Rule 8(1)(f) and Rule 8(3)(f) of the Securities Contract Regulation Rules, 1957 have been carved in order to protect the interest of securities market and especially those investors who trade through or are counterparties to the investors who trade through such broker. In cases of sole proprietorship as that of Kewal, responsibility is more since proprietor and proprietorship concern for all practical purposes are one and the same and if they are involved in some transactions bearing financial liability, it may affect the interest of clients, buyers/sellers and their counterparties, settlement/deliveries, and the business itself. Whether the alleged transaction which does not have underlying securities transaction actually rendered a liability or rendered an asset is immaterial since such risks are not contemplated to be undertaken by a broker under these rules.
In a sole proprietorship, no separate PAN (Permanent Account Number) is required. The PAN of the proprietor is the PAN of the firm and proprietor files income tax return for the proprietorship in his personal name. The same holds for trading and dealing in securities market wherein demat account, trading account and KYC forms have Proprietor’s identity and PAN. Further, in a sole proprietorship, there is no legal distinction between a sole proprietor and his/her business. The proprietor realizes all the profits, bears all the losses, and incurs all the liabilities of the business.