POLICIES & PROCEDURES
The Policies and Procedures of our Brokering Firm is as described as here-under in accordance with Trading Compliance requirements pertaining to National Stock Exchange. It can also be found in byelaws, regulations and circulars of our Firm. This document facilitate quick reference our Policies & General Procedures of our Day-To-Day Operation in our Firm.
TABLE OF CONTENTS •Client Registration
•Trading Rules
•Order Management System and Internal Controls •Contract note
•Electronic Contract note (ECN) •Charging of Brokerage
•Quarterly statement of accounts •Demat account operations
•Dealing with clients’ funds and securities •Margin Requirements
•Internet Trading
•Other dealings with clients •Dealing with intermediaries
•Location and Operation of Terminals
•Display of Notice Board / SEBI registration certificate •Control over branches and sub brokers
•Maintenance of Records
•Due diligence in employee activities
•Prevention of Money Laundering Act (PMLA), 2002 PSBL POLICY I. Client Registration
zClient registration documents are to be executed with any new client before commencing transactions with the client.
zClient registration documents are to be segregated into mandatory and non-mandatory parts. zKnow your client (KYC) form, Member constituent agreement (MCA) and Risk Disclosure document (RDD) as per the SEBI prescribed formats, constitute the mandatory part of the registration documents. All additional and voluntary clauses should be taken in voluntary documents separated from the mandatory part.
zIn KYC we ensure that:
zComplete details of Client information / Status, Bank and Depository Account details, Financial details of the constituent, Investment/ Trading experience, References, Financial documents (for Non Individual Constituents) and Signature of client are provided.
zPhotograph, Proof of identity and address, Board Resolution from corporate clients permitting trading in derivative products are attached.
zThe segments in which a client wants to transact are selected and marked by the client clearly. zIn MCA ensure that
zIn respect of clients registered in other exchange(s) also (if a member is attached to different exchange(s), separate exchange-wise agreement is executed.
zAgreement is printed on a non-judicial stamp paper of appropriate value and is dated.
zAgreement is signed by both the member and the client and is witnessed.
zAgreement contains clauses prescribed by SEBI / NSE from time to time.
zin respect of clients introduced by sub-broker, tripartite agreement is to be executed
zIn RDD ensure that
zClient acknowledges the risk disclosure document and is aware that certain basic risks are involved in trading in equity and derivative products.
zClient should be made aware that contracts cannot be rescinded on the ground of lack of awareness or any other ground.
zConduct in person verification of individual and HUF clients.
zCollect PAN card copy of client, verify the same with the web site of Income tax Department and upload details of the client before placing orders for the client.
zAllot a unique client code to each client and maintain a file mapping the client codes and the PAN’s.
zProvide copies of all the executed documents to the clients.
TRADING RULES
Preliminary rules and regulation for trading (Cash market)
1. Client has give to initial margin deposit (20% cash and / or 50% security. hair cut 50%). 2. On their deposit client has buy three times delivery and balance amount will be paid next day. 3. On their deposit client has got twenty times gross exposures (intra day) in cash market.
4. If client fails to pay his outstanding debit payment within four days, his holding Security or collateral security will be selling on fifth day. Without any intimation.
5. Any outstanding position during the day must be squared up latest by 3.15 p.m otherwise Due to any technical fault any loss/profit towards those outstanding positions will be solely client responsibility.
6. Rs.5000.00 cheque send along with New client registration form for intraday Trading deposit.
Preliminary rules and regulation for trading (F&O market) 1. For f&o trading, client has to pay initial margin first then he will trade in f&o.
2. Client has give to initial margin deposit (50% cash and 50% security. hair cut 50%). 3. On their deposit client has got ten times gross exposure in f&o for only intraday trading.
4. Those who want carry forward position in F&O segment he has to pay initial margin (as per NSE rule) of total carry forward amount.
5. For future trading, client has to pay mark to market loss next day before 12.30 noon, if client fail to pay required obligation within time his position will be square up without intimation. 6. If client fails to pay his outstanding debit payment within 2nd days, his holding Security or
collateral security will be selling on third day. Without any intimation. II. Order Management System and Internal Controls
zWe follow standard procedures for receipt of orders, recording the same and placing the orders in the trading system of the respective Exchanges.
zClient-wise and security-wise limits on exposure, open position, etc. is set up as per the Exchange Guideline.
zRisk mitigation measures is properly documented and made accessible to clients.
zDocumentation of internal controls on areas like order modification / cancellation, client code changes and post-trade activities are in place and are being updated from time-to-time.
zWe ensure monitoring mechanism for client’s debits / obligations and appropriate collection procedures.
