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TMI BlogMaster Circular for Stock BrokersX X X X Extracts X X X X X X X X Extracts X X X X ..... of SEBI relevant to Stock Brokers. A list of SEBI circulars compiled in this Master Circular is given in Appendix at the end of this Master Circular. 4. In case of any inconsistency between the Master Circular and the applicable circulars, the content of the relevant circular shall prevail. 5. This circular is available on SEBI website at www.sebi.gov.in. Yours faithfully Debashis Bandyopadhyay General Manager TABLE OF CONTENTS I. REGISTRATION OF STOCK BROKERS S. No. Subject Page no. 1. Registration of Brokers Verification of antecedents of the applicant 6 2. Conversion of individual membership into corporate membership 6 3. Additional information to be submitted at the time of registration of Stock Broker with SEBI 6 4. Additional requirements for processing applications of Stock Brokers for Registration/ Prior approval for sale of membership/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. Oversight of Members (Stock Brokers/Trading Members/Clearing Members of any Segment of Stock Exchanges and Clearing Corporations) 35 22. Policy of Annual Inspection of Members by Stock Exchanges/Clearing Corporations 41 23. Enhanced Supervision of Stock Brokers / Depository Participants 43 24. Annual System Audit of Stock Brokers / Trading Members 61 25. Regulation of Transactions Between Clients and Brokers 83 26. Collateral deposited by Clients with Brokers 85 27. Severance of connections with other businesses 86 28. Applicability of Rule 8(1)(f) and 8(3)(f) of the Securities Contract (Regulation) Rules, 1957 86 29. Mode of payment and delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Risk Management 136 49. Safeguards to avoid trading disruption in case of failure of software vendor 140 VI. CHANGE IN STATUS, CONSTITUTION, CONTROL, AFFILIATION 50. Surrender of Certificate of Registration of Sub-Brokers and Change of Affiliation of Sub-Brokers 142 51. Change in affiliation of Sub-Brokers 145 52. Periodical Report Grant of prior approval to members of Stock Exchanges/ Sub-Brokers 148 53. Revised procedure for seeking prior approval for change in control through single window 150 VII. SUBSIDIARY 54. Floating of a Subsidiary/Company by a Stock Exchange to acquire the membership of other Stock Exchange 152 55. Exclusion of turnover from the turnover of the Subsidiary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clearing Corporations, Depositories and their Associated Persons in Securities Market 169 71. Digital Mode of Payment 170 72. Regulatory Framework for Commodity Derivatives Brokers 171 73. Annexures pertaining to Section II i. Annexure 1 ii. Annexure 2 iii. Annexure 3 iv. Annexure 4 v. Annexure 5 vi. Annexure 6 vii. Annexure 7 74. Appendix - List of Circulars / Notifications I. REGISTRATION OF STOCK BROKERS 1. Registration of Brokers - Verification of antecedents of the applicant Reference: Circular SMD/POLICY/CIRCULAR/30/97 dated November 25, 1997. 1.1. In terms of Rule 8(1)(e) of Securities Contracts (Regulation) Rules, 1957, no person shall be eligible to be elected as a member if he has been convicted of an offence involving fraud or dishonesty . 1.2. Stock Exchanges shall verify the antecedents of the applicant before granting admission as a member of Stock Exch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 1 2 3 4 5 FIPB Approval, if applicable Sole Proprietorship: Name of proprietor Educational Qualification Age (on the date of filing of application) Experience (specify the nature and years) Partnership: Name of partners Age (on the date of application) Educational Qualification Experience (specify the nature and years) In case partner(s) is/are registered with SEBI, give SEBI R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons) 8.7 Others, please specify 9. Please give the following information in all the cases other than the case of new membership 9.1 Name of the previous holder of the card 9.2 SEBI Registration No. 9.3 Date of Registration with SEBI 10. Whether the applicant is member of more than one Stock Exchange? YES/ NO 11. If yes, please give name(s) of the Stock Exchange(s) with Code No. and SEBI registration no. 12. Whether any of the Associate Companies/Partnership/ Proprietorship Firm is /are having direct/indirect interest (* as defined below) in capital market? YES / NO * The member is deemed to have direct/indirect interest in the following conditions: 12.1 Where he is individual, he or any of his relative being a broker/any intermediary, he or any of his relative being a partner in a broking firm/any intermediary, he or any of his relative being a director in a broking company/any intermediary or he or any of his relatives clubbed together holding substantial equity in any roking company/any intermediary engaged in capital market. 12.2 Where it is partnership firm/company, the relative(s) of partner(s)/director(s) in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my knowledge and belief. Date: Signature Name and Address of the applicant List of Enclosures: a. Registration fees Rs 50,000/- through NEFT/RTGS/IMPS or any other mode allowed by RBI or by draft in favour of The Securities and Exchange Board of India . b. Copy of relevant clause of MOA duly certified by the Stock Exchange. c. Certificate from the qualified Chartered Accountant certifying the networth and paid up capital. d. Undertaking by applicant that he/ it had not introduced through any member broker/ sub-broker of the Exchange any fake/forged/stolen shares in the Exchange/market. If yes, details thereof including action taken, if any, by the applicant. Certification by Stock Exchange The above details have been scrutinised as per record made available to the Stock Exchange. SIGNATURE: NAME: DESIGNATION: SEAL OF STOCK EXCHANGE Certification from the Stock Exchange: This is to certify that i) The member is eligible to be admitted as the member of the Exchange as per the provisions of SC(R)A, SC(R)R, bye-laws of the exchange and circulars issued by Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. i. Form A ii. Additional Information Form iii. Undertakings furnished by the Applicant 4.2.2. Change of name applications for Brokers a. Stock Exchanges shall ensure that change of name applications should be accompanied by information from the Exchange as to whether the change in name is accompanied by / associated with change in majority shareholding / management / control. Applications not accompanied with such information from the Exchange would be returned to the concerned exchanges. b. Stock Exchanges shall instruct all the member brokers of the exchange to comply with the above instructions and ensure that applications forwarded to SEBI strictly adhere with the above time schedules / documents failing which the applications would be returned to the concerned Exchange. 4.3. Clarification regarding eligibility for availing fee continuity benefit by corporate entity formed by converting partnership membership card of the Exchange 4.3.1. In order to get benefit of clause I (4) of Schedule III of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, all erstwhile partner(s) should be wholetime directors in the corporate entity so formed, and the whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Brokers to permit their Sub-Brokers to start business only after receipt of Sub-Broker registration certificate from SEBI Reference: Circular SUB-BROK/CIR/02/2001 dated January 15, 2001. 6.1. As per Section 12(1) of the SEBI Act, 1992 read with Rule 3 of Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Rule 1992, no sub-broker shall buy, sell, deal in securities, unless he holds a certificate granted by the Board under the Regulations. Stock Exchanges shall inform all the brokers that their sub-brokers are permitted to start business only after clearance and receipt of registration certificate from SEBI. If any person contravenes or attempts to contravene or abets the contravention of the above said rule, shall be punishable under section 24(1) of SEBI Act 1992. 7. Admission of Limited Liability Partnerships as Members of Stock Exchanges Reference: Circular CIR/MIRSD/12/2011 dated July 11, 2011. 7.1. Securities Contract (Regulation) Rules, 1957 (SCRR) do not explicitly mention Limited Liability Partnerships (LLPs) as the Limited Liability Partnership Act, 2008 was a subsequent development. As per the LLP Act, LLP is a body corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Corporation, then for operating in any other segment of the Clearing Corporation or for operating in the Stock Exchange which has promoted that Clearing Corporation, the entity shall follow the procedure as prescribed in Clause 8.2.2 above. 8.2.4. Fees shall be applicable for all the stock brokers, self clearing members and clearing members as per Schedule V of the Broker Regulations. As per current practice, the entity shall continue to be liable to pay fees for each additional segment approved by the Stock Exchange or Clearing Corporation, as per the Schedule to the Brokers Regulations. For stock brokers coming under Schedule III, fees shall continue to be applicable as per that Schedule till such time as the Schedule V becomes applicable to them. 8.3. The Stock Exchange or Clearing Corporation shall grant approval for any additional segment to the stock broker, self-clearing member or clearing member, as the case may be, after exercising due diligence and on being satisfied about the compliance of all relevant eligibility requirements, and shall also ensure: 8.3.1. The applicant, its directors, proprietor, partners and associates satisfy the Fit and Proper Criteria a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered with SEBI as a clearing member in any Clearing Corporation, then for operating in any other Clearing Corporation(s) or any Stock Exchange, the entity shall follow the procedure as prescribed in Clause 9.2.2 above. 9.2.4. Fees shall be applicable for all the stock brokers, self-clearing members and clearing members as per Schedule V of the Broker Regulations. As per current requirement, the entity shall continue to be liable to pay fees for each segment approved by the Stock Exchange or Clearing Corporation, as per the Schedule to the Brokers Regulations. 9.3. The Stock Exchange or Clearing Corporation shall grant approval for operating in any segment(s) or additional segment(s) to the SEBI registered stock broker, self-clearing member or clearing member, as the case may be, after exercising due diligence and on being satisfied about the compliance of all relevant eligibility requirements, and shall also, inter-alia ensure: 9.3.1. The applicant, its directors, proprietor, partners and associates satisfy the Fit and Proper Criteria as defined in the SEBI (Intermediaries) Regulations, 2008; 9.3.2. The applicant has taken satisfactory corrective steps to rectify the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Rule 8(1)(f) and Rule 8(3)(f) of the Securities Contract (Regulation) Rules, 1957. 11. Online Registration Mechanism for Securities Market Intermediaries Reference: Circular SEBI/HO/MIRSD/MIRSD1/CIR/P/2017/38 dated May 02, 2017. 11.1. SEBI Intermediary Portal (https://siportal.sebi.gov.in) has been operationalized for the intermediaries to submit all the registration applications online. The SEBI Intermediary Portal includes online application for registration, processing of application, grant of final registration, application for surrender / cancellation, submission of periodical reports, requests for change of name / address / other details etc. 11.2. All applications for registration / surrender / other requests shall be made through SEBI Intermediary Portal only. The application in respect of stock brokers / sub-broker and depository participants shall continue to be made through the Stock Exchanges and Depositories respectively. 11.3. The applicants will be separately required to submit relevant documents viz. declarations / undertakings, in physical form, only for records without impacting the online processing of applications for registration. 11.4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular SMDRP/POLICY/CIR-39/2001 dated July 18, 2001 and Circular SEBI/MRD/SE/CIR-34/2003/29/09 dated September 29, 2003. 13.1. It shall be mandatory for the broker to use unique client code for all clients. For this purpose the broker shall collect and maintain in their back office the Permanent Account Number (PAN) allotted by the Income Tax Department for all their clients. 13.2. In case of other entities 13.2.1. Brokers shall verify the documents with respect to the unique code retain a copy of the document. 13.2.2. The brokers shall also be required to furnish the above particulars of their clients to the Stock Exchanges/Clearing Corporations and the same would be updated on a monthly basis. Such information for a specific month should reach the exchange within 7 working days of the following month. 13.2.3. The Stock Exchanges shall be required to maintain a database of client details submitted by brokers. Historical records of all quarterly submissions shall be maintained for a period of 7 years by the exchanges. 14. Simplification and Rationalization of Trading Account Opening Process Reference: Circular CIR/MIRSD/16/2011 dated August 22, 2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulations, Notices, Guidelines and Circulars issued by SEBI and the Stock Exchanges from time to time. Any such clause introduced in the existing as well as new documents shall stand null and void. 14.4. The client will now be required to sign only on one document i.e. Account Opening Form. Further, in the same form, the client shall continue to put his signatures instead of saying yes or tick mark while indicating preferences for trading in different exchanges / segments, in accordance with existing requirements. However, in case the investor wants to avail Running Account facility, execute Power of Attorney, etc., he would have to give specific authorization to the stock broker in order to avoid any dispute in the future. 14.5. In case the stock broker is also a depository participant, he can use the same KYC form (as specified in Annexure-2 ) for basic details and take additional information pertaining to demat account. 14.6. Stock Broker/ Depository Participant shall make available these standard documents to the clients, either in electronic or physical form, depending upon the preference of the client as part of account opening kit. The preference of the client ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voke the authorisation at any time. The stock brokers, while sending periodical statement of accounts to the clients, shall mention therein that their running account authorisation would continue until it is revoked by the clients. c. For the clients having outstanding obligations on the settlement date, the stock broker may retain the requisite securities/funds towards such obligations and may also retain the funds expected to be required to meet margin obligations for next 5 trading days, calculated in the manner specified by the exchanges. d. The actual settlement of funds and securities shall be done by the broker, at least once in 90 days / 30 days, depending on the preference of the client. While settling the account, the broker shall send to the client a statement of accounts containing an extract from the client ledger for funds and an extract from the register of securities displaying all receipts/deliveries of funds/securities. The statement shall also explain the retention of funds/securities and the details of the pledge, if any. e. The client shall bring any dispute arising from the statement of account or settlement so made to the notice of the broker prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust not result in funding by the broker in contravention of the applicable laws) 15.4.5. the right to sell clients securities or close clients positions, without giving notice to the client, on account of non-payment of client s dues (This shall be limited to the extent of settlement/margin obligation) 15.4.6. shortages in obligations arising out of internal netting of trades 15.4.7. conditions under which a client may not be allowed to take further position or the broker may close the existing position of a client 15.4.8. temporarily suspending or closing a client s account at the client s request, and 15.4.9. deregistering a client 15.5. All the documents in both the mandatory and the non-mandatory parts shall be printed in minimum font size of 11. 15.6. A copy of all the documents executed by client shall be given to him, free of charge, within 7 days from the date of execution of documents by the client. The stock broker shall take client s acknowledgement for receipt of the same. 15.7. The stock brokers having own web-sites shall display all the documents executed by a client, client s position, margin and other related information, statement of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the proof of address furnished by the said investor is not the address where the investor is currently residing, the intermediary may take a declaration of the residence/correspondence address on which all correspondence will be made by the intermediary with the investor. No proof is required to be submitted for such correspondence/residence address. In the event of change in this address due to relocation or any other reason, investor may intimate the new address for correspondence to the intermediary within two weeks of such a change. The residence/ correspondence address and any such change thereof may be verified by the intermediary through positive confirmation such as (i) acknowledgment of receipt Welcome Kit/ dispatch of contract notes / any periodical statement, etc. (ii) telephonic conversation; (iii) visits, etc. 17. The Securities and Exchange Board of India (KYC Registration Agency) Regulations, 2011 Reference: Circular CIR/MIRSD/22/2011 dated October 25, 2011, Circular MIRSD/CIR-23/2011 dated December 02, 2011, Circular MIRSD/CIR-26 dated December 23, 2011, SEBI (KYC Registration Agency) Amendment Regulation 2013 vide Notification no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation to KRA, as and when required. 17.4.7. The intermediary shall have adequate internal controls to ensure the security / authenticity of data uploaded by it. 17.5. Guidelines for KRAs 17.5.1. KRA system shall provide KYC information in data and image form to the intermediary. 