Schedule - II - Code of Conduct for Stock Brokers - Securities and Exchange Board of India (Stock Brokers) Regulations, 1992

SCHEDULE II Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 CODE OF CONDUCT FOR STOCK BROKERS [Regulation 9] A. General. (1) Integrity: A stock-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business. (2) Exercise of due skill and care : A stock-broker shall act with due skill, care and diligence in the conduct of all his business. (3) Manipulation : A stock-broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains. (4) Malpractices: A stock-broker shall not create false market either singly or in concert with others or indulge in any act detrimental to the investors interest or which leads to interference with the fair and smooth functioning of the market. A stockbroker shall not involve himself in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness. (5) Compliance with statutory requirements: A stock-broker shall abide by all the provisions of the Act and the rules, regulations issued by the Government, the Board and the Stock Exchange from time to time as may be applicable to him. B. Duty to the Investor (1) Execution of Orders: A stock-broker, in his dealings with the clients and the general investing public, shall faithfully execute the orders for buying and selling of securities at the best available market price and not refuse to deal with a Small Investor merely on the ground of the volume of business involved. A stock-broker shall promptly inform his client about the execution or non-execution of an order, and make prompt payment in respect of securities sold and arrange for prompt delivery of securities purchased by clients. (2) Issue of Contract Note: A stock-broker shall issue without delay to his client 1 [or client of the sub-broker, as the case may be] a contract note for all transactions in the form specified by the stock exchange. (3) Breach of Trust: A stock-broker shall not disclose or discuss with any other person or make improper use of the details of personal investments and other information of a confidential nature of the client which he comes to know in his business relationship. (4) Business and Commission: (a) A stock-broker shall not encourage sales or purchases of securities with the sole object of generating brokerage or commission. (b) A stock-broker shall not furnish false or misleading quotations or give any other false or misleading advice or information to the clients with a view of inducing him to do business in particular securities and enabling himself to earn brokerage or commission thereby. (5) Business of Defaulting Clients: A stock-broker shall not deal or transact business knowingly, directly or indirectly or execute an order for a client who has failed to carry out his commitments in relation to securities with another stock-broker. (6) Fairness to Clients: A stock-broker, when dealing with a client, shall disclose whether he is acting as a principal or as an agent and shall ensure at the same time, that no conflict of interest arises between him and the client. In the event of a conflict of interest, he shall inform the client accordingly and shall not seek to gain a direct or indirect personal advantage from the situation and shall not consider clients interest inferior to his own. (7) Investment Advice: A stock-broker shall not make a recommendation to any client who might be expected to rely thereon to acquire, dispose of, retain any securities unless he has reasonable grounds for believing that the recommendation is suitable for such a client upon the basis of the facts, if disclosed by such a client as to his own security holdings, financial situation and objectives of such investment. The stock-broker should seek such information from clients, whenever he feels it is appropriate to do so. 2 [(7A) Investment advice in publicly accessible media- (a) A stock broker or any of his employees shall not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of his interest including the interest of his dependent family members and the employer including their long or short position in the said security has been made, while rendering such advice. (b) In case an employee of the stock broker is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice.] (8) Competence of Stock-Broker: A stock-broker should have adequately trained staff and arrangements to render fair, prompt and competence services to his clients. C. Stock-Brokers vis-a-vis Other Stock-Brokers (1) Conduct of Dealings: A stock-broker shall co-operate with the other contracting party in comparing unmatched transactions. A stock-broker shall not knowingly and wilfully deliver documents which constitute bad delivery and shall co-operate with other contracting party for prompt replacement of documents which are declared as bad delivery. (2) Protection of Clients Interests: A stock-broker shall extend fullest co-operation to other stock-brokers in protecting the interests of his clients regarding their rights to dividends, bonus shares, right shares and any other right related to such securities. (3) Transactions with Stock-Brokers: A stock-broker shall carry out his transactions with other stock-brokers and shall comply with his obligations in completing the settlement of transactions with them. (4) Advertisement and Publicity: A stock-broker shall not advertise his business publicly unless permitted by the stock exchange. (5) Inducement of Clients: A stock-broker shall not resort to unfair means of inducing clients from other stock-brokers. (6) 9 [ **** ] D 3 [****] 11 [ E Duty as an underwriter In addition to duties specified above, the Stock Broker while acting as an Underwriter shall comply with following: 1. A Stock Broker shall make all efforts to protect the interests of its clients. 