III. Contract Note
zWe ensure that contract notes are issued in the prescribed format within 24 hours of execution of trades on the Exchange. Copies of contract notes and proof of Delivery / Dispatch to be maintained.
zWe issue on pre-printed stationary and signed by an Authorized Signatory mentioning name.
zUnique Client Code and PAN of the Constituent is printed.
zWith running serial number (reset to one at the beginning of the Financial Year).
zTrade price and brokerage is mentioned separately.
zFor contract notes issued with weighted average price for multiple trades resulting from single order, annexure containing details of all the trades is provided.
IV. Electronic Contract note (ECN)
zECNs is issued only if specifically consented by client.
zECNs is digitally signed, encrypted, non-tamperable and in compliance with provisions of IT Act, 2000.
zDelivery of ECNs is made by sending e-mail to the mail id provided by client.
zLog reports for sent mails and rejected / bounced mails is properly maintained. In case of non-delivery of ECNs, contract note is being sent in physical form.
zClient to consent that non-receipt of bounced back mail by PSBL, amounts to delivery of contract notes.
zECNs are required is being simultaneously published on the web-site of trading member and clients are given secured access to the same by way of client specific logon and password.
V. Charging of Brokerage
zBrokerage rate is subject to a maximum of 1.5% of the transaction amount. However, in Capital Market segment, trading member can charge brokerage up to 25 paise per share if the market value of the scrip is less than Rs 10/-.
zIn case of option contract, brokerage is to be charged on option premium amount and shall not exceed 1.5% of premium amount or Rs. 100/- per lot whichever is higher
VI. Quarterly statement of accounts
exceeding three months (calendar quarter) within a month of the expiry of the said period.
zThe statements content account of all receipts and deliveries / payments during the relevant period and not simply, the details of holdings as at the end of the period.
zWe maintain proof of dispatch / delivery for the same. zAn error reporting clause giving 24 hr is incorporated VII. Banking and Demat account operations
zMaintenance of separate client bank account and constituent beneficiary account for keeping clients’ funds and securities respectively.
zSegregate Firm’s and clients’ funds / securities in separate accounts. zFunds / securities of clients is not deposited in Firm’s accounts.
zWe do not charge any payments towards expenses / levies made from client bank account. zReceipts from / transfer to third parties, of funds and securities is not being effected in client bank account and constituent beneficiary account
VIII. Dealing with clients’ funds & securities
zWe ensure that funds / securities are received from respective clients’ accounts only.
zEnsure that pay-out of funds / securities is made to respective clients within one working day of pay-out by Exchange.
zClients’ funds / securities are not used for any purpose other than meeting the respective client’s margin / pay in obligations.
zAuthorization is obtained from clients for deposit of their collaterals with exchange / clearing corporation towards margin.
zClients’ securities is not being pledged to bank / financier for raising funds.
zFunds are received from / paid to clients by way of a/c payee cheques / demand drafts or by way of direct credit into the bank account through EFT or any other modes allowed by RBI only.
IX. Margin Requirements
zWe ensure to collect initial margin and maintenance margin in the approved mode (funds / bank fixed deposits / bank guarantee / approved securities with appropriate hair cut) from the clients. zWe ensure to put in place risk management system regarding the amount of margin collection and the mode of collection from other clients in Capital Market segment.
zWe ensure to collect initial margin in the approved mode from clients in F & O segment on an upfront basis.
zPSBL report margin actually collected from clients, to NSCCL on a daily basis.
zIn the computation of margin collection from the clients for the purpose of reporting to the Exchange.
zUnencumbered funds received only from the respective clients on an upfront basis can be included. Any Debit balances in the F&O client ledger should first be set off by apportioning the free balances / value of securities and the only balance amount if any to be considered towards margins collected from clients.
zAny free balance of the same clients in other segments after considering the debit balances and margins (if any) applicable in the respective segments can be considered towards margins for the F&O segment.
zMargins taken in the form of securities in the approved list to be valued as per the closing rate on the previous trading day and not the trading day, with an appropriate hair-cut.
zInformation related to margin applicable, utilized and required / balance in respect of each client is to be sent on a daily basis to the respective clients in both the segments. This information shows break up details in terms of funds, bank guarantee, bank deposits and securities.