17.5.2. KRA shall send a letter to the client within 10 working days of the receipt of the initial/updated KYC documents from intermediary, confirming the details thereof and maintain the proof of dispatch. 17.5.3. KRA(s) shall develop systems, in co-ordination with each other, to prevent duplication of entry of KYC details of a client and to ensure uniformity in formats of uploading / modification / downloading of KYC data by the intermediary. 17.5.4. KRA shall maintain an audit trail of the upload / modifications / downloads made in the KYC data, by the intermediary in its system. 17.5.5. KRA shall ensure that a comprehensive audit of its systems, controls, procedures, safeguards and security of information and documents is carried out annually by an independent auditor. The Audit Report along with the steps taken to rectify the deficiencies, if any, shall be placed before its Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mutual funds directly from the clients (i.e. not through any distributor), they may also rely upon the IPV performed by the scheduled commercial banks. 18. Operationalisation of Central KYC Records Registry (CKYCR) Reference: Circular CIR/MIRSD/66/2016 dated July 21, 2016 and Circular CIR/MIRSD/120/2016 dated November 10, 2016. 18.1. Government of India has authorized the Central Registry of Securitization and Asset Reconstruction and Security interest of India (CERSAI), set up under subsection (1) of Section 20 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, to act as, and to perform the functions of, the Central KYC Records Registry under the PML Rules 2005, including receiving, storing, safeguarding and retrieving the KYC records in digital form of a client , as defined in clause (ha) sub-section (1) of Section 2 of the Prevention of Money Laundering Act, 2002 18.2. As per the 2015 amendment to PML (Maintenance of Records) Rules, 2005 (the rules), every reporting entity shall capture the KYC information for sharing with the Central KYC Records Registry in the manner mentioned in the Rules, as per the KYC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Identity and Address of the client. However, the client shall have to authorize the intermediary to access his data through UIDAI system. 19.3. The Hon'ble Supreme Court, in Writ Petition (Civil) No. 494 of 2012 in the matter of Justice K.S. Puttaswamy (Retd.) Another vs Union of India Others, vide order dated August 11, 2015 and October 15, 2015 directed that the usage of the Aadhaar card as issued by the Unique Identification Authority of India (UIDAI) is voluntary. In view of the said orders, the usage of Aadhaar card is optional and purely on a voluntary basis, subject to the final judgment of the Hon ble Supreme Court in the aforesaid petition. 19.4. For accessing the details enabling client identification and authentication from UIDAI based on client authorisation, on voluntary basis, intermediaries who utilize the services of KYC Service Agencies (KSAs) would be registered as KYC User Agencies (KUA) with UIDAI. 19.5. For entering into account based relationship, the client may provide the following information to the intermediary: 19.5.1. Name 19.5.2. AADHAAR Number 19.5.3. Permanent Account Number (PAN) 19.6. The above information can be provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KYC) requirements for the securities markets vide circular nos. CIR/MIRSD/16/2011 dated August 22, 2011 and MIRSD/SE/Cir-21/2011 dated October 5, 2011. The SEBI KYC Registration Agency (KRA) Regulations, 2011 have been notified and guidelines have been issued under these regulations from time to time. 20.3. Further, the Prevention of Money Laundering Rules, 2005 also require that every banking company, financial institution and intermediary, as the case may be, shall identify the beneficial owner and take all reasonable steps to verify his identity. The Government of India in consultation with the regulators has now specified a uniform approach to be followed towards determination of beneficial ownership. Accordingly, the intermediaries shall comply with the following guidelines. 20.3.1. For clients other than individuals or trusts - Where the client is a person other than an individual or trust, viz., company, partnership or unincorporated association/body of individuals, the intermediary shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the following information: a. The identity of the natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of identification of beneficial ownership of the client. III. SUPERVISION OVERSIGHT 21. Oversight of Members (Stock Brokers/Trading Members/Clearing Members of any Segment of Stock Exchanges and Clearing Corporations) Reference: Circular SEBI/MIRSD/MASTER CIR-04/2010 dated March 17, 2010 and Circular CIR/MIRSD/13/2012 dated December 07, 2012. 21.1. Inspection of Members by Stock Exchanges / Clearing Corporations 21.1.1. The Stock Exchange or the Clearing Corporation, as the case may be, shall, in consultation with SEBI, formulate a policy for annual inspection of their members in various segments and follow up action thereon. The policy shall also cover various kinds of risks posed to the investors and market at large on account of the activities/business conduct of their members. 21.1.2. The Stock Exchange or the Clearing Corporation, as the case may be, shall conduct inspection of their members in various segments in terms of the above policy and in case of members who hold multiple memberships of the exchanges, the Stock Exchanges shall establish an information sharing mechanism with one another on the important outcome of inspection in order to improv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016/95 dated September 26, 2016. from the end of the half year period. 21.2.4. The Stock Exchange/Clearing Corporation shall analyze the audit reports so received and take appropriate follow up action. 21.2.5. The Stock Exchange/Clearing Corporation shall initiate appropriate actions remedial, penal or disciplinary - against the members where deficiencies are noticed in audit reports or where audit report has not been received, and inform the details of action taken to SEBI, within six months from the end of the half year period. 21.3. Default in case of Multiple Membership 21.3.1. Whenever a member of any segment is declared defaulter, the concerned Stock Exchange/Clearing Corporation shall immediately declare it a defaulter in all its segments. It shall also immediately inform all other Stock Exchanges/Clearing Corporations the details of the defaulter member such as name of the member, the names of the proprietors/partners/promoters/dominant shareholders, as applicable. 21.3.2. Immediately on receipt of the information about default of a member, the Stock Exchange / Clearing Corporation shall declare the said member defaulter on all its segments. 21.3.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... numbers, Order no. time. Contract notes are not issued in the prescribed format/not issued within 24 hours of trade execution/not signed properly by the broker or his authorized representatives. 4. Duplicates/counterfoils/acknowledged copies of the contract notes issued not being maintained or maintained with inadequate details. 5. Not issuing contracts in the prescribed format while acting as principal. 6. Appropriate stamp duty not paid and charging Securities Transaction Tax (STT) on non equity funds transactions by the brokers. 7. Brokerage is not shown separately on contract notes. The correct rate at which the transaction was executed is not passed on to the client. 8. Charges other than brokerage and statutory charges levied on the clients which are not specifically agreed upon by the clients or charging more than the limits prescribed. 9. In case the Electronic Contract Notes (ECN) are issued, the same are not made available on brokers websites/ sending ECN on single email-id for a group of clients/not maintaining ECN logs for ECN sent to the clients. III Relating to Investor services 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng orders in the trading system. 27. The broker granting the trading terminals at places other than that specified by SEBI e.g. registered office, branch office or registered sub-brokers offices. 28. Terminals operated by personnel without having proper qualification/ persons operating the terminal are not employees/remisiers/sub-brokers of stock brokers. VI Others 29. Non-maintenance or improper maintenance of Books of Accounts which are required to be maintained as per Rule 15 of SC (R) Rules, 1957 and Regulation 17 of SEBI (Brokers and Sub-Brokers) Regulations 1992. 30. Non-compliance with provisions relating to spot/negotiated deals. 31. Instances of the broker/dealers/others connected with the broker, involved in front running, circular trading, creating false markets, misuse of the exchange mechanism for securing financing transactions, entering fictitious transactions and illegal transactions. 32. Non submission of audit report/internal audit reports within the prescribed time limit. 33. Dealing with unregistered sub-brokers/acting through brokers of other exchanges for its clients without r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd arbitration cases filed by investors shall be inspected irrespective of the fact of when they were last inspected. 1.5. Stock Brokers having adverse observations in the internal audit report on high risk issues like wrong reporting of margins, transfer of trades, pledging of client securities, dealing with unregistered intermediaries etc., shall be inspected irrespective of the fact of when they were last inspected. 1.6. Subsidiaries of Regional Stock Exchanges shall be inspected every year. 1.7. Stock Exchange shall frame internal policy for selection of stock brokers for inspection based on inputs/alerts from Risk Based Supervision. 1.8. Besides the above, the special purpose/limited inspections shall be carried out based on any triggers like patterns found during investor complaint resolution/Arbitration, complaints on specific malpractices of a broker or references from various authorities. The inspection shall be irrespective of the fact of when the last inspection was carried out. 1.9. Apart from the above few stock brokers shall be selected by the Stock Exchanges on a random basis for inspection. 1.10. Stock Brokers who do not fall unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Stock Exchanges, through a sophisticated alerting and reconciliation mechanism, to detect any misutilisation of clients fund. 23.1.3. Changes in the existing system of internal audit for stock brokers/depository participants viz. appointment, rotation of Internal Auditors, formulation of objective sample criteria, monitoring of quality of Internal Audit Reports, timeline for submissions of Internal Audit Reports, etc. 23.1.4. Monitoring of Financial Strength of Stock Brokers by Stock Exchanges so as to detect any signs of deteriorating financial health of stock brokers and serve as an early warning system to take preemptive and remedial measures. 23.1.5. Imposition of uniform penal action on stock brokers/depository participants by the Stock Exchanges/Depositories in the event of non-compliance with specified requirements. 23.1.6. Other Requirements: a) Uploading client's funds and securities balances by Stock Brokers to Stock Exchange System and onwards transmission of the same to the clients for better transparency. b) Clarification on Running Account Settlement c) Providing PAN details of Directors, Key Management Personnel and Dealers, to Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k broking activities. 2.2. The stock brokers shall inform the Stock Exchanges of existing and new demat account(s) in the following format: Name of DP Account Number/ Client ID DP ID Name of Account Holder PAN Sub-type/ tag of Demat Account (Proprietary/ Client/ Pool/ Collateral) Date of Opening 2.3. Stock Exchanges and/or Depositories, as the case may be, shall ensure the following: 2.3.1. All new bank and demat accounts opened by the stock brokers shall be named as per the above given nomenclature and the details shall be communicated to the Stock Exchanges within one week of the opening of the account. 2.3.2. In case of closure of any of the reported bank and demat accounts, the same shall be communicated to the Stock Exchanges within one week of its closure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e broker during the half yearly internal audits. 2.5. As per existing norms, a stock broker is entitled to have a lien on client's securities to the extent of the client's indebtedness to the stock broker and the stock broker may pledge those securities. Pledge of such securities is permitted, only if, the same is done through Depository system in compliance with Regulation 58 of the SEBI (Depositories and Participants) Regulations, 1996. To strengthen the existing mechanism, the stock brokers shall ensure the following: 2.5.1. Securities of only those clients can be pledged who have a debit balance in their ledger. 2.5.2. Funds raised against such pledged securities for a client shall not exceed the debit balance in the ledger of that particular client. 2.5.3. Funds raised against such pledged securities shall be credited only to the bank account named as Name of the Stock Broker - Client Account . 2.5.4. The securities to be pledged shall be pledged from BO account tagged as Name of the Stock Broker - Client Account . 2.5.5. Stock Brokers shall send a statement reflecting the pledge and funding to the clients as and when their securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A- Aggregate of fund balances available in all Client Bank Accounts, including the Settlement Account, maintained by the stock broker across Stock Exchanges. B- Aggregate value of collateral deposited with Clearing Corporation and/or clearing member (in cases where the trades are settled through clearing member) in form of Cash and Cash Equivalents (Fixed deposit (FD), Bank guarantee (BG), etc.) (across Stock Exchanges). Only funded portion of the BG, i. e. the amount deposited by stock broker with the bank to obtain the BG, shall be considered as part of B. C- Aggregate value of Credit Balances of all clients as obtained from trial balance across Stock Exchanges (after adjusting for open bills of clients, uncleared cheques deposited by clients and uncleared cheques issued to clients and the margin obligations). D- Aggregate value of Debit Balances of all clients as obtained from trial balance across Stock Exchanges (after adjusting for open bills of clients, uncleared cheques deposited by clients, uncleared cheques issued to clients and the margin obligations). E- Aggregate value of proprietary non-cash collaterals i.e. securities which have been deposited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proprietary margin obligations (across Stock Exchanges) is less than the own funds and securities lying with the Stock Exchanges as collateral deposit, as follows: Principle: The sum of Proprietary funds and securities i.e. (G + E + F) lying with the Clearing Corporation/clearing member should be greater than or equal to Proprietary margin obligations (P). If value of G is positive (i.e. A+B C), then proprietary funds are lying with the Clearing Corporation/clearing member and/or client bank accounts along with the clients funds to the extent of positive value of G. The sum of the proprietary funds (positive value of G), the value of proprietary securities (E) and the non-funded portion of bank guarantee (F) available in the Stock Exchanges is compared with the Proprietary margin obligations (P). If P (G+E+F), then Stock Exchange shall calculate the difference I, which is the amount of proprietary margin obligation funded from clients assets. I = P - (G+E+F) If G is negative, then, value of G is considered as 0, as there is no proprietary funds lying with the Stock Exchange. The value of I indicates the extent of funds and se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate actions to protect the clients funds from being misused. Stock Exchanges shall also maintain records of such clarifications sought and details of such inspections. The aforesaid calculations are illustrated in tabular format in Table 1, 2 3 given at the end of the Annexure . 3.5. Stock Exchanges shall carry out the monitoring of clients funds for all stock brokers, except for those who are carrying out only proprietary trading and/or only trading for institutional clients. 3.6. Stock Brokers shall ensure due compliance in submitting the information to the Exchanges within the stipulated time. 4. Internal Audit of Stock Broker 4.1. SEBI has mandated half yearly internal audit for stock brokers/clearing members. The following additional requirements in relation to internal auditors shall become applicable: 4.2. Appointment and Rotation of Internal auditors 4.2.1. Stock Exchanges shall ensure that; 4.2.1.1. Stock Broker obtains from the internal auditor the following details and shares the same with the Stock Exchange: a. Declaration stating that the internal auditor or its directors/partners have no interest in or relation wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. 4.4. Monitoring of quality of Internal Audit Reports 4.4.1. The Stock Exchange shall every year identify a certain number of internal auditors based on criteria, such as, number and size of stock brokers audited, discrepancy in findings of auditor vis- -vis Stock Exchange inspection, regulatory actions taken against the auditor/partners/directors, etc. A certain number of stock brokers who have been audited by these identified internal auditors shall be selected for inspection by the Stock Exchanges. The selection of these stock brokers shall be on the basis of the Supervisory Risk Rating Score derived from the Risk Based Supervisory System. Further, the sample and period of inspection shall be the same as that used for internal audit. 4.4.2. In cases where material deviations are observed between the findings of the internal audit report and the Stock Exchange inspection report, the Stock Exchanges shall caution the stock broker to reconsider the appointment of that particular internal auditor. The same shall also be brought to notice of all the stock brokers who are audited by that particular internal auditor. The Stock Exchange shall also bring the deviat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or associates or firms or entities) / (Net worth). c. (Value of maximum outstanding inter corporate debt during the year) / (Net worth). d. (Value of maximum outstanding inter corporate debt during the year) / (Share capital). 