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TMI BlogCommittee on Model Rule and Bye-laws of Stock ExchangesX X X X Extracts X X X X X X X X Extracts X X X X ..... Rules may not be applicable in the same way for all stock exchanges. Besides, on account of the nature and constitution of stock exchanges, some of the new Model Rules can not be implemented as suggested. The Model Rules have been divided into 4 Parts. Part 'A' given in the Annexure contains rules which have already been implemented under SEBI directives etc. Reference of Model Rules, Subject matter and the corresponding Circulars issued by SEBI/GOI etc. have been made. It may be seen that while there may be a variation in language in the Model Rules, for most of Rules in Part A, however the basic principle underlying the Model Rules and the relevant SEBI Circular/GOI notification etc. is the same. Such rules have been identified with asterisks in Part A. In respect of Rules No. 5.5 (Compliance Officer), 6.8.1 (Special Authorisation by the Governing Board- Buy back of Membership), 7.20 (Declaration of Defaulter automatically), 7.34 (Apportionment of Consideration Realised/Other Realisation of Receivables) and 8.3.6 (Ethics Committee), SEBI Regulations/Circulars already issued in this regard will prevail. Part 'B' gives reference to the rules in Model Rules and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emination of information to investors and brokers. 3.2.16 Promotion of Other Companies SEBI's circular no. SMD- II/POLICY/CIR-37/99 dated November 26, 1999 and SMD-I/POLICY/CIR-40/99 dated December 16, 1999 regarding floating of Floating of a Subsidiary/Company by a Stock Exchange for membership of other Stock Exchange. 4. FUNCTIONARIES 4.2 Governing Board SEBI's circular no. SMD/SED/6919/93 dated April 20, 1993 regarding composition of Governing Board 4.3 Standing Committees SEBI's circular no. SMD/SED/6919/93 dated April 20, 1993* *Model Rule: There shall be Standing Committees to be constituted in the ratio of 40:60 between members and non members to discharge functions in the specific areas such as arbitration, claims against defaulters, disciplinary action and investors' services. 4.5 Selection Committee SEBI's circular no. SMD-II/52 dated January 10, 1996 for selected of ED. 4.7 Ethics Committee SEBI Circular dated May 17, 2001 regarding Code of Ethics for Directors and Functionaries of Exchanges 4.9 Administrative Set-up * SEBI circular no. SMD/SED/6919/93 dated April 20, 1993 *Model Rule: The Governing Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifying Stock-broking and Allied Activities as Main Objects SEBI Circular No. SMD/Policy/ Cir-11/98 dated March 16, 1998. 5.5 Compliance Officer Regulation 18 A of SEBI (Investment Advice by Intermediaries) (Amendment) Regulations 2001, has made it mandatory for every stock broker to appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc issued by the Board or the Central Government and for redressal of investors' grievances and the compliance officer appointed under SEBI Regulations would also be responsible for complying with the stock exchange regulations and would be different from the member itself. 6 PARTNERSHIP FIRMS, REPRESENTATIVE MEMBERS / TRADING MEMBERS, CLEARING MEMBERS, MEMBERSHIP/ TRADING MEMBERSHIP, REMISIERS, , APPROVED USERS AND SUB-BROKERS 6.1 Partnerships 6.5 Multiple Membership / Trading Membership - Eligibility Criteria 6.5.4 Conditions Precedent for Multiple Membership As per SEBI Circular No. SMD-DBAII/Policy/CIR-47/2000 dated October 10, 2000, the condition of operating membership card for a minimum period of 5 years for mult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers by the stock exchanges, within the existing legal framework. *Model Rules have provided for approval of SEBI for buyback scheme. 6.10 Termination of Membership / Trading Membership 6.10.1 Adjudged Bankrupt Rule 8(3) (b) of SCRR, 1957 6.10.2 Convicted of Fraud Rule 8(3) (c) of SCRR, 1957 6.10.3 Engaged in Other Business Rule 8(3) (f) of SCRR, 1957 6.16 Remisiers 6.16.10 Remisier not to Sign Contract Notes SEBI Circular No. SMD/POLICY/ CIRCULAR/3-97 dated March 31, 1997. 