X. Internet Trading
zWe ensure reliability, security and confidentiality of internet trading system.
zClient specific user id and password to be used for execution of trades by the respective client.
zPassword policy to be adhered (secrecy, periodic change and other aspects).
zInternet clients shall trade through internet trading system and only in case of connectivity problems, their orders can be entered through back up system (like call and trade facility) after proper identification of the client.
zWe ensure that clients do not deal on behalf of others.
XI. Other dealings with clients
zWe issue contract notes for all trades in respect of the constituents introduced by sub-brokers also.
zWe maintain direct dealings with clients introduced by a broker and ensure that the sub-broker does not issue any bills / notes to the clients nor deal with the clients’ funds and securities in any manner.
zReconcile dividend account periodically and ensure that dividend received on behalf of clients is credited to the respective clients within 30 days of receipt.
zWe provide exclusive e-mail id for registering investor complaints and display the id on your website and other materials, pamphlets and advertisement campaigns.
zWe maintain confidentiality of all client related information.
z‘Statement of Securities Transaction tax’ to be issued on an annual (financial year) basis within one month from the close of the financial year, unless required by the clients otherwise as to receive the STT statement on a daily basis.
XII. Dealing with intermediaries
zDeal directly with clients, registered sub broker in CM segment and authorised person in F&O segment.
zInspect at least 10% of sub-brokers every year and ensure that each sub-broker is inspected at least once in every five years.
zIn F&O segment, dealings with approved authorized persons may be done only if they are also registered as sub brokers in the Capital Market segment of the Exchange
XIII. Location and Operation of Terminals
zWe ensure that trading terminals are not located at any place other than the main / branch office and the offices of registered sub brokers / authorized persons of the member.
zWe ensure that trading terminal is not operated by a person other than an approved user / approved person.
zWe ensure that all terminal operators in F & O segment are NCFM / BDCE qualified and that at least one of every 5 Capital Market terminal operators in a location is NCFM qualified.
zWe ensure that no NEAT terminals are extended to another location without the approval of the Exchange.
details viz. terminal id, user, location, etc. also needs to be uploaded prior to such change. zWe ensure that secrecy of terminal-wise logon and password is maintained.
zWe are required to undertake system audit on annual basis, for period ending 30th June, of all the branches where CTCL or Internet Based Trading facility is provided and submit one consolidated report thereof to the Exchange within one month from end of the period.
XIV. Display of Notice Board / SEBI registration certificate
zMembership Certificate is being displayed in all our offices / offices of their registered sub brokers where trading terminals are located, notice boards/plates at prominently visible locations, painted / printed in a permanent manner, in a font and colour which enables easy reading of the subject matter and containing prescribed details.
zDisplay copy of SEBI registration certificate in the above said offices. XV. Control over branches and sub brokers
zWe ensure due diligence and credentials of entities proposed to be appointed as sub brokers/authorized persons.
zWe ensure proper procedures while opening and closing branches.
zWe ensure that clients are informed in advance in case of closure of branch.
zWe ensure that branches, sub-brokers, authorized persons do not indulge in unauthorized trading activities.
zWe monitor the activities of sub brokers/relationship managers /officials in-charge of branches to avoid unregistered intermediation, fraudulent activities, misuse of clients’ accounts, etc.
zWe ensure proper procedure for accounting of demand drafts and pay orders received from clients in the respective clients’ accounts.
zWe obtain and analyze periodic reports and information from all branches/sub brokers, to address various risk areas.
zWe welcome any feedback from the clients of sub brokers and branches on their dealings with the sub brokers and branch officials.
zWe inspect at least 10% of branches and sub brokers every year and ensure that ach branch and sub broker is inspected at least once in every five years.
XVII. Maintenance of Records
zWe maintain separate books of accounts and records for trades executed on each recognized stock exchange (in case of membership in different exchanges).
zWe maintain records and registers relating to business for a period of five years either in hard form or non tamperable soft form, including the following:
zStatements of funds and securities obligations received from NSCCL. zClient ledger, Margin register, Register of complaints.
zRecords in respect of brokerage collected separately from constituents.
zRegister of transactions.
zRegister or Ledger Account of Securities, client wise and security wise. XVIII. Continued membership requirements
zWe obtain prior permission of Exchange and SEBI before effecting any change in shareholding / sharing pattern or change in directors / partners.
zAny change in name of the our Firm is intimated to the Exchange forthwith along with the necessary records, for the purpose of effecting the change in the SEBI registration certificate. zDetails of Compliance Officer and any changes thereof to be intimated to the Exchange
XIX. Due diligence in employee activities
zWe establish and enforce procedures to supervise its business and the activities of its employees that are reasonably designed to achieve compliance with all the relevant regulatory requirements.
zWe shall specifically authorize in writing persons, who may be authorized to transact on behalf of the member and do such acts which the member delegates to such persons.