5.2. Stock Brokers shall submit financial statements to Stock Exchanges in the same format as prescribed under Companies Act, 2013 irrespective of whether they fall under the purview of Companies Act, 2013 or not. The due date for submission of the aforesaid financial statements to Stock Exchanges shall be the same as prescribed under Companies Act, 2013 for submission to Registrar of Companies. 5.3. No stock broker shall appoint or re-appoint- 5.3.1. an individual as statutory auditor for more than one term of five consecutive years; and 5.3.2. an audit firm as statutory auditor for more than two terms of five consecutive years: Provided that 5.4. An individual statutory auditor who has completed his term under clause 5.3.1 above shall not be eligible for re-appointment as statutory auditor in the same stock broker for five years from the completion of his term. 5.5. A statutory audit firm whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... broker shares incomplete/wrong data or fails to submit data on time. k. Failure to submit financial statements as per timeline prescribed under Companies Act, 2013. 6.1.2. Monitoring criteria for Depository Participants a. Failure to furnish Networth certificate to Depository for year ending March 31st by September 30th. b. Failure to furnish Internal Audit report to Depository for half year ending September 30th by November 15th and half year ending March 31st by May 15th. c. Failure to co-operate with the Depository for conducting inspection by not submitting all the information/records sought within 45 days from the due date specified in the letter of intimation. d. Failure to submit data for the half yearly Risk Based Supervision within the time specified by Depositories. e. Failure to furnish half yearly compliance certificate/report to Depository for half year ending June 30th by July 30th and half year ending December 31st by January 31st. f. Failure to furnish monthly Investor grievance report by 10th day of next month. g. In case depository participant shares incomplete/wrong data or fails to submit data on time. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock broker to the Exchange for their clients. 8. Running Account Settlement 8.1. The stock broker shall ensure that; 8.1.1. There must be a gap of maximum 90/30 days (as per the choice of client viz. Quarterly/Monthly) between two running account settlements. 8.1.2. For the purpose of settlement of funds, the mode of transfer of funds shall be by way of electronic funds transfer viz., through National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), etc. 8.1.3. The required bank details for initiating electronic fund transfers shall be obtained from new clients and shall be updated for existing clients. Only in cases where electronic payment instructions have failed or have been rejected by the bank, then the stock broker may issue a physical payment instrument. 8.1.4. Statement of accounts containing an extract from client ledger for funds securities along with a statement explaining the retention of funds/securities shall be sent within five days from the date when the account is considered to be settled. 9. Providing PAN Number 9.1. The stock brokers shall provide Permanent Account Numbers of all their Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck broker Amount of funds of one client used for settlement obligation another client = Total Debit balances of all Clients (after adjusting for open bills and uncleared cheques) Misuse of client s fund for own purpose = Absolute value of G - Total Debit balances of all clients (after adjusting for open bills and uncleared cheques) Table 2 RECONCILIATION - Funds of clients used for Margin obligation of proprietary trading: G(if positive) - own money Value of Own Securities Deposited as Collateral with Clearing Corporation/ Clearing member - across all Stock Exchanges Non funded portion of the Bank Guarantee (F) - across all Stock Exchanges Proprietary margin Obligation across all Stock Exchanges Difference G (from the reconciliation stage I - positive value) E F P I = P - (G+E+F) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem auditors, broker wise, on a quarterly basis to SEBI. Stock Broker System Audit Framework 1. Audit Process 1.1. System Audit of stock brokers should be conducted with the following periodicity: 1.1.1. Annual system audit is prescribed for stock brokers who satisfy any of the following criteria: a. Stock Brokers who use [Computer-to-Computer Link (CTCL) or Intermediate Messaging Layer (IML)] (or other similar trading facilities) / Internet Based Trading (IBT)/ Direct Market Access (DMA)/ Securities Trading using Wireless Technology (STWT) / Smart Order Routing (SOR) and have presence in more than 10 locations or number of terminals are more than 50. b. Stock Brokers who are depository participants or are involved in offering any other financial services. 1.1.2. Half yearly system audit has been prescribed for stock brokers who use Algorithmic Trading or provide their clients with the facility of Algorithmic Trading as per SEBI Circular CIR/MRD/16/2013 dated May 21, 2013. 1.1.3. For all other stock brokers, system audit shall be conducted once in two years. 1.2. Such audit shall be conducted in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the exchange) corrective action must be taken and reported to the Stock Exchange. The auditor should indicate if a follow-on audit is required to review the status of NCs. 1.7. In order to ensure that the corrective actions are taken by the stock broker, follow-on audit, if any, shall be scheduled by the stock broker within 6 months of submission of the audit report by the system auditor. 1.8. The system auditors should follow the reporting standard as specified in Annexure IV of this Framework for the executive summary of the System Audit report to highlight the major findings of the System Audit. 2. Auditor Selection Norms 2.1. The Auditor shall have minimum 3 years of experience in IT audit of securities market participants e.g. Stock Exchanges, Clearing Corporation, Depositories, stock brokers, depository participants etc. The audit experience should cover all the major areas mentioned under Terms of Reference (ToR) of the system audit specified by SEBI / Stock Exchange. 2.2. It is recommended that resources employed shall have relevant industry recognized certifications e.g. D.I.S.A. (ICAI) Qualification, CISA (Certified Information System Aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he system of online risk management (including upfront real-time risk management) is in place for all orders placed through exchange provided terminals. 3.2.2. Trading Limits Whether a system of pre-defined limits / checks such as Order Quantity and Value Limits, Symbol wise User Order / Quantity limit, User / Branch Order Limit, Order Price limit, etc) are in place and only such orders which are within the parameters specified by the RMS are allowed to be pushed into exchange trading engines. The system auditor should check that no user or branch in the system is having unlimited limits on the above parameters. 3.2.3. Order Alerts and Reports Whether the system has capability to generate alerts when orders that are placed are above the limits and has capability to generate reports relating to Margin Requirements, payments and delivery obligations. 3.2.4. Order Review Whether the system has capability to facilitate review of such orders were not validated by the system. 3.2.5. Back testing for effectiveness of RMS Whether the system has capability to identify trades which have exceeded the pre-defined limits (Order Quantity and Value Limits, Sym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s connectivity Whether stock broker has ensured that a backup network link is available in case of primary link failure with the exchange. 3.5.2. Network Architecture Whether the web server is separate from the Application and Database Server. 3.5.3. Firewall Configuration Whether appropriate firewall is present between stock broker's trading setup and various communication links to the exchange. Whether the firewall is appropriately configured to ensure maximum security. 3.6. Access Controls 3.6.1. Access to server rooms Whether adequate controls are in place for access to server rooms and proper audit trails are maintained for the same. 3.6.2. Additional Access controls Whether the system provides for any authentication mechanism to access to various components of the exchange provided terminals. Whether additional password requirements are set for critical features of the system. Whether the access control is adequate 3.7. Backup and Recovery 3.7.1. Backup and Recovery Policy Whether the organization has a well documented policy on periodic backup of data generated from the broking operations. 3.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regularly reviewed and updated. Compliance with these policies is periodically assessed. 3.11.2. IT Infrastructure Planning The system auditor should verify whether the plans/policy for the appropriate management and replacement of aging IT infrastructure components have been documented, approved, and implemented. The activities, schedules and resources needed to achieve objectives related to IT infrastructure have been integrated into business plans and budgets. 3.11.3. IT Infrastructure Availability (SLA Parameters) The system auditor should verify whether the broking firm has a process in place to define its required availability of the IT infrastructure, and its tolerance to outages. In cases where there is huge reliance on vendors for the provision of IT services to the brokerage firm the system auditor should also verify that the mean time to recovery (MTTR) mentioned in the Service Level Agreement (SLA) by the service provider satisfies the requirements of the broking firm. 3.11.4. IT Performance Monitoring (SLA Monitoring) The system auditor should verify that the results of SLA performance monitoring are documented and are reported to the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, release note approvals. 4.2.7. Production issues / disruptions reported during last year, reasons for such disruptions and corrective actions taken. 4.2.8. User Awareness. The system auditor should check whether critical changes made to the (CTCL or IML) / IBT / DMA / STWT/ SOR are well documented and communicated to the Stock Exchange. 4.3. Risk Management System (RMS) 4.3.1. Online risk management capability The system auditor should check whether system of online risk management including upfront real-time risk management, is in place for all orders placed through (CTCL or IML) / IBT / DMA / STWT. 4.3.2. Trading Limits Whether a system of pre-defined limits /checks such as Order Quantity and Value Limits, Symbol wise User Order / Quantity limit, User / Branch Order Limit, Order Price limit, etc., are in place and only such orders which are within the parameters specified by the RMS are allowed to be pushed into exchange trading engines. The system auditor should check that no user or branch in the system is having unlimited limits on the above parameters. 4.3.3. Order Alerts and Reports Whether the system has capability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor should check whether an alternative mode of trading is available in case of failure of SOR Facility. 4.5. Password Security 4.5.1. Organization Access Policy Whether organization has a well documented policy that provides for a password policy as well as access control policy for exchange provided terminals and for API based terminals. 4.5.2. Authentication Capability Whether the system authenticates user credentials by means of a password before allowing the user to login, and whether there is a system for authentication of orders originating from Internet Protocol by means of two-factor authentication, including Public Key Infrastructure (PKI) based implementation of digital signatures. 4.5.3. Password Best Practices Whether there is a system provision for masking of password, system prompt to change default password on first login, disablement of user id on entering multiple wrong passwords (as defined in the password policy document), periodic password change mandate and appropriate prompt to user, strong parameters for password, deactivation of dormant user id, etc. 4.6. Session Management 4.6.1. Session Authentication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta consistency - Whether backup logs are maintained and backup data is tested for consistency. 4.10.3. System Redundancy Whether there are appropriate backups in case of failures of any critical system components. 4.11. BCP/DR (Only applicable for Stock Brokers having BCP / DR site) 4.11.1. BCP / DR Policy Whether the stock broker has a well documented BCP/ DR policy and plan. The system auditor should comment on the documented incident response procedures. 4.11.2. Alternate channel of communication Whether the stock broker has provided its clients with alternate means of communication including channel for communication in case of a disaster. Whether the alternate channel is capable of authenticating the user after asking for additional details or OTP (One-Time-Password). 4.11.3. High Availability Whether BCP / DR systems and network connectivity provide high availability and have no single point of failure for any critical operations as identified by the BCP/ DR policy. 4.11.4. Connectivity with other FMIs The system auditor should check whether there is an alternative medium to communicate with Stock Exchanges and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the appropriate management and replacement of aging IT infrastructure components have been documented, approved, and implemented. The activities, schedules and resources needed to achieve objectives related to IT infrastructure have been integrated into business plans and budgets. 4.15.3. IT Infrastructure Availability (SLA Parameters) The system auditor should verify whether the broking firm has a process in place to define its required availability of the IT infrastructure, and its tolerance to outages. In cases where there is huge reliance on vendors for the provision of IT services to the brokerage firm the system auditor should also verify that the mean time to recovery (MTTR) mentioned in the Service Level Agreement (SLA) by the service provider satisfies the requirements of the broking firm. 4.15.4. IT Performance Monitoring (SLA Monitoring) The system auditor should verify that the results of SLA performance monitoring are documented and are reported to the management of the broker. 4.16. Exchange specific exceptional reports The additional checks recommended by a particular exchange need to be looked into and commented upon by the System ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orithmic Trading. 5.2. Software Change Management - The system auditor should check whether proper procedures have been followed and proper documentation has been maintained for the following: 5.2.1. Processing / approval methodology of new feature request or patches. 5.2.2. Fault reporting / tracking mechanism and process for resolution. 5.2.3. Testing of new releases / patches / modified software / bug fixes. 5.2.4. Version control- History, Change Management process, approval etc. 5.2.5. Development / Test / Production environment segregation. 5.2.6. New release in production promotion, release note approvals. 5.2.7. Production issues / disruptions reported during last year, reasons for such disruptions and corrective actions taken. 5.2.8. User Awareness. The system auditor should check whether critical changes made to the (CTCL or IML) / IBT / DMA / STWT/ SOR are well documented and communicated to the Stock Exchange. 5.3. Risk Management System (RMS) 5.3.1. Online risk management capability The system auditor should check whether the online risk management including upfront real-time risk managem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides functionality to the client who has availed of the SOR facility, to specify for individual orders for which the clients do not want to route order using SOR. 5.4.6. Time stamped market information The system is capable of receiving time stamped market prices from recognized Stock Exchanges from which the member is authorized to avail SOR facility. 5.4.7. Audit Trail - Audit trail for SOR should capture order details, trades and data points used as a basis for routing decision. 5.4.8. Server Location The system auditor should check whether the order routing server is located in India. 5.4.9. Alternate Mode - The system auditor should check whether an alternative mode of trading is available in case of failure of SOR Facility. 5.5. Algorithmic Trading - The system auditor should check whether proper procedures have been followed and proper documentation has been maintained for the following: 5.5.1. Change Management Whether any changes (modification/addition) to the approved algos were informed to and approved by Stock Exchange. The inclusion / removal of different versions of algos should be well documented. 5.5.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for carrying out trading through use of Algorithms. The system auditor should also identify any misuse or unauthorized access to algorithms or the system which runs these algorithms. 5.5.9. Reporting to Stock Exchanges The system auditor should check whether the stock broker is informing the Stock Exchange regarding any incidents where the algos have not behaved as expected. The system auditor should also comment upon the time taken by the stock broker to inform the Stock Exchanges regarding such incidents. 5.6. Password Security 5.6.1. Organization Access Policy The system auditor should whether the stock broker has a well-documented policy that provides for a password policy as well as access control policy for exchange provided terminals and for API based terminals. 5.6.2. Authentication Capability Whether the system authenticates user credentials by means of a password before allowing the user to login. Whether there is a system for authentication of orders originating from Internet Protocol by means of two-factor authentication, including Public Key Infrastructure (PKI) based implementation of digital signatures. 5.6.3. Password Bes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e system should provide for two factor authentication mechanism to access to various CTCL or IML components. Whether additional password requirements are set for critical features of the system. Whether the access control is adequate. 