2. A Stock Broker shall ensure that it and its personnel will act in an ethical manner in all its dealings with a body corporate making an issue of securities (hereinafter referred to in the Schedule as the issuer ). 3. A Stock Broker shall not make any statement, either oral or written, which would misrepresent- a. the services that the underwriter is capable of performing for its client, or has rendered to any other issuer company; b. his underwriting commitment. 4. A Stock Broker shall avoid conflict of interest and make adequate disclosure of its interest. 5. A Stock Broker shall put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, shall take reasonable steps to resolve the same in an equitable manner. 6. A Stock Broker shall make appropriate disclosure to the client of its possible source or potential areas of conflict of duties and interest while acting as underwriter which would impair its ability to render fair, objective and unbiased services. 7. A Stock Broker shall not divulge to other issuer, press or any party any confidential information about its issuer company, which has come to its knowledge and deal in securities of any issuer company without making disclosure to the Board and also to the Board of directors of the issuer company. 8. A Stock Broker shall ensure that any change in registration status/any penal action taken by board or any material change in financials which may adversely affect the interests of clients/investors is promptly informed to the clients and any business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients/investors. 9. (a) A Stock Broker or any of its employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of its interest including its long or short position in the said security has been made, while rendering such advice. (b)In case, an employee of a Stock Broker is rendering such advice, the Stock Broker shall ensure that he shall disclose its interest, the interest of dependent family members and that of the employer including their long or short position in the said security, while rendering such advice. 10. A Stock Broker or any of its directors, partners or manager having the management of the whole or substantially the whole of affairs of the business, shall not either through its account or their respective accounts or through their associates or family members, relatives or friends indulge in any insider trading. 11. A Stock Broker acting as an underwriter shall not indulge in any unfair competition, which is likely to be harmful to the interest of other entities acting as underwriters carrying on the business of underwriting or likely to place such other underwriters in a dis-advantageous position in relation to the underwriter while competing for, or carrying out any assignment. 12. An underwriter shall not be party to or instrumental for- (a) creation of false market; (b) price rigging or manipulation; or (c) passing of unpublished price sensitive information in respect of securities which are listed or proposed to be listed in any stock exchange to any person or intermediary. ] 10 [ **** ] ************* NOTES:- 1 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2000, w.e.f. 23-09-2003 2 Inserted by the SEBI (Investment Advice by Intermediaries ) (Amendment) Regulations, 2001, w.e.f. 29-05-2001. 3 Omitted by the SEBI (Stock Brokers and Sub-brokers) (Second Amdt.) Regulations, 2011, w.e.f. 17- 08-2011. Prior to the omission, it read as under: D. (1) A stock broker, shall enter into an agreement as specified by the Board with his client. 4 Words and make payment in respect of securities sold and arrange for prompt delivery of securities purchased by clients omitted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-09-2003. 5 Substituted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-09-2003. 6 Words, and shall issue appropriate purchase/sale note omitted by the SEBI (Stock Brokers and Subbrokers)(Amendment) Regulations, 2003, w.e.f. 23-09-2003. 7 Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 29-05-2001. 8 Omitted by SEBI (Stock Brokers and Sub-brokers) (Second Amdt.) Regulations, 2011, w.e.f. 17- 08-2011. Prior to the omission, it read as under: (4) Agreement between sub-broker, client of the sub-broker and main broker:- A sub-broker shall enter into a tripartite agreement with his client and with the main stock broker specifying the scope of rights and obligations of the stock broker, sub-broker and such client of the sub-broker. 9. Omitted vide Notification No. SEBI/LAD-NRO/GN/2018/27 dated 30-07-2018 w.e.f. 01-04-2019 before it was read as (6) False or Misleading Returns: A stock-broker shall not neglect or fail or refuse to submit the required returns and not make any false or misleading statement on any returns required to be submitted to the Board and the stock exchange. 10. Omitted vide Notification No. SEBI/LAD-NRO/GN/2018/27 dated 30-07-2018 w.e.f. 01-04-2019 before it was read as Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 CODE OF CONDUCT FOR SUB-BROKERS [Regulation 15] A. General (1) Integrity: A sub-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all investment business. (2) Exercise of due Skill and Care: A sub-broker, shall act with due skill, care and diligence in the conduct of all investment business. B. Duty to the Investor (1) Execution of Orders: A sub-broker, in his dealings with the clients and the general investing public, shall faithfully execute the orders for buying and selling of securities at the best available market price. A sub-broker shall promptly inform his client about the execution or non-execution of an order 4 [***]. 