PSBL PMLA POLICY
INTRODUCTION :1. The Prevention of Money Laundering Act, 2002 (PMLA) has been brought into force with effect from 1st July, 2005. Necessary Notifications / Rules under the said Act have been published in the Gazette of India on 1st July 2005 by the Department of Revenue, Ministry of Finance, Government of India.
2. As per PMLA, every banking company, financial institution (which includes Chit Fund company, a co-operative bank, a housing finance institution and a non-banking financial company) and Intermediary (which includes a Stock-broker, sub-broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, Portfolio Manager, Investment adviser and any other intermediary associated with securities market and registered under section 12 of the Securities and Exchange Board of India Act, 1992) shall have to maintain a record of all the transactions, the nature and value of which has been prescribed in the Rules notified under the PMLA. For the purpose of PMLA, transactions include:
• All cash transactions of the value of more than Rs.10 lakhs or its equivalent in foreign currency.
• All series of cash transactions integrally connected to each other, which have been valued below Rs.10 lakhs or its equivalent in foreign currency, such series of transactions within one calendar month.
• All suspicious transactions whether or not made in cash and including, inter-alia, credits or debits into from any non monetary account such as Demat account, security account maintained by the registered intermediary.
For the purpose of suspicious transactions reporting apart from `transactions integrally connected', `transactions remotely connected or related need to be considered.
“Suspicions Transactions” means a transaction whether or not made in cash which to a person acting in good faith --
(a) Gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or
(b) Appears to be made in circumstances of unusual or unjustified complexity; or (c) Appears to have no economic rationale or bonafide purpose.
3. The Anti-Money Laundering Guidelines provides a general background on the subjects of money laundering and terrorist financing in India and provides guidance on the practical implications of the PMLA. The PMLA Guidelines sets out the steps that a registered intermediary and any of its representatives, need to implement to discourage and identify any money laundering or terrorist financing activities.
OBJECTIVE :
The main objectives of the PMLA are as follows:
1. To have a proper Customer Due Diligence (CDD) process before registering clients.
2. To monitor / maintain records of all cash transactions of the value of more than Rs.10 lacs.
3. To maintain records of all series of integrally connected cash transactions within one calendar month.
4. To monitor and report suspicious transactions.
5. To discourage and identify money laundering or terrorist financing activities. 6. To take adequate and appropriate measures to follow the spirit of the PMLA. GUIDELINES:
Broker being a SEBI registered intermediaries have to comply with spirit of anti money laundering provisions. To comply with PMLA, the following three specific parameters should be observed, which are related to the overall `Client Due Diligence Process':
1. Policy for acceptance of clients; 2. Procedure for identifying the clients;
3. Transaction monitoring and reporting especially Suspicious Transactions Reporting (STR).
Client / Customer Due Diligence (CDD):
For the purpose of CDD, Broker is dealing with institutional clients. According to SEBI regulation / rules Institutional clients includes:
z Banks
z Mutual Funds
z Foreign Institutional Investors (FII) z Financial Institutions
z Insurance Companies
According to SEBI, all trades done by institutional client should be settled through Clearing House. In clearing house trade, trades are settled by Broker and custodian of the respective client.
In view of above, following steps to be taken to comply with `Customer Due Diligence' process before registering as client:
z Obtain basic details for the purpose of the complying with KYC norms prescribed by SEBI.
z List of Directors and authorized person to trade on behalf of client and copy of Board resolution to that effect.
z Obtain SEBI registration number.
z Custodian details with whom client trade to be settled.
z Obtain contact details of client front / back office and contact person. z Obtain PAN NO. (Income Tax number).
z Obtain risk Disclosure Document duly executed by prospective client as prescribed by SEBI.
The client / customer due diligence (CDD) measures comprise the following:
1. Client Information & Identity :
Before registering client, obtain antecedent information. Verify independently information submitted by client but not limited to his identity, registered office address, correspondence address, contact details, occupation, Promoters / Directors, source of income, experience in securities market, PAN no. SEBI Registration No. etc. Obtain as many as information. Generally Institutional client are recognize at global level. We need to verify clients identity and origin using services of Bloomberg, Reuters, internet services or any other reliable, independent source documents, data or information. After verifying information, registration form along with other supporting documents should be approved by Compliance Officer designated for verification.