6.18 Sub-brokers 6.18.1 Appointment SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 provide for registration of sub brokers. 6.18.3 Non-Compliance of Requirements GOI Circular No. 14/8/SE/85 dated December 30, 1985 provides that The Stock-broker with whom a sub-broker is associated should be directly responsible for any acts of commission or omission on the part of the sub-broker, notwithstanding any agreement or arrangement entered into between the stock broker and the sub-broker. 7. NOMINATION, TRANSFER, TRANSMISSION AND DECLARATION OF DEFAULTER 7.20 Declaration of Defaulter Automatically As per GOI Circular no. 1/26/SE/ 91 dated August 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to Multiple Membership/ Trading Membership GOI Circular no. 1/26/SE/ 91 dated August 21, 1991 has provided that apportionment of the assets of the defaulter members against the claims must be done strictly Stock exchange wise. If there is, however, a surplus of the assets at any particular Stock Exchange, the same may be distributed against the claims at other Stock Exchanges. 8. CONSTITUTION AND POWERS OF GENERAL MEETING, GOVERNING BOARD, STANDING COMMITTEES, CHAIRMAN, MANAGING DIRECTOR, COMPANY SECRETARY, AUDITOR, LEGAL ADVISOR AND SCRUTINEERS 8.3 Standing Committees 8.3.1 Committee for Settlement of Claims Against Defaulters, Disciplinary Action and Investors' Services Committees and Conciliation and Arbitration Panels SEBI Circular Nos. SMD-II/ 11615/92 dated November 20, 1992 and Order dated April 20, 1993 has provided for nomination on the standing committees in the ratio of 40:60 between members and non members. * *Model Rules have provided for constitution of 4 new standing Committees (Investors Services Committee, Ethics Committee, Audit Committee and Membership Selection Committee) apart from Defaults Committee (renamed as Settlement of Claims agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange 8.3.6.9 No Role of the Elected Members of the Governing Board in the Day- to- Day Functioning of the Exchange SEBI Circular as above describes the role of Chairman/President and directors of the Exchange.* *Model Rules have applied the same on elected members of the exchange 8.3.6.10 Access to Information SEBI Circular as above describes the role of directors of the Exchange regarding access to information.* *Model Rules have applied the same on elected members. 8.3.6.11 Misuse of Position SEBI Circular as above describes the role of directors/Committee members regarding access to information.* *Model Rules have applied the same on elected members/Committee members. 8.3.6.12 Compliance Officer SEBI Circular dated May 17, 2001 regarding Code of Ethics for Directors and Functionaries of Exchanges 8.5 Managing Director 8.5.1 day-to-day Administration and Executive Powers SEBI Order dated April 20, 1993 & circulars no. SMDRP/ Policy/Cir-25/99 dated August 12, 1999 & IEMI/LKS/MI/ 2990/95 dated August 08, 1995 have described the powers, duties and functions of the Executive Directors.* *However Model Rules have listed out specific areas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI circular SMD-II/11615/92 dated November 20, 1992 & SEBI circular SMD /SED/6919/93 dated April 20, 1993* *Model Rules have provided for superannuation age of ED as 60 years and tenure of 5 years, subject to renewal. 9.11 Election Procedure for Elected Members 9.11.8 Election of Chairman SEBI circular SMD /SED/6919/93 dated April 20, 1993 11 DISCIPLINARY PROCEEDINGS 11.5 Causes Requiring Disciplinary Action SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 11.5.1 Misconduct 11.5.2 Unbusinesslike Conduct 11.5.2.1 Fictitious Names SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. 11.5.2.2 Fictitious Dealings SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. 11.5.2.3 Circulation of Rumours SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. 11.5.2.4 Prejudicial Business SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. 