Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2000. - S.O. No.234(E) - SEBI/LE/4655/00 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 14 th March, 2000 S.O. 234(E).- In exercise of the powers conferred by sub-section (1) of section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 namely :- I. (i) These Regulations may be called the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2000. (ii) They shall come into force on the date of their publication in the Official Gazette. II. In the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992, 1. In regulation 2, (i) The following new clauses (a) and (aa) shall be inserted before existing clause (a), namely : (a) clearing corporation or clearing house means the clearing corporation or clearing house of a recognised stock exchange to clear and settle trades in securities. (aa) clearing member means a member of a clearing corporation or clearing house of the derivatives exchange or derivatives segment of an exchange, who may clear and settle transactions in securities. (ii) The existing clause (a) shall be renumbered as clause (aaa) ; (iii) A new clause (ga) shall be inserted after clause (g) and before clause (h), namely; (ga) trading member means a member of the derivatives exchange or derivatives segment of a stock exchange and who settles the trade in the clearing corporation or clearing house through a clearing member. ; 2. After Chapter III and before Chapter IV, a new Chapter IIIA shall as such be inserted, namely; Chapter IIIA Registration of trading and clearing members Application for registration of Trading member or Clearing member 16A (1) An application for grant of certificate of registration by a trading member of a derivatives exchange or derivatives segment of a stock exchange shall be made in Form AA of Schedule - I, through the concerned derivatives exchange or derivative segment of a stock exchange of which he is a member. (2) An application for grant of certificate of registration by a clearing member of the clearing corporation or clearing house of a derivatives exchange or derivatives segment of a stock exchange, shall be made in Form AA of Schedule I, through the concerned clearing corporation or clearing house of which he is a member. Provided that a trading member who also seeks to act as a clearing member shall make separate applications for each activity in Form AA of Schedule I. (3) The derivatives exchange or segment or clearing house or corporation as the case may be shall forward the application to the Board as early as possible but not later than thirty days from the date of its receipt. Furnishing of Information, Clarification, etc. 16B (1) The Board may require the applicant or the concerned stock exchange or segment or clearing house or corporation to furnish such other information or clarifications, regarding the trading and settlement in derivatives and matters connected thereto, to consider the application for grant of a certificate. (2) The applicant or its principal officer shall, if so required, appear before the Board for personal representation. Consideration of Application 16C (1) The Board shall take into account for considering the grant of a certificate all matters relating to dealing and settlement in derivatives and in particular the following, namely, whether the applicant- (a) is eligible to be admitted as a trading member of a derivative exchange and/or a clearing member of a derivatives exchange or derivatives segment of a stock exchange or clearing corporation or house; (b) has the necessary infrastructure like adequate office place, equipments and manpower to effectively undertake his activities; (c) is subjected to disciplinary proceedings under the rules, regulations and bye-laws of any stock exchange with respect to his business as a stock broker or member of derivatives exchange or segment or member of clearing house or corporation involving either himself or any of his partner, directors or employees. (2) An applicant who desires to act as a trading member, in addition to complying with the requirements of sub-regulation (1), shall have a net-worth as may be specified by the derivative exchange or segment from time to time and the approved user and sales personnel of the trading member have passed a certification programme approved by the Board; (3) An applicant who desires to act as a clearing member, in addition to complying with the requirements of sub-regulation (1), shall have a minimum net worth of 300 lacs and shall deposit at least a sum of 50 lacs or higher amount with the clearing corporation or clearing house of the derivatives exchange or derivatives segment in the form specified from time to time. Explanation : For the purpose of sub-regulations (2) and (3), the expression net worth shall mean paid up capital and free reserves and other securities approved by the Board from time to time (but does not include fixed assets, pledged securities, value of member s card, non-allowable securities (unlisted securities), bad deliveries, doubtful debts and advan-ces (debts or advances overdue for more than three months or debts or advances given to the associate persons of the member), prepaid expen-ses, losses, intangible assets and 30% value of marketable securities). Procedure for registration 16D The Board on being satisfied that the applicant is eligible, shall grant a certificate in Form DA of Schedule I, to the applicant and send an intimation to that effect to the derivatives segment of the stock exchange or derivatives exchange or clearing corporation or clearing house, as the case may be. Procedure where registration is not granted 16E (1) Where an application for the grant of a certificate under regulation 16A does not fulfil the requirements specified in 16C of the regulations, the Board may