2. Beneficial Ownership and control:
After completing registration process, client account should be verified by independent employee to check the actual beneficial ownership and control of the particular account. We need to obtain the details with respect to Shareholders, Promoters from the client and it has to be verified independently. In this process we should find out who is authorized to operate the client's account and who is ultimately controlling the account. Also verify the sources of funds for funding the transaction. We also have to take care at the time of settlement regarding nature of transaction, movement / source of transaction, etc. Periodically ask for client's financial details to determine the genuineness of transaction.
The “Beneficial Owner” is the natural person or persons who ultimately own, control or influence a client and / or persons on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement.
3. Ongoing due diligence and scrutiny:
Periodically we need to conduct due diligence and scrutiny of client's transaction and accounts to ensure that transactions are being conducted in knowledge, to find out the risk profile, source of funds, etc. At regular interval, ongoing due diligence and scrutiny need to
be conduct i.e. perform ongoing scrutiny of the transactions and account throughout the course of the business relationship to ensure that the transactions being conducted are consistent with the Organization’s knowledge of the client, its business and risk profile, taking into account, where necessary, the customer's source of funds.
¾ Policy for acceptance of clients:
Before registering client, we need to identify the following details of the prospective client : 1. Ascertain the category of clients before registration as Client. (i.e. Individual
or Corporate, FII, Mutual Fund, PMS or other).
2. Obtain all necessary documents for registration. (Photograph, Photo Identity, Proof of Address, copy of PAN, etc.). Documents should be verified with original and same to be counter signed by Authorized representative of the organization.
3. Obtain copy of Bank Statement for ascertaining the mode of payment of transaction.
4. Registration of clients to be made on physical presence of the prospective client.
5. Obtain antecedent details of the prospective client.
6. Ensure that new registration is to be made in clients name only. 7. Ensure that account should not opened in fictitious or benami name. 8. Client's occupation, sources of income.
9. Determine the parameter to categories of client as per risk.
10. Obtain financial statement for at lease for last 2 years duly certified by Chartered Accountants.
11. Ensure that all details of KYC form should be complete in all respect Incomplete KYC should not accept by organization.
12. Organization should not register client in case any kind of doubt has been raised by client (i.e. unable to submit required form/proof, any suspicious behavior noticed at the time of registration, etc.)
13. Account should not opened where organization cannot apply Customer Due Diligence / KYC policies.
14. The client's account should be scrutinized regularly for determining nature of transaction taker place. In case of any suspicious transaction, the account should be freezer or securities / money should not be delivered to client. The following safeguards are to be followed while accepting the clients:
a) The client account should not be opened in a fictitious / benami name or on an anonymous basis.
b) Risk perception of the client need to defined having regard to :
1 Client's' location (registered office address, correspondence addresses and other addresses if applicable);
3. Manner of making payment for transactions undertaken.
The parameters of clients into low, medium and high risk should be classified. Clients of special category (as given below) may be classified as higher risk and higher degree of due diligence and regular update of KYC profile should be performed.
c) Documentation like KYC, Broker-client agreement and Risk Disclosure Document and other information from different category of client prescribed by SEBI and any other regulatory authority to be collected depending on perceived risk and having regard to the requirement to the Prevention of Money Laundering Act, 2002, guidelines issued by RBI and SEBI from time to time.
d) Ensure that a client account is not opened where the organization is unable to apply appropriate client's due diligence measures / KYC policies. This may be applicable in cases where it is not possible to ascertain the identity of the client, information provided to the organization is suspected to be non-genuine, perceived non-co-operation of the client in providing full and complete information. Discontinue to do business with such a person and file a suspicious activity report.
We can also evaluate whether there is suspicious trading in determining whether to freeze or close the account. Should be cautious to ensure that it does not return securities or money that may be from suspicious trades. However, we can consult the relevant authorities in determining what action should be taken when it suspects suspicious trading. e) We need to comply with adequate formalities when client is permitted to act on behalf of another person / entity. It should be clearly specified the manner in which the account should be operated, transaction limits for the operation, additional authority required for transactions exceeding a specified quantity / value and other appropriate details. The rights and responsibilities of both the persons (i.e. the agent-client registered with Broker, as well as the person on whose behalf the agent is acting) should be clearly laid down. Adequate verification of a person's authority to act on behalf the customer should be carried out.
f) Necessary checks and balance to be put in place before opening an account so as to ensure that the identity of the client does not match with any person having known criminal background or is not banned in any other manner, whether in terms of criminal or civil proceedings by any enforcement agency worldwide.