5.11. Backup and Recovery 5.11.1. Backup and Recovery Policy Whether the organization has a well documented policy on periodic backup of data generated from the broking operations. 5.11.2. Log generation and data consistency Whether backup logs are maintained and backup data should be tested for consistency. 5.11.3. System Redundancy Whether there are appropriate backups in case of failures of any critical system components 5.12. BCP/DR (Only applicable for Stock Brokers having BCP / DR site) 5.12.1. BCP / DR Policy Whether the stock broker has a well-documented BCP / DR policy and plan. The system auditor should comment on the documented incident response procedures. 5.12.2. Alternate channel of communication Whether the stock broker has provided its clients with alternative means of communication including channel for communication in case of a disaster. Whether the alternate channel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing models such as Infrastructure as a service (IaaS), Platform as a service (PaaS), Software as a service (SaaS), Network as a service (NaaS)) 5.16.1. IT Governance and Policy The system auditor should verify whether the relevant IT Infrastructure-related policies and standards exist and are regularly reviewed and updated. Compliance with these policies is periodically assessed. 5.16.2. IT Infrastructure Planning The system auditor should verify whether the plans/policy for the appropriate management and replacement of aging IT infrastructure components have been documented, approved, and implemented. The activities, schedules and resources needed to achieve objectives related to IT infrastructure have been integrated into business plans and budgets. 5.16.3. IT Infrastructure Availability (SLA Parameters) The system auditor should verify whether the broking firm has a process in place to define its required availability of the IT infrastructure, and its tolerance to outages. In cases where there is huge reliance on vendors for the provision of IT services to the brokerage firm the system auditor should also verify that the mean time to recovery (MTTR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/ Observations Description of the findings in sufficient detail, referencing any accompanying evidence (e.g. copies of procedures, interview notes, screen shots etc.) 3. Status/ Nature of Findings - the category can be specified for example: a. Non-Compliant b. Work In progress c. Observation d. Suggestion 4. Risk Rating of Findings A rating has to been given for each of the observations based on their impact and severity to reflect the risk exposure, as well as the suggested priority for action. Rating Description HIGH Weakness in control those represent exposure to the organization or risks that could lead to instances of non-compliance with the requirements of TORs. These risks need to be addressed with utmost priority. MEDIUM Potential weakness in controls, which could develop into an exposure or issues that represent areas of concern and may impact internal controls. These should be addressed reasonably promptly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney of the clients in a separate account and their own money in a separate account. No payment for transactions in which the Member broker is taking a position as a principal will be allowed to be made from the client s account. The above principles and the circumstances under which transfer from client s account to Member broker s account would be allowed are enumerated below. 25.1.1. Member Broker to keep accounts: Every member broker shall keep such books of accounts, as will be necessary, to show and distinguish in connection with his business as a member: a. Moneys received from or on account of each of his clients and b. the moneys received and the moneys paid on Member s own account 25.1.2. Obligation to pay money into clients accounts . Every member broker who holds or receives money on account of a client shall forthwith pay such money to current or deposit account at bank to be kept in the name of the member in the title of which the word clients shall appear (hereinafter referred to as clients account ). Member broker may keep one consolidated clients account for all the clients or accounts in the name of each client, as he thinks fit. Provided that when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his nominee(s). 25.2.4. Securities that are fully paid for and are held in custody by the Member as security/margin etc. Proper authorization from client for the same shall be obtained by Member. 25.2.5. Fully paid for client s securities registered in the name of Member, if any, towards margin requirements etc. 25.2.6. Securities given on Vyaj-badla. Member shall obtain authorization from clients for the same. 25.3. Member Brokers shall make payment to their clients or deliver the securities purchased within 24 hours of pay-out unless the client has requested otherwise Words two working days replaced with 24 hours in view of Para 12 of Annexure-A of SEBI circular MIRSD/SE/CIR-9/2009 dated December 03, 2009.. 25.4. Member brokers shall issue the contract note for purchase/sale of securities to a client within 24 hours of the execution of the contract. 25.5. In case of purchases on behalf of clients, Member brokers shall be a liberty to close out the transactions by selling the securities, in case the client fails to make the full payment to the Member Broker for the execution of the contract within two days of contract note having been delivered for cash s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s related to misuse of collateral deposited by clients, exchanges should look into the allegations, conduct inspection of broker if required and based on its findings take necessary action. 26.3. In case client collateral is found to be mis-utilised, the broker would attract appropriate deterrent penalty for violation of norms provided under Securities Contract Regulation Act, SEBI Act, SEBI Regulations and circulars, Exchange Byelaws, Rules, Regulations and circulars. 27. Severance of connections with other businesses Reference: Circular SMD/VRN/1476/95 dated April 27, 1995. 27.1. Rule 8(1)(f) and Rule 8(3)(f) of the Securities Contract (Regulation) Rules, 1957, requires that members of a Stock Exchange, whether individual, partnership or corporate, shall not engage in any business other than that of securities. Stock Exchanges should be ensured that the applicants do not attract the above stated rule. 28. Applicability of Rule 8(1)(f) and 8(3)(f) of the Securities Contract (Regulation) Rules, 1957 Reference: Circular SMD/POLICY/CIR-6/97 dated May 07, 1997. 28.1. Borrowing and lending of funds, by a trading member, in connection with or incidental to or co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the instrument. 30.1.2. Maintain an audit trail of the funds received through electronic fund transfers to ensure that the funds are received from their clients only. 31. Disclosure of proprietary trading by Broker to Client Reference: Circular SEBI/MRD/SE/CIR-42/2003 dated November 19, 2003. 31.1. With a view to increase the transparency in the dealings between the broker and the client, every broker shall disclose to his client whether he does client based business or proprietary trading as well. 31.2. The broker shall disclose this information upfront to his new clients at the time of entering into the Know Your Client agreement. 31.3. In case of a broker who at present does not trade on proprietary account, chooses to do so at a later date, he shall be required to disclose this to his clients before carrying out any proprietary trading. 32. Pro account trading terminal Reference: Circular SEBI/MRD/SE/CIR-32/2003/27/08 dated August 27, 2003 32.1. During the course of inspections carried out by SEBI and Stock Exchanges of the books of accounts and other documents of members, following observations were made: 32.1.1. Certain members are putti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerns, Stock Exchanges are directed to ensure the following: 33.3.1. A stock broker/ sub-broker of an exchange cannot deal with brokers/sub-brokers of the same exchange either for proprietary trading or for trading on behalf of clients, except with the prior permission of the exchange. The Stock Exchanges while giving such permission, shall consider the reasons stated by the brokers/sub-brokers for dealing with brokers/sub-brokers of the same exchange and after carrying out due diligence allow such brokers/sub-brokers to deal with only one stock broker/sub-broker of the same exchange. 33.3.2. A stock broker/sub-broker of an exchange can deal with only one broker/sub-broker of another exchange for proprietary trading after intimating the names of such stock broker/sub-broker to his parent Stock Exchange. 33.3.3. As per Regulation 15(1) (e) of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 a sub-broker shall not be affiliated to more than one stock broker of one Stock Exchange. It is reiterated that a stock broker of an exchange can deal with only one broker of another exchange on behalf of clients after obtaining necessary registration as a sub-broker. 34. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on contains a clause permitting the person to deal in securities business. 34.4.3. The person shall have the necessary infrastructure like adequate office space, equipment and manpower to effectively discharge the activities on behalf of the stock broker. 34.4.4. The approved users and/or sales personnel of Authorised Persons shall have the necessary certification of the respective segments at all points of time. 34.5. Conditions of Appointment 34.5.1. The following are the conditions of appointment of an authorised person: a. The stock broker shall be responsible for all acts of omission and commission of the authorized person. b. All acts of omission and commission of the authorized person shall be deemed to be those of the stock broker. c. The authorized person shall not receive or pay any money or securities in its own name or account. All receipts and payments of securities and funds shall be in the name or account of stock broker. d. The authorised person shall receive his remuneration - fees, charges, commission, salary, etc. - for his services only from the stock broker and he shall not charge any amount from the clients. e. A person shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y document to client in its own name. No fund/securities of clients shall go to account of authorized person. 34.7.7. On noticing irregularities, if any, in the operations of authorised person, stock broker shall seek withdrawal of approval, withhold all moneys due to authorised person till resolution of investor problems, alert investors in the location where authorised person operates, file a complaint with the police, and take all measures required to protect the interest of investors and market. 34.8. Obligations of Exchange 34.8.1. The Stock Exchange shall maintain a database of all the authorised persons which shall include the following: a. PAN Number of authorised person and in case of partnership or body corporate, PAN Number of all the partners or directors as the case may be. b. Details of the broker with whom the authorised person is registered. c. Locations of branch assigned to authorised person(s). d. Number of terminals and their details, given to each authorised person. e. Withdrawal of approval of authorised person. f. Change in status or constitution of authorised person. g. Disciplinary action taken by the Exchange against the authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary steps to verify the details by any mode as considered appropriate by them which may include the following: a. By way of sending SMS and E-mail directly to the investors at the numbers/E-mail address uploaded by the stock brokers. b. By way of sending letters to the address of the investors uploaded by the stock brokers. 35.4. Sending of alerts by the Stock Exchanges 35.4.1. Upon receipt of confirmation from the investors, the Stock Exchanges shall commence sending the transaction details generated based on investors Permanent Account Number, directly to them. 35.5. Handling of discrepancies, if any 35.5.1. If any discrepancy is observed by the Stock Exchanges in the details uploaded by the stock brokers including non-confirmation by investors, bounced E-mails, undelivered SMS/letters, etc., the Stock Exchanges shall inform the respective stock broker. 35.6. Meeting out the expenses for providing SMS and E-mail alerts 35.6.1. The Stock Exchanges may use the amount set aside from the listing fees (20% of the listing fees) for providing services to the investing public, to meet the expenses for providing this facility. 36. Prevention of Unauthoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 23, 2010 and CIR/MRD/DMS/28/2010 dated August 31, 2010. 37.1. A Power of Attorney (PoA) is executed by the client in favour of the stock broker /stock broker and depository participant to authorize the broker to operate the client s demat account and bank account to facilitate the delivery of shares and pay in/ pay out of funds. 37.2. Generally, the PoA is taken from the clients who want to avail internet based trading services. For offering internet based trading services, a Stock Broker requires necessary authorizations for seamless trading, collection of margins as well as settlement of funds and securities. Further, some of the Stock Brokers also obtain authorizations from their clients to offer non-internet based services. 37.3. It came to SEBI s notice that the clients are compelled to give irrevocable power of attorney to manage client s demat account and bank account so that the client is able to pay funds or deliver shares to its broker on time. In some cases, the PoA even allows a broker to open and close accounts on behalf of the client and to trade on client s account without the consent of the client. 37.4. In order to standardize the norms to be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication/act was made/done pursuant to receipt of instruction from Client. 1.1.2. Funds Transfer of funds from the bank account(s) of the clients for the following: a. For meeting the settlement obligations of the client(s)/ margin requirements of the client(s) in connection with the trades executed by the clients on the Stock Exchange through the same stock broker. b. For recovering any outstanding amount due from the client(s) arising out of clients trading activities on the Stock Exchanges through the same stock broker. c. For meeting obligations arising out of the client subscribing to such other products/facilities/services through the stock broker like Mutual Funds, Public Issues (shares as well as debentures), rights, offer of shares in etc. d. Towards monies/fees/charges, etc. due to the stock broker /depository participant/ principal payable by virtue of the client using/subscribing to any of the facilities/services availed by the client at his/her instance. Necessary audit trail should be available with the stock broker for such transactions. 2. PoA favouring Stock Brokers and Depository Participants 2.1. PoA executed in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed parties as mentioned in the PoA. 3.1.2. Transfer of funds from the bank account(s) of the Clients for trades executed by the clients through another stock broker. 3.1.3. Open a broking / trading facility with any stock broker or for opening a beneficial owner account with any depository participant. 3.1.4. Execute trades in the name of the client(s) without the client(s) consent. 3.1.5. Prohibit issue of Delivery Instruction Slips (DIS) to beneficial owner (client). 3.1.6. Prohibit client(s) from operating the account. 3.1.7. Merging of balances (dues) under various accounts to nullify debit in any other account. 3.1.8. Open an email ID/ email account on behalf of the client(s) for receiving statement of transactions, bills, contract notes etc. from stock broker / depository participant. 3.1.9. Renounce liability for any loss or claim that may arise due to any blocking of funds that may be erroneously instructed by the stock broker to the designated bank. 4. Stock Broker / Depository Participant should ensure that: 4.1. A duplicate/ certified true copy of the PoA is provided to the Client(s) after execution. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oker would not be treated as modification of client code, provided the trades in error account are subsequently liquidated in the market and not shifted to some other code. 38.5. Further, brokers shall disclose the codes of accounts which are classified as error accounts to the Stock Exchanges. Each broker should have a well-documented error policy approved by the management of the broker. Stock Exchanges shall periodically review the trades flowing to the error accounts of the brokers. 38.6. Waiver of Penalty 38.6.1. Stock exchanges may waive penalty for a client code modification where stock broker is able to produce evidence to the satisfaction of the stock exchange to establish that the modification was on account of a genuine error. 38.6.2. Not more than one such waiver per quarter may be given to a stock broker for modification in a client code. Explanation: If penalty wavier has been given with regard to a genuine client code modification from client code AB to client code BA, no more penalty waivers shall be allowed to the stock broker in the quarter for modifications related to client codes AB and BA. 38.7. Proprietary trades shall not be allowed to be mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermitted on the increased value of funded stocks. 39.2.4. Stock Brokers shall ensure maintenance of the aforesaid margin at all times during the period that the margin trading facility is being availed by the client. In case of short fall, stock broker shall make necessary margin calls. 39.2.5. The exchange/stock broker, based on the risk assessment, shall have the discretion to impose/collect higher margin than the margin specified in para 39.2.1 above. 39.3. Liquidation of Securities by the stock broker in case of default by the client 39.3.1. The stock broker shall list out situations/conditions in which the securities may be liquidated and such situations/conditions shall be included in the Rights and Obligations Document . The broker shall liquidate the securities, if the client fails to meet the margin call to comply with the conditions as mentioned in this circular or specified in the Rights and Obligations Document specified by exchange. 