms of the Criminal Code and in terms of the Professional Secrecy Act, the Money Laundering Act and the Insider Dealing Act. The Malta Stock Exchange Act, the Statute and the Bye-laws refer to the disciplinary actions and penalties imposed on defaulting stockbrokers such as disqualification, expulsion or suspension procedures, which, in practice are very difficult to be applied, and fines are imposed instead. The conclusion of this thesis pays special attention tot he proposed amendments, among which the new term to define a stockbroker as per section 2 of the Act, will no more merely look at the individual, rather it will be directed at the firm concept to be in compliance with EU requirements. The idea of having stockbroking firms working as a team to promote certain financial products and to offer advice thereon, .is much more common.