reject the application of the applicant after giving a reasonable opportunity of being heard. (2) The refusal to grant the certificate of registration shall be communicated by the Board within 30 days of such refusal to the concerned segment of the stock exchange, or clearing house or corporation and to the applicant stating therein the grounds on which the application has been rejected. (3) An applicant may, if aggrieved by the decision of the Board under sub-regulation (2) apply within a period of thirty days from the date of receipt of such information to the Board for reconsideration of its decision. (4) The Board shall reconsider an application made under sub-regulation (3) and communicate its decision as soon as possible in writing to the applicant and to the concerned segment of the stock exchange or clearing house or corporation. Effect of refusal of certificate of registration 16F An applicant, whose application for the grant of a certificate of registration has been refused by the Board, shall not, on and from the date of receipt of the communication under sub-regulation (2) or sub-regulation (4) of regulation 16E, deal in or settle the derivatives contracts as a member of the derivatives exchange or derivatives segment or clearing corporation or clearing house. Payment of fees and consequences of failure to pay fees 16G (1) Every applicant eligible for grant of a certificate as trading or clearing member shall pay such fee and in such manner as specified in Schedule IV. (2) Where a trading or clearing member fails to pay the fees as provided in sub-regulation (1), the Board may suspend or cancel the registration certificate after giving an opportunity of being heard, whereupon the trading and clearing member shall cease to deal in or settle the derivatives contract as a member of the derivatives segment of the exchange or derivatives exchange or clearing corporation or clearing house . Trading member/Clearing member to abide by the Code of Conduct, etc. 16H (1) The code of conduct specified for the stock brokers as stipulated in Schedule II, shall be applicable mutatis mutandis to the trading member, clearing member and such members shall at all times abide by the same. (2) The trading member and clearing member shall abide by the code of conduct as specified in the rules, bye-laws and regulations of the derivatives exchange or derivatives segment of the exchange. (3) The trading members shall obtain details of the prospective clients in Know Your Client format as specified by the Board before executing an order on behalf of such client. (4) The trading member shall mandatorily furnish Risk Disclosure Document disclosing the risk inherent in trading in derivatives to the prospective clients in the form specified by the derivatives exchange or derivatives segment. (5) The trading or clearing member shall deposit margin or any other deposit and shall maintain position or exposure limit as specified by the Board or the concerned exchange or segment or clearing corporation or clearing house from time to time. Chapter IV, V and VI applicable 16-I (1) The provision of Chapter IV, V and VI shall be applicable mutatis mutandis to a trading member and a clearing member and such members shall abide by the provisions of the said Chapters. (2) In the chapters referred to in sub-regulation (1), the word stock broker shall refer to trading member or clearing member and the word stock exchange shall refer to derivatives exchange or derivatives segment of an exchange or clearing corporation or clearing house. (3) The Board may issue such directions under section 11B of the Act to the trading member or clearing member as may be deemed appropriate and such member shall abide by such directions. (4) In case of violation of any regulation, the trading or the clearing member shall be liable to penalty as specified in regulation 26. 3. In Schedule I(i), the following Form AA shall be inserted after Form A and before Form B , namely; FORM AA SECURITIES AND EXCHANGE BOARD OF INDIA (STOCK BROKERS AND SUB-BROKERS) REGULATIONS, 1992 (REGULATION 16A) APPLICATION FORM FOR REGISTRATION AS A TRADING AND/OR A CLEARING MEMBER WITH THE SECURITIES AND EXCHANGE BOARD OF INDIA 1. Name of the Derivatives Exchange/Segment/Clearing corporation/Clearing House of which the applicant is the member. Please furnish the tenure of membership. 2. Name of the Member with Code No. 3. Whether the applicant is to act as a Trading member and/or a Clearing member. 4. If the applicant is to act as a Trading member, the applicant is required to furnish the name and details of the clearing member through whom he intend to clear and settle his trade. 5. Address of the Member. 6. Trade name of Member. 7. Form of Organisation : Sole proprietorship/partnership/corporate body/financial institution. (Please give names of proprietor/partners/directors). 8. Please furnish a copy of the Memorandum and Articles of Association or the Partnership Deed, as the case may be. 9. Educational Qualifications of proprietor/partners/directors, etc. 10. Whether the applicant or its sales personnel or approved user has passed any certification programme? If so, please specify the detail. 11. The experience of the applicant or their two directors or partners in derivatives trading or securities market, if so, please give details. 12. Date of admission to membership to the derivatives exchange or derivatives segment/clearing corporation/clearing house. 13. Whether a member of more than one exchange or derivatives segment or clearing corporation or clearing house of any segment? If so, please give name(s) of the clearing corporation/clearing house, or any stock exchange(s) with code number(s)? 14. Networth of the applicant, please furnish details along with necessary documents in support thereof. 