39.3.2. However, the broker shall not liquidate or use in any manner the securities of the client in any situation other than the conditions stipulated at para 39.3.1 above. 39.4. Eligibility requirements for stock b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Brokers shall have appropriate Board approved policy in this regard. 39.7. Disclosure Requirement 39.7.1. The stock broker shall disclose to the Stock Exchanges details on gross exposure towards margin trading facility including name of the client, Category of holding (Promoter/promoter group or Non-promoter), clients' Permanent Account Number ( PAN ), name of the scrips (Collateral stocks and Funded stocks) and if the stock broker has borrowed funds for the purpose of providing margin trading facility, name of the lender and amount borrowed, on or before 12 noon on the following trading day. The format for this disclosure by the stock broker to the stock exchange is enclosed at Annexure. 39.7.2. The Stock Exchanges shall disclose on their websites the scrip wise gross outstanding in margin accounts with all brokers to the market. Such disclosure regarding margin trading done on any day shall be made available after the trading hours, on the following day, through its website. 39.7.3. The Stock Exchanges shall put in place a suitable mechanism to capture and maintain all relevant details including member-wise, client-wise, scrip-wise information regarding outsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall not be covered under IPF. 39.10.4. The stock brokers wishing to extend margin trading facility to their clients shall be required to obtain prior permission from the exchange where the margin trading facility is proposed to be offered. The exchange shall have right to withdraw this permission at a later date, after giving reasons for the same. ANNEXURE Format of the Daily Reporting by the members to the Exchange on the amount financed by them under the Margin Trading Facility Name of the member Clearing No. Name of Client Category of Holding (Promoter/Promoter Group or Non Promoter PAN Name of Stock (Collateral or Funded Stock) Stock Exchange Qty Financed (Number of shares) Amount Financed (In lakhs) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions: a. The authorization shall be in writing and be signed by the client only and not by any authorised person on his behalf or holder of the Power of Attorney. b. The email id shall not be created by the broker. The client desirous of receiving ECN shall create/provide his own email id to the stock broker. c. The authorization shall have a clause to the effect that that any change in the email-id shall be communicated by the client through a physical letter to the broker. In respect of internet clients, the request for change of email id may be made through the secured access by way of client specific user id and password. 40.3.2. Issuing ECNs when specifically consented a. 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. 40.3.3. Where to send ECNs a. 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manner stated above, in order to further strengthen the electronic communication channel, the member shall simultaneously publish the ECN on his designated website in a secured way and enable relevant access to the clients. b. Access to the website i. 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. c. Preservation/Archive of electronic documents i. 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. 41. Conditions to be met by Broker for providing Internet Based Trading Service Reference: Circular SMDRP/POLICY/CIR-06/2000 dated January 31, 2000 and Circular FITTC/DC/CIR-1/98 dated June 16, 1998. 41.1. Internet Based trading can take place through order routing systems, which will route client orders, to exchange trading systems, for execution of trades on the existing stock exchanges. SEBI Registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arranged for alternative means of communications in case of Internet link failure. iii. Qualified Personnel: The Stock Exchange must lay down the minimum qualification for personnel to ensure that the broker has suitably qualified and adequate personnel to handle communication including trading instructions as well as other back office work which is likely to increase because of higher volumes. iv. Written Procedures: Stock Exchange must develop uniform written procedures to handle contingency situations and for review of incoming and outgoing electronic correspondence. v. Signature Verification/ Authentication: It is desirable that participants use authentication technologies. For this purpose it should be mandatory for participants to use certification agencies as and when notified by Government / SEBI. They should also clearly specify when manual signatures would be required. c. Client Broker Relationship i. Know Your Client: The Stock Exchange must ensure that brokers comply with all requirements of Know Your Client and have sufficient, verifiable information about clients, which would facilitate risk evaluation of clients. ii. Broker-Client Agreement: Brok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ker systems should be capable of assessing the risk of the client as soon as the order comes in. The client should be informed of acceptance/rejection of the order within a reasonable period. In case system based control rejects an order because of client having exceeded limits etc., the broker system may have a review and release facility to allow the order to pass through. iii. Reports on margin requirements, payment and delivery obligations, etc. should be informed to the client through the system. e. Contract Notes i. Contract notes must be issued to clients as per existing regulations, within 24 hours of the trade execution. f. Cross Trades i. As in the case of existing system, brokers using Internet based systems for routing client orders will not be allowed to cross trades of their clients with each other. All orders must be offered to the market for matching. ii. It is emphasised that in addition to the requirements mentioned above, all existing obligations of the broker as per current regulation will continue without changes. Exchanges may also like to specify more stringent standards as they may deem fit for allowing Internet based trading facilities to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curity 42.2.1. The break in data encryption at the WAP gateway server raises security issues. Until the shortcoming is addressed by WAP, the WAP server should be hosted by the broker itself and not by a third party. 42.2.2. Suitable firewalls should be installed between trading set-up directly connected to an Exchange trading system and the WAP server. 42.2.3. WTLS (Wireless Transport Layer Security) level security or a higher level of security (as and when available) for wireless communication is mandatory for wireless transactions. 42.2.4. The WTLS encrypts data upto the WAP Gateway server. Transmission from the WAP Gateway server to the Internet server should be secured using Secured Socket Level Security, preferably with 128 bit encryption, for server access through Internet. Alternately, the WAP Gateway server and Internet server may be co-hosted. The server resource should not be shared for any other applications. 42.2.5. The following security measures applicable for fixed Internet based systems should be made mandatory: a. User ID b. First Level password (Private code) c. Automatic expiry of passwords at the end of a reasonable duration. Reinitialize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for internet based trading and securities trading using wireless technology. DOT policy and regulation shall govern the level of encryption. 43.3.2. Adequate measures should be taken for user identification, authentication and access control using means such as user-id, passwords, smart cards, biometric devices or other reliable means, to prevent misuse of facility by unauthorized persons. 43.3.3. Unique identification number as given in case of internet based trading shall be made applicable for securities trading using wireless technology. 43.3.4. In case of failure of the wireless network, alternative means of communication for placing orders should be available. 43.3.5. Additional provisions specifying possible risks, responsibilities and liabilities associated with securities trading using wireless technology should be incorporated in the Broker-Client agreement as an addendum or by bringing to the notice of clients, who are desirous of availing such facility, and taking their concurrence on the same. 43.3.6. As it may not be possible to give detailed information to the investor on a hand held device e.g. mobile phones, it may be ensured that minimum inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.1.6. Two-factor authentication for login session may be implemented for all orders emanating using Internet Protocol. Public Key Infrastructure (PKI) based implementation using digital signatures, supported by one of the agencies certified by the government of India, is advisable. Further the two factors in the Two-factor authentication framework should not be same. 44.1.7. In case of no activity by the client, the system should provide for automatic trading session logout. Further to the above, the following practice is advisable 44.1.8. The back-up and restore systems implemented by the broker should be adequate to deliver sustained performance and high availability. The broker system should have on-site as well as remote site back-up capabilities 45. Direct Market Access facility Reference: Circular MRD/DoP/SE/CIR-7/2008 dated April 03, 2008, Circular MRD/DoP/SE/CIR-03/2009 dated February 20, 2009 and Circular CIR/MRD/DP/20/2012 dated August 02, 2012. 45.1. Direct Market Access (DMA) is a facility which allows brokers to offer clients direct access to the exchange trading system through the broker s infrastructure without manual intervention b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / alerts log with audit trail facility. The DMA Server should have internally generated unique numbering for all such client order/trades. 45.4.6. A systems audit of the DMA systems and software shall be periodically carried out by the broker as may be specified by the exchange and certificate in this regard shall be submitted to the exchange. 45.4.7. The exchanges and brokers should provide for adequate systems and procedures to handle the DMA trades. 45.5. Risk Management 45.5.1. The broker shall ensure that trading limits/ exposure limits/ position limits are set for all DMA clients based on risk assessment, credit quality and available margins of the client. The broker system shall have appropriate authority levels to ensure that the limits can be set up only by persons authorized by the risk / compliance manager. 45.5.2. The broker shall ensure that all DMA orders are routed through electronic/automated risk management systems of the broker to carry out appropriate validations of all risk parameters including Quantity Limits, Price Range Checks, Order Value, and Credit Checks before the orders are released to the Exchange. 45.5.3. All DMA orders shall be subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y concerns it may have. 45.12. The terms and conditions for the purpose of DMA is specified in Annexure below. The Terms and Conditions shall be provided to the client or investment manager acting on behalf of a client (s) for availing the DMA facility. In case the DMA facility provided by the stock broker is used by the client the paragraphs 1 to 18 of Part A of Annexure shall be applicable. In case the DMA facility provided by the stock broker is used by the client through an investment manager the paragraphs 1 to 18 of Part B of Annexure shall be applicable and additionally, the investment manager shall provide to the stock broker the details as specified at the end of the Annexure. ANNEXURE PART A: DMA FACILITY USED BY THE CLIENT 1. The client is expected to be fully aware of the risks associated with the market and the financial instruments being traded on stock exchanges through DMA. The client shall be responsible for complying with laws, rules, regulations, notifications etc issued by regulatory authorities as may be applicable from time to time. 2. The client shall ensure that DMA facility provided by the Broker is used only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revealed to any third party. 10. The client acknowledges that all DMA orders placed by them through the DMA facility would be validated by the risk management system of the broker. The Broker has the right to accept or reject any DMA order placed by the client at its sole discretion. 11. The client shall be solely responsible for all acts or omissions of any person using a DMA facility and shall be bound to accept and settle all transactions executed through the DMA facility provided by the Broker notwithstanding that such order(s) may have been submitted erroneously or by an unauthorized user, or that its data is inaccurate or incomplete when submitted, or the client subsequently determines for whatever reason that the order should not have been submitted. 12. The client shall notify the Broker in the event of DMA facility being compromised. Upon receipt of this notice, client s DMA facility shall be promptly disabled but the client shall continue to be responsible for any misuse of the DMA facility or any orders placed through the DMA facility as a result of the compromise of the DMA facility at their end. The Broker shall not be liable for any loss, liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including applicable stock exchanges as amended from time to time. PART B: DMA FACILITY USED BY THE CLIENT THROUGH AN INVESTMENT MANAGER 1. The client shall be solely responsible for all acts or omissions of any person using a DMA facility and shall be bound to accept and settle all transactions executed through the DMA facility provided by the Broker to the investment manager acting on behalf of the client, notwithstanding that such order(s) may have been submitted erroneously or by an unauthorized user, or that its data is inaccurate or incomplete when submitted, or the client subsequently determines for whatever reason that the order should not have been submitted. 2. The investment manager is expected to be fully aware of the risks associated with the market and the financial instruments being traded on stock exchanges through DMA. The investment manager shall be responsible for complying with laws, rules, regulations, notifications etc issued by regulatory authorities as may be applicable from time to time. 3. Where the DMA facility provided by the Broker is used to execute trade on behalf of one or more clients, by the investment manager, then it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual users to the broker prior to placing DMA orders. 8. The investment manager shall not use or allow the use of DMA facility to engage in any form of market misconduct including insider trading and market manipulation or conduct that is otherwise in breach of applicable laws, rules and regulation. 9. The investment manager is aware that Algorithmic trading i.e. generation of orders using automated execution logic is governed by Algorithmic trading guidelines issued by SEBI and Exchanges and requires prior approval of the exchanges. The investment manager shall ensure that new algorithms and changes to existing approved algorithms are not used through the DMA facility without prior approval of concerned stock exchanges. The investment manager shall ensure that it has necessary checks and balances, in place to identify and control dysfunctional algorithms and the Broker shall have the right to shut down the DMA facility and remove any outstanding client orders in case of any suspected dysfunctional algo. 10. The investment manager is aware that authentication technologies and strict security measures are required for routing orders through DMA facility and undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw the DMA facility in case of:- 16.1. Breach of the limits imposed by the broker or any regulatory authority. 16.2. On account of any misuse of the DMA facility by the client/ investment manager or on instructions from SEBI/Exchanges. 16.3. Any other reason, at the discretion of the broker. Broker shall endeavor to give reasonable notice to the client in such instances. 17. The Broker shall not be liable or responsible for non-execution of the DMA orders of the client due to any link/system failure at the client/ Broker/ exchange(s) end. 18. This document shall not be altered, amended and /or modified by the parties in a manner that shall be in contravention of any other provisions of this document. Any additional terms and conditions should not be in contravention with rules / regulations /bye-laws/circulars, of the relevant authorities including applicable stock exchanges as amended from time to time. DETAILS TO BE PROVIDED TO THE STOCK BROKER On the letter head of the Investment manager PART A DETAILS OF THE INVESTMENT MANAGER: NAME OF THE INVESTMENT MANAGER: NAME OF THE HOME REGULATOR COUNTRY OF JU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k broker, the stock exchange shall communicate such reasons of rejections to the stock broker. Further, the decision of the stock exchange on the SOR application of the stock broker and reasons for rejection of the SOR application shall also be communicated to all the other stock exchanges where the broker s SOR facility intends to route orders. 46.2.6. Stock exchange shall ensure that brokers adhere to the best execution policy while using Smart Order Routing. 46.2.7. Smart Order Routing facility shall be provided to all class of investors. 46.2.8. Stock Broker shall communicate to all clients the features, possible risks, rights, responsibilities and liabilities associated with the smart order routing facility. The client desirous of availing such facility shall do so by entering into a broker-client agreement, as applicable. For the existing clients, the same shall be implemented through an addendum to the existing broker-client agreement, as applicable. 46.2.9. Stock broker shall maintain logs of all activities to facilitate audit trail. Broker shall maintain record of orders, trades and data points for the basis of decision. 46.2.10. Stock exchange shall permit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stem shall be located in India. Stock exchange shall permit SOR approved brokers to offer SOR facility through all their servers irrespective of their location in India. 