The market regulator has sent a circular to broking houses and fund houses that every individual with a trading terminal registration has to work from office, said three people with direct knowledge of the matter, seeking anonymity.

“The regulator believes the two-year pandemic-led work-from-home caused surveillance lapses which, in turn, led to a spike in cases of manipulation,” said one of the three people, a Sebi official.

However, in July 2020, former Sebi chief Ajay Tyagi had said: “Stock brokers working permanently from home is worth considering. Currently, trading from home has worked without a glitch or default. At present, working from home is a temporary relaxation. We will also analyse the downsides.”

Following the Sebi circular, the Association of Mutual Funds in India (AMFI) has issued an advisory to all fund houses and members, asking them to resume work from office. “Flexibility given to employees to work from homes, especially those handling critical functions that deal with the markets, such as investments, dealing, operations, compliance, risk management, etc., may be withdrawn. This may be implemented at the earliest, but no later than 10 June 2022,” said AMFI in a circular on 25 May.

Whenever a stock broker operates a terminal from a particular location, the place is considered his branch office and requires display of name boards and stock broker’s certificate.

The broker is also required to register the location in the exchange system. On 20 March 2020, as the pandemic spread, Sebi relaxed this rule, and exchanges allowed trading from locations other than the registered ones.

“The regulator did not extend this exemption and, in fact, issued a directive to brokers in third week of this month that anyone who operates a trading terminal must work from office,” the second person said.

“While traditional brokers were anyway on the way of calling their entire work force back from home, this will have a bigger impact on new-age fintech firms who were offering work from home as an incentive to its employees,” said the third person, a top executive of a brokerage.

Discount brokerage firm Zerodha has 90% of its staff working from home. “The 10% staff that comes to office includes risk, compliance officers and anyone who owns the registration of a trading terminal and is trading on behalf of our client. For us, this may not make much of a difference since most of our clients prefer to trade on their own through the app,” a Zerodha executive said.

“Ever since the covid pandemic started, one of the biggest risks and challenges faced by almost all organizations is security of the organization and its client data. It is all the more challenging for companies which are in fintech businesses such as broking, mutual fund houses and asset management companies (financial intermediaries) since they are dealing with clients’ data and using trading platform having high surveillance of market regulator,” said Raunak Singh, partner, Avitr legal.

Not all employees are, however, happy with the change. “There is resistance from employees who are questioning policies of return to work. Their point is, if no questions were raised in the last two years, then why are regulators not trusting now? At the same time, Sebi will have to check into the sensitivity of data across several layers. Regulated entities and regulatory bodies are facing a similar issue like India Inc. where resignations are happening because they don’t want to work from office,” Nirmala Menon, founder, Interweave Consultancy, which works on work-life issues, said.

Singh, however, said: “Given that there is a continuous decline in covid cases, and considering many companies have started physical operations in full strength, Sebi’s plan to bring employees of financial intermediaries back to office may not face much resistance. However, for a long-term solution, Sebi should interact with industry associations and carve out a middle path to allow working from home for employees without compromising on data leakage while maintaining system and financial integrity.”

jayshree.p@livemint.com