11.5.2.5 Market Manipulation and Rigging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Firms 5.2.4 For Companies / Bodies Corporate 5.2.4.4 Age of Designated Directors / Nominees 5.2.4.6 Other Business 5.2.4.8 Promoters', Identity and Undertaking 5.2.4.9 Approval from the Exchange for Change in Shareholding Pattern 5.2.5 General Conditions 5.2.5.1 Educational Qualification 5.2.5.2 Professional Qualification 5.2.5.4 Common Applicability of Conditions 5.2.5.5 Financial Soundness 5.2.5.9 Unsound mind 5.2.5.10 Insolvent 5.2.5.11 Moral Turpitude 5.2.5.12 Other Business Rule 8(1) (F) of SCRR, 1957 and SEBI Circular no. SMD/VRN/ 1476/ 95 dated 27.04.1995 provide that the member should severe his connection with other business on admission. Model Rules provide that the member is given a period of 3 months to severe his connection from other business. 5.2.5.14 Guilty of Contravention 5.4 Branch Office 6 PARTNERSHIP FIRMS, REPRESENTATIVE MEMBERS / TRADING MEMBERS, CLEARING MEMBERS, MEMBERSHIP/ TRADING MEMBERSHIP, REMISIERS, , APPROVED USERS AND SUB-BROKERS 6.1 Partnerships 6.1.1 Who May Form Partnership 6.1.2 Other Business* As per the Model Rules, the firm and partners are given 3 month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading Membership - Eligibility Criteria 6.5.1 Disclosure 6.5.2 Requirements to be Fulfilled 6.5.3 Books of Accounts 6.7 Continuous Requirements for Membership / Trading Membership 6.7.1 Refresher Course 6.7.5 Right Vesting in Governing Board When Business/ Nomination not Activated/Exercised 6.7.6 Right of Nomination for Deceased Members 6.7.7 Payment of Dues 6.8 Buy-Back / Surrender of Membership / Trading Membership 6.8.2 Prohibition to Re-issue Buy-back / Surrender Right 6.8.3 Notice of Surrender 6.8.4 Acceptance or Refusal of Surrender 6.9 Notice of Resignation 6.9.1 Written Notice Required 6.9.2 Objection 6.9.3 Acceptance or Refusal of Resignation 6.10 Termination of Membership / Trading Membership 6.10.4 Minimum Networth, Working Capital and Assets 6.10.5 Company / Body Corporate 6.10.6 Eligibility Criteria Not Maintained 6.10.7 Expulsion Rules to Apply 6.11 Intimation of Death of Member / Trading Member 6.12 Claims Against Deceased Member / Trading Member 6.12.1 Conditions Precedent Before Exercise of Right of Nomination 6.12.2 Conditions Precedent Applicable to Liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.3.1 Form For Member / Trading Member Nominating During His Life Time 7.3.2 Form of Nomination in Favour of a Family Member 7.3.3 Form for Legal Heirs / Legal Representatives 7.3.4 Nomination Irrevocable 7.4 Notice of Nomination 7.5 Candidates to be Recommended 7.6 Objections 7.7 Member's / Trading member's Duty to Report 7.8 Dues and Claims 7.8.1 Dues of the Exchange 7.8.2 Liabilities Relating to Contracts 7.9 Consideration of Application 7.10 Inquiry 7.11 Admission of New Members / Trading Members 7.12 Admission Under Misrepresentation 7.13 Fresh Nomination 7.14 Payment of Entrance and Admission Fees and Annual Subscription 7.15 Intimation Letter for Election / Selection 7.16 Certificate of Admission to Membership / Trading Membership 7.17 Publication of Notice 7.18 Declaration of Defaulter / Deemed Defaulter 7.19 Declaration of Deemed Defaulter 7.21 Members' Duty to Inform 7.22 Compromise Forbidden 7.23 Post Declaration of Defaulter Process 7.23.1 Defaulter's Books and Documents 7.23.2 List of Debtors and Creditors 7.23.3 Defaulter to Give Information 7.24 Asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.3 Suspension of Rules, Bye-laws and Regulations 8.2.6 Other General Powers 8.2.6.1 Delegation of Powers 8.2.6.2 Review 8.2.6.3 Delegation of Powers in Emergency 8.2.7 Decision of Governing Board Final 8.2.8 Governing Board as Trustees 8.2.9 Indemnity to the Governing Board 8.3 Standing Committees 8.3.3 Audit Committee 8.3.5 Investors' Services Committee 8.3.7 Limitation of Constituting other Committees 8.3.8 Removal of Member 8.3.9 Casual Vacancy 8.3.10 Vacation of Office 8.3.11 Retiring Members 8.5 Managing Director 8.5.2 Delegation