46.2.23. All other existing obligations for the broker as per current regulations and circulars will continue. 46.2.24. Stock exchange may specify additional safeguards as they deem fit for allowing Smart Order Routing facility to their brokers. 47. Broad Guidelines on Algorithmic Trading Reference: Circular CIR/MRD/DP/09/2012 dated March 30, 2012 and Circular CIR/MRD/DP/16/2013 dated May 21, 2013. 47.1. Any order that is generated using automated execution logic shall be known as algorithmic trading. 47.2. Guidelines to the stock exchanges and the stock brokers: Stock exchanges shall ensure the following while permitting algorithmic trading: 47.2.1. The stock exchange shall have arrangements, procedures and system capability to manage the load on their systems in such a manner so as to achieve consistent response time to all stock brokers. The stock exchange shall continuously study the performance of its systems and, if necessary, undertake system upgradation, including periodic upgradati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rithms. Stock exchanges shall periodically review their surveillance arrangements in order to better detect and investigate market manipulation and market disruptions. 47.2.8. The stock exchange shall include a report on algorithmic trading on the stock exchange in the Monthly Development Report (MDR) submitted to SEBI inter-alia incorporating turnover details of algorithmic trading, algorithmic trading as percentage of total trading, number of stock brokers / clients using algorithmic trading, action taken in respect of dysfunctional algos, status of grievances, if any, received and processed, etc. 47.2.9. The stock exchange shall synchronize its system clock with the atomic clock before the start of market such that its clock has precision of atleast one microsecond and accuracy of atleast +/- one millisecond. 47.3. Stock exchange shall ensure that the stock broker shall provide the facility of algorithmic trading only upon the prior permission of the stock exchange. Stock exchange shall subject the systems of the stock broker to initial conformance tests to ensure that the checks mentioned below are in place and that the stock broker s system facilitate orderly trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ols at its end 47.8.1. Price check Algo orders shall not be released in breach of the price bands defined by the exchange for the security. 47.8.2. Quantity check Algo orders shall not be released in breach of the quantity limit as defined by the exchange for the security. 47.8.3. Order Value check - Algo orders shall not be released in breach of the value per order as defined by the stock exchanges. 47.8.4. Cumulative Open Order Value check The individual client level cumulative open order value check, may be prescribed by the broker for the clients. Cumulative Open Order Value for a client is the total value of its unexecuted orders released from the stock broker system. 47.8.5. Automated Execution check An algo shall account for all executed, unexecuted and unconfirmed orders, placed by it before releasing further order(s). Further, the algo system shall have pre-defined parameters for an automatic stoppage in the event of algo execution leading to a loop or a runaway situation. 47.8.6. All algorithmic orders are tagged with a unique identifier provided by the stock exchange in order to establish audit trail. 47.9. The other risk management check ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48.2. Testing of Software 48.2.1. In addition to the testing and approval requirements specified by SEBI on IBT, DMA, STWT, SOR and AT, stock exchanges shall frame appropriate testing policies for functional as well as technical testing of the software. Such framework shall at the minimum include the following: a. Testing in a simulated test environment: Stock exchanges shall provide suitable facilities to market participants / software vendors to test new software or existing software that have undergone change. Subjecting the new software or existing software that have undergone change to such testing facility shall be mandatory for market participants, before putting it in use. b. Mock testing i. Stock exchanges shall organize mock trading sessions on regular basis, atleast once in a calendar month, to facilitate testing of new software or existing software that has undergone any change of functionality, in a close-to-real trading environment. Stock exchanges shall suitably design and plan such mock trading sessions to ensure maximum participation and sufficient trading volumes for the purpose of testing. ii. Stock exchanges shall mandate a minimum time period f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-approval / periodic system audit of Computer-to-Computer Link (CTCL) or Intermediate Messaging Layer (IML), IBT, DMA, STWT, SOR and AT, stock brokers / trading members shall engage a system auditor with any of the certifications specified in para 47.5.1 to 47.5.4 above. While finalizing the system auditor, stock brokers / trading members shall ensure the system auditor does not have any conflict of interest with the stock broker and the directors / promoters of the system auditor are not directly or indirectly related to the current directors or promoters of stock broker / trading member. 48.3. Approval of Software of stock broker / trading member 48.3.1. Stock brokers / trading members shall seek approval of the respective stock exchanges for deployment of the software in the securities market by submitting necessary details required by stock exchange including details of software, tests undertaken and certificate / report provided by the system auditor. Stock exchange may seek additional details as deemed necessary for evaluating the application of the stock broker / trading member. 48.3.2. Stock exchanges shall grant approval or reject the application of the stock b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifications by the stock exchange with stock brokers / trading members 48.5.1. API is an interface that enables interaction of software with other software and typically includes language and message format that is used by an application program to communicate with the operating system or other application program. Stock brokers / trading members and software vendors require relevant API specifications to facilitate interaction of the developed software with the systems of the stock exchanges. 48.5.2. Stock exchanges shall provide relevant API specifications to all stock brokers / trading members and software vendors who are desirous of developing software for the securities market, after establishing their respective credentials. 48.5.3. In case of refusal to share APIs, stock exchanges shall provide reasons in writing to the desirous stock brokers / trading members or software vendors within a period of fifteen working days from the date of receipt of such request for sharing of API. 48.5.4. Further, stock exchanges shall not selectively release updates / modifications, if any, of the existing API specifications to few stock brokers / trading members or software ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and related services in timely and continuous manner. 49.3. Stock exchanges may advise the stock brokers to take the following measures: 49.3.1. Explore the possibility of establishing a 'software escrow arrangement' with their existing software vendors. 49.3.2. In case of large stock brokers, consider reducing dependence on a single software vendor for trading and risk management systems, by engaging more than one software vendor. 49.3.3. Consider including the following in their contracts with the software vendors: a. access to documents related to design and development specifications in the event software vendor fails to provide continuous and timely services to the stock broker; b. development of expertise at the end of the stock broker through appropriate training with regard to software usage and maintenance; c. appropriate penalty clauses for cases of disruptions to the trading system of the stock broker on account of (i) software vendor failing to provide continuous and timely services to the stock broker or (ii) glitches to the software provided by the software vendor; d. obligation on the part of the software vendor to cooperate in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with the application for surrender. 50.1.4. On receipt of the application for surrender and being found suitable in all respects, the procedure as prescribed in the SEBI (Stock Broker and Sub-Broker) Regulations, 1992 read with Regulation 15(i) the SEBI (Procedure for Holding Inquiry) Regulations, 2002, shall be followed. 50.1.5. The sub-broker may, if he so desires, make a representation for dispensing with the procedure, along with the application for surrender in terms of fresh proviso to regulations 16(i) of the SEBI ((Procedure for Holding Inquiry and Imposing Penalty) Regulations, 2002. 50.1.6. If the surrender application is accepted by SEBI, registration would be cancelled by SEBI with effect from the date of de-recognition by the Exchange. Until SEBI cancels the registration and issues no due certificate, the deposit, if any, of the sub- broker shall not be released to the sub-broker by the Exchange. 50.2. In case of transition from sub-broker to Authorized Person (AP) (where the sub-broker surrenders registration while seeking approval as AP) with the same stock broker and the same Stock Exchange, issue of advertisement in newspaper regarding surrender of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applications for change of affiliation from the outgoing broker to the incoming broker, along with its application for fresh registration. The sub-brokers shall enter into a fresh stock broker sub-broker agreement with the incoming broker in terms of Regulation 15(1)(c) of the SEBI (Stock Broker and Sub-Broker) Regulations and a copy of the same shall be enclosed with the application for change of affiliation. The application for change of affiliation shall also be accompanied with the original certificate of registration of the sub-broker for carrying out the necessary changes. Though the affiliation of the sub-broker will change, it shall be liable for all its activities before the change of affiliation. 50.6. Change in name of sub-broker or affiliating broker 50.6.1. Change in name of the sub-broker or in name of affiliating broker would not amount to change in status and constitution of the sub-broker and hence no approval is required for the same. If a sub-broker changes name, it shall be the responsibility of the affiliating broker to submit the registration certificate of such sub-broker to SEBI through the concerned exchange for recording change of name on the regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The sub-broker seeking change in affiliation shall be eligible to do business with the old broker till the application is granted approval by SEBI. Thereafter, on grant of approval by SEBI the exchange shall ensure that affiliation of the sub-broker is changed to new broker with immediate effect. Documents to be submitted: Exchange recommendation and recommendation by the broker with whom affiliation is being sought. Certificate of registration in original for recording change in affiliation. In case of lost /misplaced certificate, an affidavit (on stamp paper of appropriate value) indemnifying SEBI from possible harm caused by loss of certificate and a copy of FIR/ police complaint lodged by the sub-broker is required to be furnished. Letter from the sub-broker seeking change in affiliation addressed to SEBI. No Objection Certificate (NOC) from the existing affiliated broker with whom the sub-broker wishes to discontinue business. Certified true copy of the agreement between the broker and the sub-broker. ii. A broker merges / amalgamates with another broker or is acquired by another broker. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their affiliation within a period of six months from the date on which the broker ceases to exist or the registration will be deemed cancelled. The application for surrender of certificate of registration of sub-broker(s) shall be submitted to the exchange through the existing broker whereas the application for change in affiliation of sub-broker shall be submitted to the exchange through the broker with whom affiliation is being sought. The exchange shall forward the application for surrender / change in affiliation to SEBI for approval. v. SEBI takes punitive action against the broker like cancellation / debarred from securities market or the broker is declared a defaulter or expelled from exchange. Sub-Brokers affiliated to a broker against whom punitive action has been taken, may apply for change in affiliation to another broker or apply for surrender The sub-brokers must apply for change in affiliation or surrender through the exchange within a period of one (1) month from the date of the SEBI order. The application for surrender of certificate of registration of sub-broker(s) shall be submitted to the exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment in SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter referred to as the said Regulations ) vide Notification No. LAD-NRO/GN/2011-12/03/12650 dated April 19, 2011, the requirement of members of the Stock Exchanges and sub-brokers to obtain prior approval from SEBI for change in status or constitution has been done away with. However, the members of the Stock Exchanges would be required to take prior approval from SEBI for change in control. 52.2. The Stock Exchanges will continue to grant prior approval to their members and sub-brokers for change in status or constitution, which would include the following: 52.2.1. in case of a body corporate - a. amalgamation, demerger, consolidation or any other kind of corporate restructuring falling within the scope of section 230 of the Companies Act, 2013 Words section 391 of the Companies Act, 1956 (1 of 1956) replaced with section 230 of the Companies Act, 2013 in view of Companies Act 2013 being in force. or the corresponding provision of any other law for the time being in force; b. change in its managing director, whole-time director or director appointed in compliance with clause (v) of sub-rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV Any change between the following legal forms - individual, partnership firm, Hindu undivided family, private company, public company, unlimited company or statutory corporation and other similar changes. V In case of a partnership firm any change in partners not amounting to dissolution of the firm. VI Any other purpose as may be considered appropriate by the Stock Exchanges. Guidelines to fill up the format and sending the same to SEBI 1. A separate annexure shall be submitted for each Type of change as specified in the format. 2. The report shall be signed by an authorized representative of the Stock Exchange and the same shall be stamped. 3. The Stock Exchanges shall furnish the report to SEBI by 7th day of month following the end of each quarter. 4. The report shall be submitted by e-mail at [email protected]. A hard copy of the report shall also be submitted to SEBI. 53. Revised procedure for seeking prior approval for change in control through single window Reference: Circular CIR/MIRSD/14/2011 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he incumbent is a member / depository participant and forward a self attested copy of the same to SEBI. 53.2.3. The application shall be addressed to Chief General Manager, MIRSD, SEBI . 53.2.4. The prior approval granted by SEBI shall be valid for a period of 180 days from the date of communication. VII. SUBSIDIARY 54. Floating of a Subsidiary/ Company by a Stock Exchange to acquire the membership of other Stock Exchange Reference: Circular SMD-II/POLICY/CIR-37/99 dated November 26, 1999, Circular SMD-I/POLICY/CIR-40/99 dated December 16, 1999, Circular SMD-II/ALLSE/CIR-02/2000 dated January 10, 2000, Circular SMDRPD/POLICY/CIR-8/2001 dated February 07, 2001 and Circular SEBI/SMD/SE/CIR-20/2003/02/06 dated June 02, 2003. 54.1. Small Stock Exchanges may promote/float a subsidiary/company to acquire membership rights of other Stock Exchange subject to the under noted conditions: 54.1.1. The subsidiary/company shall be 100% owned by the Stock Exchange promoting/floating such a subsidiary/company. 54.1.2. For the purposes of fulfillment of above condition, the Exchange and its members shall together hold 100% in nominal value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock Brokers and Sub-Brokers) (Second Amendment) Regulations, 2000 dated August 30, 2000. 55.1. Where a Stock Exchange has formed a subsidiary company, which has become a stock broker of another Stock Exchange, then the turnover of the stock broker who is buying, selling or dealing in securities, through the subsidiary company as a sub-broker, shall be excluded from the turnover of the subsidiary company, only if the stock broker has paid five years turnover based fees plus fee for a block of five years in accordance with the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, on the concerned Stock Exchange which has formed the subsidiary company. 56. Eligibility for Trading Member Reference: Circular SMDRP/POLICY/CIR-41/2001 dated August 09, 2001. 56.1. Subsidiaries of the Stock Exchanges can become trading and or clearing members of the derivatives segment on fulfilling the eligibility criteria laid down by the exchanges and prescribed under the SEBI (Stock Broker and Sub-Broker) Regulations, subject to the following conditions: 56.1.1. All the risk containment measures laid down by SEBI shall be followed by these subsidiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l General Meeting of subsidiary company whichever is earlier. g. There should be a gap of at least one year after a consecutive period of three years before re-nomination of any person for the post of non-member director. h. The parent exchange may appoint a maximum of two directors who are officers of the parent exchange. Such directors shall be in addition to 50% non-member directors (public representatives) mentioned above. 57.2.3. Staff of the Subsidiary - The subsidiary company shall have its own staff none of whom shall be concurrently working for or holding any position of office in the parent exchange. 