15. Whether the applicant or its director or partners, any time convicted of any economic offence? If so, please furnish the details? 16. Whether the applicant or its directors or partners, declared insolvent/bankrupt or declared defaulter by any exchange? If so, please furnish details? 17. Whether the applicant or its directors or partners anytime subjected to any proceedings or penalty by the Board under SEBI Act or any of the regulations framed under the SEBI Act? If so, please furnish the details. 18. Indicate fax, telex and phone number(s). 19. Whether the application is accompanied by a requisite fee as per Schedule IV of the Regulations as applicable to the applicant. I declare that the information given in this form is true and in the event of any information furnished is false, misleading or suppression of facts, my certificate of registration is liable to be cancelled by SEBI without assigning any reasons whatsoever. Dated : Signature Recommendation of the derivatives exchange/derivatives segment, clearing corporation/house. This is to certify that.......................................is a member of this Derivatives Exchange/Derivatives Segment or Clearing Corporation or Clearing House and is recommended for registration with the Securities and Exchange Board of India. Signature Name Designation (ii) The following Form DA shall be inserted after Form D and before Form E, namely ; Form DA Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (Regulation 16D) Certificate of Registration In exercise of the powers conferred by sub-section (1) of section12 of the Securities and Exchange Board of India Act, 1992 read with the rules and regulations made thereunder, the Board hereby grants a certificate of registration to............................................a member of the......................................... derivatives exchange/derivatives segment/clearing corporation/clearing house as trading/clearing member for carrying on the activities of dealing in derivatives/clearing settlement of derivatives trades and for carrying on such other activities as are permitted by such exchange(s)/segment(s)/clearing corporation/clearing house subject to the conditions prescribed therefor, from time to time, by the Board. Registration number allotted is as under : This certificate shall be valid till it is suspended or cancelled in accordance with the Regulations. Date :------------------------ By order For and on behalf of Securities and Exchange Board of India 4. After Schedule III, a new Schedule IV shall be added as follows : SCHEDULE IV [REGULATION 16G(1)] FEES TO BE PAID BY THE TRADING OR CLEARING MEMBER OF DERIVATIVES EXCHANGE/DERIVATIVES SEGMENT/CLEARING CORPORATION/CLEARING HOUSE 1. A clearing member shall pay a fee of 25,000 every year till his registration is in force, in the manner specified below : (a) for the first financial year along with the application for registration; (b) for the subsequent financial years before 1st June of that financial year. 2. A trading member shall pay every year a fee till his registration is in force, in the manner specified below :- (a) where the annual turnover does not exceed 500 crore in the financial year, a sum of 10,000 for each financial year; and (b) where the annual turnover exceeds 500 crore in the financial year, a sum of 10,000 plus 10 paisa per 1,00,000 of turnover, for the turnover in excess of 500 crore in the financial year. Explanation : For the purpose of clause 2, the expression annual turnover shall mean the aggregate value of all trades, executed by the trading member on the derivatives exchange or the derivatives segment and shall also include the value of trades settled on the expiration of derivatives contracts. 3. Every remittance of fees by a trading member as specified in clause 2 shall be made every financial year as under :- (a) For the first financial year in which certificate of registration is granted a sum of 10,000 shall be paid along with the application for registration. (b) For the subsequent financial years from the initial registration : (i) A sum of 10,000 shall be paid before 1st June of that financial year; and (ii) A balance fee of the preceding financial year for the turnover in excess of 500 crores shall be paid before the 1st June of the financial year. (c) The remittance shall be accompanied by a certificate authenticating the turnover by the concerned derivatives exchange or derivatives segment. 4. A trading member who also acts as a clearing member shall pay the annual fee separately, as applicable to each category as specified in clauses 2 and 3 above. 5. The fees indicated above shall be paid by draft in favour of Securities and Exchange Board of India, Mumbai . Such draft shall be forwarded to the Board through the concerned derivatives exchange or derivatives segment or clearing corporation or clearing house. 6. The financial year shall mean the year commencing from 1st April and ending on 31st March of the following year. [F. No. SEBI/LE/4655/00] D.R. MEHTA, Chairman FOOT NOTE : (1) Securities and Exchange Board of India (Stock Brokers and Sub-Brokers), Regulations, 1992, the principal Regulations, was published in the Gazette of India on October 23,1992, vide G.S.R.780(E). (2) It was subsequently amended on : (a) November 28,1995 by the SEBI (Payment of Fees) Amendment Regulations,1995 vide S.O.No.939(E). (b) January 5,1998 by SEBI (Stock Brokers and Sub-Brokers) Regulations,1998 vide S.O.No.l3(E). (c) January 21,1998 by SEBI (Stock Brokers and Sub-Brokers) (Second Amendment), Regulations,1998 vide S.O.No.75(E). (d) December 16, 1998 by SEBI (Stock Brokers and Sub-Brokers) (Third Amendment) Regulations,1998 vide S.O.No.1078 - (E). (e) July 6, 1999 by SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations,1999 vide S.O.No.541(E).