5 [(2) A sub-broker shall render necessary assistance to his client in obtaining the contract note from the stock-broker.] (3) Breach of Trust : A sub-broker shall not disclose or discuss with any other person or make improper use of the details of personal investments and other information of a confidential nature of the client which he comes to know in his business relationship. (4) Business and Commission : (a) A sub-broker shall not encourage sales or purchases of securities with the sole object of generating brokerage or commission. (b) A sub-broker shall not furnish false or misleading quotations or give any other false or misleading advice or information to the clients with a view of inducing him to do business in particular securities and enabling himself to earn brokerage or commission thereby. (c) A sub-broker shall not charge from his clients a commission exceeding one and one-half of one per cent of the value mentioned in the respective sale or purchase notes. (5) Business of Defaulting Clients: A sub-broker shall not deal or transact business knowingly, directly or indirectly or execute an order for a client who has failed to carry out his commitments in relation to securities and is in default with another broker or sub-broker. (6) Fairness to Clients: A sub-broker, when dealing with a client, shall disclose that he is acting as an agent 6 [***] ensuring at the same time, that no conflict of interest arises between him and the client. In the event of a conflict of interest, he shall inform the client accordingly and shall not seek to gain a direct or indirect personal advantage from the situation and shall not consider clients interest inferior to his own. (7) Investment Advice : A sub-broker shall not make a recommendation to any client who might be expected to rely thereon to acquire, dispose of, retain any securities unless he has reasonable grounds for believing that the recommendation is suitable for such a client upon the basis of the facts, if disclosed by such a client as to his own security holdings, financial situation and objectives of such investment. The sub-broker should seek such information from clients, wherever they feel it is appropriate to do so. 7 [(7A) Investment advice in publicly accessible media- (a) A sub-broker or any of his employees shall not render, directly and indirectly any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of his interest including his long or short position in the said security has been made, while rendering such advice. (b) In case an employee of the sub-broker is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice.] (8) Competence of Sub-broker: A sub-broker should have adequately trained staff and arrangements to render fair, prompt and competence services to his clients and continuous compliance with the regulatory system. C. Sub-brokers vis-a-vis Stock Brokers (1) Conduct of Dealings : A sub-broker shall co-operate with his broker in comparing unmatched transactions. Sub-broker shall not knowingly and wilfully deliver documents which constitute bad delivery. A sub-broker shall co-operate with other contracting party for prompt replacement of documents which are declared as bad delivery. (2) Protection of Clients Interests: A sub-broker shall extend fullest co-operation to his stock-broker in protecting the interests of their clients regarding their rights to dividends, right or bonus shares, or any other rights relatable to such securities. (3) Transactions with Brokers: A sub-broker shall not fail to carry out his stockbroking transactions with his broker nor shall he fail to meet his business liabilities or show negligence in completing the settlement of transactions with them. (4) 8 [***] (5) Advertisement and Publicity : A stock-broker shall not advertise his business publicly unless permitted by the stock exchange. (6) Inducement of Clients: A stock-broker shall not resort to unfair means of inducing clients from other brokers. D. Sub-Brokers vis-a-vis Regulatory Authorities (1) General Conduct: A sub-broker shall not indulge in dishonourable, disgraceful or disorderly or improper conduct on the stock exchange nor shall he wilfully obstruct the business of the stock exchange. He shall comply with the rules, bye-laws and regulations of the stock exchange. (2) Failure to give Information: A sub-broker shall not neglect or fail or refuse to submit to the Board or the stock exchange with which he is registered, such books, special returns, correspondence, documents, and papers or any part thereof as may be required. (3) False or Misleading Returns: A sub-broker shall not neglect or fail or refuse to submit the required returns and not make any false or misleading statement on any returns required to be submitted to the Board or the stock exchanges. (4) Manipulation: A sub-broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains. (5) Malpractices: A sub-broker shall not create a false market either singly or in concert with others or indulge in any act detrimental to the public interest or which leads to interference with the fair and smooth functions of the market mechanism of the stock exchanges. A sub-broker shall not involve himself in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness. 11. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/14 dated 30-03-2021