57.2.4. Responsibilities of Parent Exchange towards Subsidiary Company - The parent exchange shall be responsible for all risk management of the subsidiary company and shall set up appropriate mechanism for the supervision of the trading activity of subsidiary company. Such mechanism shall include: a. Verification of compliance of margin payments and other risk management measures applicable to the subsidiary company as a broker member of another exchange. b. Reporting requirements between the subsidiary and exchange, such as placing quarterly reports on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Overseas branches of Indian Financial Institutions in a jurisdiction having IGA 2 agreement or in a jurisdiction that does not have an IGA but permits financial institutions to register and agree to a Foreign Financial Institution (FFI) agreement, may register with US authorities within the stipulated time period and obtain a GIIN in accordance with the requirements to avoid potential withholding under FATCA. 59.2.3. Overseas branches of Indian Financial Institutions in a jurisdiction that does not have an IGA and does not permit financial institutions to register and agree to an FFI agreement may not register and their overseas branches would eventually be subject to withholding under FATCA. 59.2.4. The Government has further advised that if registration of the parent intermediary/ head office is a pre-requisite for a branch to register, such intermediaries may register as indicated at 59.2.1 and 59.2.2 above. 60. Implementation of the Multilateral Competent Authority Agreement and Foreign Account Tax Compliance Act 68Reference: Circular CIR/MIRSD/2/2015 dated August 26, 2015 and Circular CIR/MIRSD/3/2015 dated September 10, 2015. 60.1. India joined the Multilatera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ID of the grievance redressel division/compliance officer exclusively for the purpose of registering complaints by investors. The above entities shall also display the email ID and other relevant details prominently on their websites and in the various materials/pamphlets/advertisement campaigns initiated by them for creating investor awareness. 62. Redressal of Investor complaints against Stock Brokers and Sub-Brokers in SEBI Complaints Redress System (SCORES) Reference: Circular CIR/MIRSD/18/2011 dated August 25, 2011 and Circular SEBI/HO/MIRSD/MIRSD6/CIR/P/2017/20 dated March 10, 2017. 62.1. SEBI commenced processing of investor complaints in a centralized web based complaints redress system SCORES . The salient features of this system are: 62.1.1. Centralised database of all complaints, 62.1.2. Online movement of complaints to the concerned listed companies, 62.1.3. Online upload of Action Taken Reports (ATRs) by the concerned companies, and 62.1.4. Online viewing by investors of actions taken on the complaint and its current status. 62.2. The investor grievances received by SEBI against stock brokers and sub-brokers will be taken up electronically w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... www.cdslindia.com xxxxxxxxxx [email protected] NSDL www.nsdl.co.in xxxxxxxxxx [email protected] You can also lodge your grievances with SEBI at http://scores.gov.in. For any queries, feedback or assistance, please contact SEBI Office on Toll Free Helpline at 1800 22 7575 / 1800 266 7575. X. GENERAL 64. Advertisement by Brokers/ Sub-Brokers and grant of trading terminals Reference: Circular SMD/POLICY/CIR-49/2001 dated October 22, 2001. 64.1. The Stock Exchanges shall ensure that brokers and sub-brokers do not issue advertisements of their business, including in their internet sites, by subsidiaries, group companies etc. in contravention to Clause C(4) and C(5) of the Code of Conduct specified in Schedule II of Regulation 7 and Clause C(5) and C(6) of the Code of Conduct specified in Schedule II of Regulation 15 of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 and Bye Laws of the concerned Stock Exchange. Similarly, the Stock Exchanges shall inform their b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stock Brokers (including Trading Members) Reference: Circular CIR/MIRSD/9/2010 dated November 04, 2010. 67.1. While a stock broker may use the brand name / logo of its group companies, it must display more prominently: a. its name as registered with SEBI, its own logo, if any, its registration number, and its complete address with telephone numbers in its portal /web site, if any, notice / display boards, advertisements, publications, know your client forms, and member client agreements; b. its name as registered with SEBI, its own logo, if any, its registration number, and its complete address with telephone numbers, the name of the compliance officer, his telephone number and e-mail address in contract notes, statement of funds and securities, and correspondences with the clients. 68. Unauthenticated news circulated by SEBI Registered Market Intermediaries through various modes of communication Reference: Circular CIR/ISD/1/2011 dated March 23, 2011 and Circular CIR/ISD/2/2011 dated March 24, 2011. 68.1. It has been observed by SEBI that unauthenticated news related to various scrips are circulated in blogs/chat forums/e-mail etc. by employees of Broking Houses/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due diligence and ensure proper care in their operations. 69.2. It has been observed that often the intermediaries resort to outsourcing with a view to reduce costs, and at times, for strategic reasons. 69.3. Outsourcing may be defined as the use of one or more than one third party either within or outside the group - by a registered intermediary to perform the activities associated with services which the intermediary offers. 69.4. Principles for Outsourcing 69.4.1. The risks associated with outsourcing may be operational risk, reputational risk, legal risk, country risk, strategic risk, exit-strategy risk, counter party risk, concentration and systemic risk. The principles for outsourcing are given below in Annexure. 69.5. Activities that shall not be Outsourced 69.5.1. The intermediaries desirous of outsourcing their activities shall not, however, outsource their core business activities and compliance functions. A few examples of core business activities may be execution of orders and monitoring of trading activities of clients in case of stock brokers; dematerialisation of securities in case of depository participants; investment related activities in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... help in considering materiality in a risk management programme include- 2.1.1. The impact of failure of a third party to adequately perform the activity on the financial, reputational and operational performance of the intermediary and on the investors / clients; 2.1.2. Ability of the intermediary to cope up with the work, in case of non performance or failure by a third party by having suitable back-up arrangements; 2.1.3. Regulatory status of the third party, including its fitness and probity status; 2.1.4. Situations involving conflict of interest between the intermediary and the third party and the measures put in place by the intermediary to address such potential conflicts, etc. 2.2. While there shall not be any prohibition on a group entity / associate of the intermediary to act as the third party, systems shall be put in place to have an arm s length distance between the intermediary and the third party in terms of infrastructure, manpower, decision-making, record keeping, etc. for avoidance of potential conflict of interests. Necessary disclosures in this regard shall be made as part of the contractual agreement. It shall be kept in mind that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, skill, and diligence in the selection of the third party to ensure that the third party has the ability and capacity to undertake the provision of the service effectively. .2. The due diligence undertaken by an intermediary shall include assessment of: 4.2.1. third party s resources and capabilities, including financial soundness, to perform the outsourcing work within the timelines fixed; 4.2.2. compatibility of the practices and systems of the third party with the intermediary s requirements and objectives; 4.2.3. market feedback of the prospective third party s business reputation and track record of their services rendered in the past; 4.2.4. level of concentration of the outsourced arrangements with a single third party; and 4.2.5. the environment of the foreign country where the third party is located. 5. Outsourcing relationships shall be governed by written contracts / agreements / terms and conditions (as deemed appropriate) {hereinafter referred to as contract } that clearly describe all material aspects of the outsourcing arrangement, including the rights, responsibilities and expectations of the parties to the contract, cli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termediary outsources its activities to foreign third party. For example, the contract shall include choice-of-law provisions and agreement covenants and jurisdictional covenants that provide for adjudication of disputes between the parties under the laws of a specific jurisdiction; 5.2.12. neither prevents nor impedes the intermediary from meeting its respective regulatory obligations, nor the regulator from exercising its regulatory powers; and 5.2.13. provides for the intermediary and /or the regulator or the persons authorized by it to have the ability to inspect, access all books, records and information relevant to the outsourced activity with the third party. 6. The intermediary and its third parties shall establish and maintain contingency plans, including a plan for disaster recovery and periodic testing of backup facilities. 6.1. Specific contingency plans shall be separately developed for each outsourcing arrangement, as is done in individual business lines. 6.2. An intermediary shall take appropriate steps to assess and address the potential consequence of a business disruption or other problems at the third party level. Notably, it shall c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Conflicts of Interest of Intermediaries, Recognised Stock Exchanges, Recognised Clearing Corporations, Depositories and their Associated Persons in Securities Market. Reference: Circular CIR/MIRSD/5/2013 dated August 27, 2013. 70.1. All intermediaries, recognized Stock Exchanges, recognised Clearing Corporations and Depositories (hereinafter collectively referred to as such entities ) are presently governed by the provisions for avoidance of conflict of interest as mandated in the respective regulations read with relevant circulars issued from time to time by SEBI. On the lines of Principle 8 of the International Organisation of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulations, it has been decided to put in place comprehensive guidelines to collectively cover such entities and their associated persons, for elimination of their conflict of interest, as detailed hereunder. 70.2. Such entities shall adhere to these guidelines for avoiding or dealing with or managing conflict of interest. They shall be responsible for educating their associated persons for compliance of these guidelines. 70.3. For the purpose of these guidelines i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y guidance enabling identification, elimination or management of conflict of interest situations. The Boards shall review the compliance of the above guidelines periodically. 70.6. The said guidelines shall be in addition to the provisions, if any, contained in respective regulations/ circulars issued by the Board from time to time regarding dealing with conflict of interest, in respect of such entities. 71. Digital Mode of Payment Reference: Circular SEBI/HO/GSD/T A/CIR/P/2017/42 dated May 16, 2017. 71.1. SEBI has notified the SEBI (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017 on March 06, 2017 to enable digital mode of payment (RTGS/NEFT/IMPS etc.) of fees/penalties/remittance/other payments etc. 71.2. Pursuant to above, SEBI has been receiving direct credit of amounts from various intermediaries / other entities. 71.3. In order to identify and account such direct credit in the SEBI account, intermediaries / other entities shall provide the information as mentioned in Annexure below to SEBI once the payment is made. 71.4. The above information should be emailed to the respective department(s) as well as to Treasury Accounts division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal commodity derivative exchanges for compliance by their members. S. No. Subject FMC Circular being repealed SEBI circulars being made applicable i Segregation of Client and Own Funds and Securities No circular issued by FMC a) SMD/SED/CIR/93/23321 dated Nov 18, 1993. b) MRD/DoP/SE/Cir- 11/2008 dated Apr 17, 2008. ii Running Account Settlement a) FMC/4/2012/C/14 No. 1/2/2012/IR-I/Client-Protect/ dated Feb 02, 2012. b) FMC/4/2013/C/59 No. 1/2/2012/IR-I/Client-Protect dated May 20, 2013. c) No. 1/2/2012/IR-I/Client-Protect dated Jun 25, 2013. d) FMC/4/2014/C/121 FMC/2014/04/23-Quarterly Settlement dated Oct 17, 2014. a) Clause 12 of Annexure A to MIRSD/ SE /Cir-19/2009 dated Dec 3, 2009. b) MIRSD /Cir/ 01/ 2011 dated May 13, 2011. iii Requirements with respect to Financial Documents, PAN, Inactive Clients etc. a) No.IRD/Div/(1)FMCR/1/2005 dated Feb 14, 2006. b) Div. III/I/(53)/06/PAN No. dated Nov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03/2011 dated Jun 9, 2011. ix SMS and Email alerts facility to clients a) FMC/4/2012/C/13 No. FMC/IR-I/Client protection/2012 dated Feb 02, 2012. b) FMC/Complt/Circular dated Jun 04, 2012. c) No:IR (2)/5/2012/SMS-Email dated Dec 07,2012. d) No.IR(2)/5/2012/SMS-Email dated Jan 21, 2013. e) No.IR(2)/5/2012/SMS/Email dated Mar 01, 2013. f) No.IR(2)/5/2012/SMS/Email dated Mar 06, 2013. g) No.IR(2)/5/2012/SMS/Email dated May 15, 2013. h) No.IR(2)/5/2012/SMS/E-mail dated Jun 21, 2013. CIR/MIRSD/15/2011 dated Aug 02, 2011. x Contract Note a) No. 07/2008/COMP/LAD-ENF/AD(SN)/6609 dated Oct 27, 2009. b) FMC/COMPL/IV/2010/03/05/00011 dated Apr 19, 2011. c) Div.III/I/89/07 dated Mar 13, 2014. d) Div.III/I/89/07 dated Dec 24, 2014. a) SMDRP/Policy/Cir-56/2000 dated Dec 15, 2000. b) SMD/SE/15/2003/29/04 dated Apr 29, 2003. c) MRD/DoP/SE/Cir-20/2005 dated Sep 8, 2005. d) Clause 13 of Annexure A to MIRSD/ SE /Cir-19/2009 dated Dec 3, 2009. xi Exclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices - Segregation thereof from Commodity Derivatives Market No. S/1/2009/MD-I dated Mar 28, 2011. a) Rule 8(1)(f) and 8(3)(f) of SCRR, 1957. b) SMD/POLICY/CIR-6//97 dated May 07, 1997. xix Authorized Persons No.6/3/2008-MKT II; FMC/2/2012/G/3 dated Jan 11, 2012. a) MIRSD/ DR-1/ Cir- 16 /09 dated Nov 06, 2009. b) Cir/MIRSD/AP/8/2010 dated Jul 23, 2010. 72.4. Part B: Following FMC circulars are specific to commodity derivatives market. Contents/norms specified in following circulars shall continue to be in force beyond September 28, 2016. Provisions of these circulars shall be applicable to all commodity derivatives exchanges including regional commodity derivatives exchanges for compliance by their members. S. No. Subject FMC Circular No. and Date i Account Opening Process a) No.-FMC/4/2011/G/30 Ref. No.: Div. III/I/89/07 dated Dec 16, 2011*. b) Div.III/I/89/07 dated Aug 23, 2013. c) F.No.FMC/COMPL/2013/10/30-FSLRC/FSDC dated Mar 28, 2014. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /FCR-I/2009 dated Dec 21, 2009. No. DIV-III/I/122/10/MR dated Jun 25, 2010. 6/3/2008-MKT II dated Feb 18, 2011. 72.6. All commodity derivatives exchanges shall continue to levy penalties they are currently levying and any revision thereof shall be decided in consultation with SEBI. Accordingly, FMC circulars dealing with penalties including Uniform Penalty Circular dated Mar 05, 2010 shall stand repealed. ANNEXURES TO SECTION II Annexure - 1 ACCOUNT OPENING KIT INDEX OF DOCUMENTS S. No. Name of the Document Brief Significance of the Document Page No MANDATORY DOCUMENTS AS PRESCRIBED BY SEBI EXCHANGES 1 Account Opening Form A. KYC form - Document captures the basic information about the constituent and an instruction/check list. B. Document captures the additional information about the constituent relevant to trading account and an instruction/check list. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XXXXXXX. In case not satisfied with the response, please contact the concerned exchange(s) at [email protected] and Phone no. 91-XXXXXXXXXX. Annexure 4 RIGHTS AND OBLIGATIONS OF STOCK BROKERS, SUB-BROKERS AND CLIENTS as prescribed by SEBI and Stock Exchanges 1. The client shall invest/trade in those securities/contracts/other instruments admitted to dealings on the Exchanges as defined in the Rules, Byelaws and Regulations of Exchanges/ Securities and Exchange Board of India (SEBI) and circulars/notices issued there under from time to time. 2. The stock broker, sub-broker and the client shall be bound by all the Rules, Byelaws and Regulations of the Exchange and circulars/notices issued there under and Rules and Regulations of SEBI and relevant notifications of Government authorities as may be in force from time to time. 3. The client shall satisfy itself of the capacity of the stock broker to deal in securities and/or deal in derivatives contracts and wishes to execute its orders through the stock broker and the client shall from time to time continue to satisfy itself of such capability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n though not required by the Exchange, Clearing House/Clearing Corporation or SEBI) and the client shall be obliged to pay such margins within the stipulated time. 12. The client understands that payment of margins by the client does not necessarily imply complete satisfaction of all dues. In spite of consistently having paid margins, the client may, on the settlement of its trade, be obliged to pay (or entitled to receive) such further sums as the contract may dictate/require. TRANSACTIONS AND SETTLEMENTS 13. The client shall give any order for buy or sell of a security/derivatives contract in writing or in such form or manner, as may be mutually agreed between the client and the stock broker. The stock broker shall ensure to place orders and execute the trades of the client, only in the Unique Client Code assigned to that client. 14. The stock broker shall inform the client and keep him apprised about trading/settlement cycles, delivery/payment schedules, any changes therein from time to time, and it shall be the responsibility in turn of the client to comply with such schedules/procedures of the relevant stock exchange where the trade is executed. 