Electronic issuance of contract notes – Additional conditions - SEBI - MRD/DoP/SE/Cir-20/2005

General Manager Market Regulation Department Policy Email:[email protected] MRD/DoP/SE/Cir-20/2005 September 8, 2005 The Executive Directors/Managing Directors/Administrators Of All Stock Exchanges Dear Sir / Madam, Sub: Electronic issuance of contract notes Additional conditions 1. Please refer to SEBI circulars No. SEBI/SMD/SE/15/2003/29/04 dated April 29, 2003 and SMDRP/Policy/Cir-56/2000 dated December 15, 2000 on the captioned subject. 2. It is hereby specified that in addition to the conditions specified in the aforesaid circulars and the provisions of the Information Technology Act, 2000 (IT Act, 2000), all the members of stock exchanges who are desirous of issuing Electronic Contract Notes (ECNs) to their clients shall comply with the following conditions:- 2.1 Issuing ECNs when specifically consented The digitally signed ECNs may be sent only to those clients who have opted to receive the contract notes in an electronic form, either in the Member Client agreement / Tripartite agreement or by a separate letter. The mode of confirmation shall be as per the agreement entered into with the clients. 2.2 Where to send ECNs The usual mode of delivery of ECNs to the clients shall be through e-mail. For this purpose, the client shall provide an appropriate e-mail account to the member which shall be made available at all times for such receipts of ECNs. 2.3 Requirement of digital signature All ECNs sent through the e-mail shall be digitally signed, encrypted, non-tamperable and shall comply with the provisions of the IT Act, 2000. In case the ECN is sent through e-mail as an attachment, the attached file shall also be secured with the digital signature, encrypted and non-tamperable. 2.4 Requirements for acknowledgement, proof of delivery, log report etc. 2.4.1 Acknowledgement The acknowledgement of the e-mail shall be retained by the member in a soft and non-tamperable form. 2.4.2 Proof of delivery i. The proof of delivery i.e., log report generated by the system at the time of sending the contract notes shall be maintained by the member for the specified period under the extant regulations of SEBI/stock exchanges and shall be made available during inspection, audit, etc. ii. The member shall clearly communicate to the client in the agreement executed with the client for this purpose that non-receipt of bounced mail notification by the member shall amount to delivery of the contract note at the e-mail ID of the client. 2.4.3 Log Report for rejected or bounced mails i. The log report shall also provide the details of the contract notes that are not delivered to the client/e-mails rejected or bounced back. ii. Also, the member shall take all possible steps (including settings of mail servers, etc) to ensure receipt of notification of bounced mails by the member at all times within the stipulated time period under the extant regulations of SEBI/stock exchanges. 2.5 When to issue or send in Physical mode 2.5.1 Issue in Physical mode In the case of those clients who do not opt to receive the contract notes in the electronic form, the member shall continue to send contract notes in the physical mode to such clients. 2.5.2 Send in Physical mode Wherever the ECNs have not been delivered to the client or has been rejected (bouncing of mails) by the e-mail ID of the client, the member shall send a physical contract note to the client within the stipulated time under the extant regulations of SEBI/stock exchanges and maintain the proof of delivery of such physical contract notes. 2.6 General requirements 2.6.1 ECNs through website In addition to the e-mail communication of the ECNs in the manner stated above, in order to further strengthen the electronic communication channel, the member shall simultaneously publish the ECN on his designated web-site in a secured way and enable relevant access to the clients. 2.6.2 Access to the website In order to enable clients to access the ECNs posted in the designated website in a secured way, the member shall allot a unique user name and password for the purpose, with an option to the client to access the same and save the contract note electronically or take a print out of the same. 2.6.3 Preservation/Archive of electronic documents The member shall retain/archive such electronic documents as per the extant rules/regulations/circulars/guidelines issued by SEBI/Stock Exchanges from time to time. 3. The Stock Exchanges are advised to 3.1 make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately. 3.2 bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and also to disseminate the same on the website. 3.3 communicate to SEBI, the status of the implementation of the provisions of this circular in Section II, item no. 13 of the Monthly Development Report. 4. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. Yours faithfully, V S SUNDARESAN