of Powers 8.5.3 General Operations Powers 8.6 Company Secretary 8.7 Auditors 8.7.1 Appointment and Duties of Statutory Auditor 8.7.2 Vaccine 8.7.3 Internal Auditor 8.8 Practising Company Secretary 8.9 Legal Advisor 8.10 Scrutineers 9 ELECTION, NOMINATION AND APPOINTMENT OF MEMBERS OF THE GOVERNING BOARD, VACANCIES IN THE GOVERNING BOARD AND ADMINISTRATIVE SET-UP 9.1.1.7 Not Complying with Conciliation/Arbitration Award 9.1.1.8 Not Resolving Complaints of Investors 9.1.1.9 Not Maintaining Base Minimum Capital 9.2 Designated Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 10.1.4.13 Validity of Votes 10.1.4.14 Casting of Votes 10.1.4.15 Minutes 10.2 Meetings of the Governing Board 10.2.1 Regulation of Meetings 10.2.2 Ordinary Meetings 10.2.3 Special/Urgent/Emergency Meetings 10.2.3.1 & 10.2.3.2 Special Meeting 10.2.3.3 Urgent and Emergency Meetings 10.2.3.4 Notice of Special/Urgent/Emergency Meetings 10.2.3.5 Business When Not to be Stated 10.2.3.6 Quorum 10.2.3.7 Interested Member Not to be Included in Quorum 10.2.3.8 Co-option of Members for Making up Quorum 10.2.3.9 Chairman to Preside 10.2.3.10 Voting 10.2.3.10.1 Personal Interest 10.2.3.10.2 Member of Committee 10.2.3.10.3 Absence During Hearings 10.2.3.11 Quorum 10.2.3.12 Majority 10.2.3.13 Chairman to Have a Casting Vote 10.2.3.14 Special Majority Resolution 10.2.3.15 Ordinary Resolution by Circular 10.2.3.16 Adjourned Meeting 10.2.3.17 Proceedings 10.2.3.18 Governing Board Need Not Give Reasons 10.2.3.19 Members/Trading Members And Others to Appear Before Meetings 10.2.3.20 Minutes 10.3 Meetings Of Standing Committees 10.3.1 Who May Convene And When 10.3.2 Quorum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etting the Breach of Rules, Bye-laws and Regulations 11.5.1.6 Failure to Submit to or Abide by Arbitration 11.5.1.7 Failure to Testify or Give Information 11.5.1.8 Failure to Submit Special Returns 11.5.1.9 Failure to Submit Accounts 11.5.1.10 Failure to Compare or Submit Accounts in Respect of Defaulters 11.5.1.11 False or Misleading Returns 11.5.1.12 Vexatious Complaints 11.5.1.13 Failure to Pay Dues and Fees 11.5.2 Unbusinesslike Conduct 11.5.2.6. Unwarrantable Business 11.5.2.7 Compromise 11.5.2.8 Dishonoured Cheque 11.5.2.9 Failure to Carry out Transactions with Clients 11.5.3 Unprofessional Conduct 11.5.3.1 Kerb Trading 11.5.3.2 Business in Securities in Which Dealings Not Permitted 11.5.3.3 Business for Defaulting Client 11.5.3.4 Dealings with Clients 11.5.3.6 Business for Insolvent 11.5.3.7 Business Without Permission When Under Suspension 11.5.3.8 Business For or With Suspended or Expelled Member/ Trading Member or Defaulter 11.5.2.9 Business for Employees of Other Members/Trading Members 11.5.2.10 Business for Exchange Employees 11.5.2.11 Advertisement 11.5.2.12 Evasion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.4.3.3 Manner of Holding of Base Minimum Capital 12.4.3.4 First Charge or Paramount Lien on Base Minimum Capital 12.4.3.5 Letter of Declaration 12.4.3.6 Return of Base Minimum Capital 12.5 Approved Users 12.5.1 Annual Subscription 12.5.2 Other Charges/Fees 12.6 Remuneration of Agents and Employees PART-C (MAY BE IMPLEMENTED AFTER DEMUTUALISATION/CORPORATISATION OF THE EXCHANGE) 8. CONSTITUTION AND POWERS OF GENERAL MEETING, GOVERNING BOARD, STANDING COMMITTEES, CHAIRMAN, MANAGING DIRECTOR, COMPANY SECRETARY, AUDITOR, LEGAL ADVISOR AND SCRUTINEERS 4.8 Chairman SEBI's circular no. SMD/SED/6919/93 dated April 20, 1993 Model Rule: There shall be a Chairman elected by the Governing Board as provided hereinafter and he shall be holding his position in a non-executive capacity. 8.4 Chairman The redignation of President as Chairman and functions and powers of Chairman as recommended by the Committee may be implemented after demutualisation/ corporatisation. 8.4.1 Chairman to Preside -------Same------- 8.4.2 Chairman to Deal at Meetings Only -------Same------- 8.4.3 Representative of the Exchange -------Same------- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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