15. The stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securities which the client has ordered to be bought or sold, stock broker may close out the transaction of the client and claim losses, if any, against the estate of the client. The client or his nominees, successors, heirs and assignee shall be entitled to any surplus which may result there from. The client shall note that transfer of funds/securities in favor of a Nominee shall be valid discharge by the stock broker against the legal heir. 21. The stock broker shall bring to the notice of the relevant Exchange the information about default in payment/delivery and related aspects by a client. In case where defaulting client is a corporate entity/partnership/proprietary firm or any other artificial legal entity, then the name(s) of Director(s)/Promoter(s)/Partner(s)/Proprietor as the case may be, shall also be communicated by the stock broker to the relevant Exchange(s). DISPUTE RESOLUTION 22. The stock broker shall provide the client with the relevant contact details of the concerned Exchanges and SEBI. 23. The stock broker shall co-operate in redressing grievances of the client in respect of all transactions routed through it and in removing objections for bad deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock broker, sub-broker and client shall continue to be in force as it is, unless the client intimates to the stock broker his/its intention to terminate their relationship by giving a notice in writing of not less than one month. ADDITIONAL RIGHTS AND OBLIGATIONS 30. The stock broker shall ensure due protection to the client regarding client s rights to dividends, rights or bonus shares, etc. in respect of transactions routed through it and it shall not do anything which is likely to harm the interest of the client with whom and for whom they may have had transactions in securities. 31. The stock broker and client shall reconcile and settle their accounts from time to time as per the Rules, Regulations, Bye Laws, Circulars, Notices and Guidelines issued by SEBI and the relevant Exchanges where the trade is executed. 32. The stock broker shall issue a contract note to his constituents for trades executed in such format as may be prescribed by the Exchange from time to time containing records of all transactions including details of order number, trade number, trade time, trade price, trade quantity, details of the derivatives contract, client code, brokerage, all cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of client specific user id and password. 38. The stock broker shall ensure that all ECNs sent through the e-mail shall be digitally signed, encrypted, non-tamper able and in compliance with the provisions of the IT Act, 2000. In case, ECN is sent through e-mail as an attachment, the attached file shall also be secured with the digital signature, encrypted and non-tamperable. 39. The client shall note that non-receipt of bounced mail notification by the stock broker shall amount to delivery of the contract note at the e-mail ID of the client. 40. The stock broker shall retain ECN and acknowledgement of the e-mail in a soft and non-tamperable form in the manner prescribed by the exchange in compliance with the provisions of the IT Act, 2000 and as per the extant rules/regulations/circulars/guidelines issued by SEBI/Stock Exchanges from time to time. 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 stock broker for the specified period under the extant regulations of SEBI/stock exchanges. The log report shall provide the details of the contract notes that are not delivered to the client ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Exchanges/SEBI. 47. All additional voluntary clauses/document added by the stock broker should not be in contravention with rules/regulations/notices/circulars of Exchanges/SEBI. Any changes in such voluntary clauses/document(s) need to be preceded by a notice of 15 days. Any changes in the rights and obligations which are specified by Exchanges/SEBI shall also be brought to the notice of the clients. 48. If the rights and obligations of the parties hereto are altered by virtue of change in Rules and regulations of SEBI or Bye-laws, Rules and Regulations of the relevant stock Exchanges where the trade is executed, such changes shall be deemed to have been incorporated herein in modification of the rights and obligations of the parties mentioned in this document. INTERNET WIRELESS TECHNOLOGY BASED TRADING FACILITY PROVIDED BY STOCK BROKERS TO CLIENT (All the clauses mentioned in the Rights and Obligations document(s) shall be applicable. Additionally, the clauses mentioned herein shall also be applicable.) 1. Stock broker is eligible for providing Internet based trading (IBT) and securities trading through the use of wireless technology that shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the date, the manner and the transactions effected pursuant to such unauthorized use, etc. 7. The Client is fully aware of and understands the risks associated with availing of a service for routing orders over the internet/securities trading through wireless technology and Client shall be fully liable and responsible for any and all acts done in the Client s Username/password in any manner whatsoever. 8. The stock broker shall send the order/trade confirmation through email to the client at his request. The client is aware that the order/ trade confirmation is also provided on the web portal. In case client is trading using wireless technology, the stock broker shall send the order/trade confirmation on the device of the client. 9. The client is aware that trading over the internet involves many uncertain factors and complex hardware, software, systems, communication lines, peripherals, etc. are susceptible to interruptions and dislocations. The Stock broker and the Exchange do not make any representation or warranty that the Stock broker s IBT Service will be available to the Client at all times without any interruption. 10. The Client shall not have any claim again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g orders for purchase and/or sale of a derivative contract being traded on Stock exchanges. It must be clearly understood by you that your dealings on Stock exchanges through a stock broker shall be subject to your fulfilling certain formalities set out by the stock broker, which may inter alia include your filling the know your client form, reading the rights and obligations, do s and don ts, etc., and are subject to the Rules, Byelaws and Regulations of relevant Stock exchanges, its Clearing Corporation, guidelines prescribed by SEBI and in force from time to time and Circulars as may be issued by Stock exchanges or its Clearing Corporation and in force from time to time. Stock exchanges does not provide or purport to provide any advice and shall not be liable to any person who enters into any business relationship with any stock broker of Stock exchanges and/or any third party based on any information contained in this document. Any information contained in this document must not be construed as business advice. No consideration to trade should be made without thoroughly understanding and reviewing the risks involved in such trading. If you are unsure, you must seek profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es contract and immediately selling it or vice versa. Lower liquidity and higher volatility may result in wider than normal spreads for less liquid or illiquid securities / derivatives contracts. This in turn will hamper better price formation. 1.4 Risk-reducing orders: The placing of orders (e.g., stop loss orders, or limit orders) which are intended to limit losses to certain amounts may not be effective many a time because rapid movement in market conditions may make it impossible to execute such orders. 1.4.1 A market order will be executed promptly, subject to availability of orders on opposite side, without regard to price and that, while the customer may receive a prompt execution of a market order, the execution may be at available prices of outstanding orders, which satisfy the order quantity, on price time priority. It may be understood that these prices may be significantly different from the last traded price or the best price in that security / derivatives contract. 1.4.2 A limit order will be executed only at the limit price specified for the order or a better price. However, while the customer receives price protection, there is a possib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... line based communications, combination of technologies and computer systems to place and route orders. Thus, there exists a possibility of communication failure or system problems or slow or delayed response from system or trading halt, or any such other problem/glitch whereby not being able to establish access to the trading system/network, which may be beyond control and may result in delay in processing or not processing buy or sell orders either in part or in full. You are cautioned to note that although these problems may be temporary in nature, but when you have outstanding open positions or unexecuted orders, these represent a risk because of your obligations to settle all executed transactions. 2. As far as Derivatives segments are concerned, please note and get yourself acquainted with the following additional features:- 2.1 Effect of Leverage or Gearing : In the derivatives market, the amount of margin is small relative to the value of the derivatives contract so the transactions are 'leveraged' or 'geared'. Derivatives trading, which is conducted with a relatively small amount of margin, provides the possibility of great profit or loss in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to liquidate a position. This can occur, for example when a currency is deregulated or fixed trading bands are widened. 3. Currency prices are highly volatile. Price movements for currencies are influenced by, among other things: changing supply-demand relationships; trade, fiscal, monetary, exchange control programs and policies of governments; foreign political and economic events and policies; changes in national and international interest rates and inflation; currency devaluation; and sentiment of the market place. None of these factors can be controlled by any individual advisor and no assurance can be given that an advisor's advice will result in profitable trades for a participating customer or that a customer will not incur losses from such events. 2.3 Risk of Option holders: 1. An option holder runs the risk of losing the entire amount paid for the option in a relatively short period of time. This risk reflects the nature of an option as a wasting asset which becomes worthless when it expires. An option holder who neither sells his option in the secondary market nor exercises it prior to its expiration will necessarily lose his entire investment in the opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies / derivatives contracts through the mechanism provided by the Exchanges. 4.2 The term stock broker shall mean and include a stock broker, a broker or a stock broker, who has been admitted as such by the Exchanges and who holds a registration certificate from SEBI. Annexure-6 GUIDANCE NOTE - DO s AND DON Ts FOR TRADING ON THE EXCHANGE(S) FOR INVESTORS BEFORE YOU BEGIN TO TRADE 1. Ensure that you deal with and through only SEBI registered intermediaries. You may check their SEBI registration certificate number from the list available on the Stock exchanges www.exchange.com and SEBI website www.sebi.gov.in . 2. Ensure that you fill the KYC form completely and strike off the blank fields in the KYC form. 3. Ensure that you have read all the mandatory documents viz. Rights and Obligations, Risk Disclosure Document, Policy and Procedure document of the stock broker. 4. Ensure to read, understand and then sign the voluntary clauses, if any, agreed between you and the stock broker. Note that the clauses as agreed between you and the stock broker cannot be changed without your consent. 5. Get a clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... containing an extract from the client ledger for funds and an extract from the register of securities displaying all the receipts/deliveries of funds and securities. The statement shall also explain the retention of funds and securities and the details of the pledged shares, if any. c) On the date of settlement, the stock broker may retain the requisite securities/funds towards outstanding obligations and may also retain the funds expected to be required to meet derivatives margin obligations for next 5 trading days, calculated in the manner specified by the exchanges. In respect of cash market transactions, the stock broker may retain entire pay-in obligation of funds and securities due from clients as on date of settlement and for next day s business, he may retain funds/securities/margin to the extent of value of transactions executed on the day of such settlement in the cash market. d) You need to bring any dispute arising from the statement of account or settlement so made to the notice of the stock broker in writing preferably within 7 (seven) working days from the date of receipt of funds/securities or statement, as the case may be. In case of dispute, refer th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of registering complaints. APPENDIX LIST OF CIRCULARS / NOTIFICATIONS S. No. Circular / Notification No. and Date Subject 1. SEBI communication SE/10118 dated October 12, 1992. Listing fees from 1992-93 to 1996-97. 2. SMD/SED/CIR/93/23321 dated November 18, 1993. Regulation Of Transactions Between Clients and Brokers. 3. SMD/VRN/1476/95 dated April 27, 1995. Severance of connections with other businesses. 4. SMD/POLICY/CIR-6/97 dated May 07, 1997. Applicability of Rule 8(1)(f) and 8(3)(f) of the Securities Contract (Regulation) Rules, 1957. 5. SMD/POLICY/CIRCULAR/30/97 dated November 25, 1997. Registration of Brokers. 6. SMD/POLICY/CIR-34/97 dated December 11, 1997. Conversion of individual membership into Corporate membership. 7. SMD/POLIC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igibility for Trading Member. 21. SMD/POLICY/CIR-49/2001 dated October 22, 2001. Advertisement by Brokers/ Sub-Brokers and grant of trading terminals. 22. CIR/MIRSD/24/2011 dated December 15, 2011. Guidelines on Outsourcing of Activities by Intermediaries. 23. SMD/DBA-II/CIR-22/2002 dated September 12, 2002. Additional requirements for processing applications of Stock Brokers for Registration/ Prior approval for sale of membership/ Change of name/ trade name. 24. SMD/POLICY/CIR-4/ 2003 dated February 11, 2003. Restructuring of the Subsidiary Management. 25. SEBI/SMD/SE/15/2003/29/04 dated April 29, 2003. Issuance of Contract Notes in electronic form. 26. SMD/DBA-II/Cir-16/9618/03 dated May 05, 2003. SEBI Registration Number of Brokers / Sub-Brokers to be quoted on all correspondences with SEBI. 27. SEBI/SMD/SE/CIR-20/2003/02/06 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lings between a client and a stock broker (trading members included). 43. SEBI/MIRSD/MASTER CIR-04/2010 dated March 17, 2010. Master Circular on Oversight of Members (Stock Brokers/Trading Members/Clearing Members of any Segment of Stock Exchanges and Clearing Corporations). 44. CIR/MRD/DMS/13/2010 dated April 23, 2010. Execution of Power of Attorney (PoA) by the Client in favour of the Stock Broker/ Stock Broker and Depository Participant. 45. SEBI/CIR/MIRSD/AP/8/2010 dated July 23, 2010. Market Access through Authorised Persons. 46. CIR/MRD/DP/ 25/2010 dated August 27, 2010. Securities Trading using Wireless Technology. 47. CIR/MRD/DP/26/2010 dated August 27, 2010. Introduction of Smart Order Routing. 48. CIR/MRD/DMS/28/2010 dated August 31, 2010. Execution of Power of Attorney (PoA) by the Client in favour of the Stock Broker/ Stock Broker and Depository Participant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIR/MIRSD/16/2011 dated August 22, 2011. Simplification and Rationalization of Trading Account Opening Process. 63. CIR/MIRSD/18/2011 dated August 25, 2011. Redressal of investor grievances against Stock Brokers and Sub-Brokers in SEBI Complaints Redress System (SCORES). 64. MIRSD/SE/CIR-21/2011 dated October 05, 2011. Uniform Know Your Client (KYC) Requirements for the Securities Markets. 65. CIR/MIRSD/22/2011 dated October 25, 2011. In-person verification (IPV) of Clients by Subsidiaries of Stock Exchanges, acting as Stock Brokers. 66. MIRSD/CIR-23/2011 dated December 02, 2011. The Securities and Exchange Board of India (KYC Registration Agency) Regulations, 2011. 67. MIRSD/CIR-26/2011 dated December 23, 2011. Guidelines in pursuance of the SEBI KYC Registration Agency (KRA) Regulations, 2011 and for In-Person Verification (IPV). 68. CIR/MRD/DP/09/2012 dated March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIR/MIRSD/13/2013 dated December 26, 2013. Know Your Client Requirements. 83. CIR/MRD/DP/06/2014 dated February 07, 2014. Testing of software used in or related to Trading and Risk Management. 84. CIR/MRD/DP/07/2014 dated February 11, 2014. Safeguards to avoid trading disruption in case of failure of software vendor. 85. CIR/MIRSD/2/2014 dated June 30, 2014. Inter-Governmental Agreement with United States of America under Foreign Accounts Tax Compliance Act Registration. 86. CIR/MIRSD/3/2014 dated August 28, 2014. Information regarding Grievance Redressal Mechanism. 87. CIR/MIRSD/4/2014 dated October 13, 2014. Single registration for Stock Brokers Clearing Members. 88. CIR/MRD/DP/29/2014 dated October 21, 2014. Modification of Client Codes of Non-institutional Trades Executed on Stock Exchanges (All Segments). 89. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Online Registration Mechanism for Securities Market Intermediaries. 102. SEBI/HO/GSD/T A/CIR/P/2017/42 dated May 16, 2017. Digital Mode of Payment. 103. CIR/MRD/DP/54/2017 dated June 13, 2017. Comprehensive Review of Margin Trading Facility. 104. CIR/HO/MIRSD/MIRSD2/CIR/P/2017/64 dated June 22, 2017. Clarification to Enhanced Supervision Circular. 105. CIR/HO/MIRSD/MIRSD2/CIR/P/2017/73 dated June 30, 2017. Policy of Annual Inspection of Members by Stock Exchanges/Clearing Corporations. 106. CIR/MRD/DP/86/2017 dated August 01, 2017. Margin Trading Facility Clarification. 107. SEBI/HO/MIRSD/MIRSD1/CIR/P/2017/04 dated September 21, 2017. Integration of broking activities in Equity Markets and Commodity Derivatives Markets under single entity. 108. CIR/HO/MIRSD/MIRSD2/CIR/PB/2017/107 dated September 25, 2017. Clarific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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