Acceptance of clients through Risk-Based Approach:
The clients may be of a higher or lower risk category depending on circumstances such as the customer's background, type of business relationship or transaction etc. We should apply each of the clients due diligence measures on a risk sensitive basis. We should adopt an enhanced customer due diligence process for higher risk categories of customers. Conversely, a simplified customer due diligence process may be adopted for lower risk categories of customers. In line with the risk-based approach, we should obtain type and amount of identification information and
documents necessarily dependent on the risk category of a particular customer.
Clients of special category (CSC):
CSC clients include the following :
1. Non-resident clients (NRI); 2. High Net worth clients (HNI)
3. Trust, Charities, NGOs and organizations receiving donations.
4. Companies having close family shareholdings or beneficial ownership. 5. Politically exposed persons (PEP) of foreign origin
6. Current /Former Head of State, Current or Former Senior High profile politicians and connected persons (immediate family, close advisors and companies in which such individuals have interest or significant influence);
7. Companies offering foreign exchange offerings;
8. Clients in high risk countries (where existence / effectiveness of money laundering controls is suspect, where there is unusual banking secrecy. Countries active in narcotics production, Countries where corruption (as per Transparency International Corruption Perception Index) is highly prevalent, Countries against which government sanctions are applied, Countries reputed to be any of the following -- Havens / sponsors of international terrorism, offshore financial centers, tax havens, countries where fraud is highly prevalent;
9. Non-face to face clients;
10. Clients with dubious reputation as per public information available etc.;
The above mentioned list is only illustrative and we should exercise independent judgment to ascertain whether new clients should be classified as CSC or not.
CLIENT IDENTIFICATION PROCEDURE:
To follow the Client Identification procedure we need to follow the following factors: ¾ The `Know Your Client' (KYC) policy should be strictly observed with respect to
the client identification procedure which need to be carried out at different states i.e. while establishing the Broker – client relationship, while carrying out transactions for the client or when have any doubts regarding the veracity or the adequacy of previously obtained client identification data.
¾ The client should be identified by using reliable sources including documents / information. Obtain adequate information to satisfactorily establish the identity of each new client and the purpose of the intended nature of the relationship. ¾ The information should be adequate enough to satisfy competent authorities
(regulatory / enforcement authorities) in future that due diligence was observed in compliance with the Guidelines. Each original documents should be seen prior to acceptance of a copy and it is verified and duly attested.
¾ Failure by prospective client to provide satisfactory evidence of identity should be noted and reported to the higher authority within the organization.
¾ SEBI has prescribed the minimum requirements relating to KYC for certain class of the registered intermediaries from time to time. Taking into account the basic principles enshrined in the KYC norms, internal guidelines should be followed in dealing with clients and legal requirements as per the established practices. Also maintain continuous familiarity and follow-up where it notices inconsistencies in the information provided by the client. The principles enshrined in the PML Act, 2002 as well as the SEBI Act, 1992 should be followed, so that Company is aware of the clients on whose behalf it is dealing.
Record Keeping:
For the purpose of the record keeping provision, we should ensure compliance with the record keeping requirements contained in the SEBI Act, 1992, Rules and Regulations made there-under, PLM act, 2002 as well as other relevant legislation, Rules, Regulations, Exchange Bye-laws and Circulars.
Records to be maintained should be sufficient to permit reconstruction of individual transactions (including the amounts and type of currencies involved, if any) so as to provide, if necessary, evidence for prosecution of criminal behavior.
Should there be any suspected drug related or other laundered money or terrorist property, the competent investigating authorities would need to trace through the audit trail for reconstructing financial profile of the suspect's account. To enable this reconstruction, Organization should retain the following information for the accounts of their customers in order to maintain a satisfactory audit trail.
a. The beneficial owner of the account;
b. The volume of the funds flowing through the account; and c. For selected transactions:
z The origin of the funds;
z The form in which the funds were offered or withdrawn, e.g. cash, cheques, etc;
z The identity of the person undertaking the transaction; z the destination of the funds;
z the form of instruction and authority.
Organization should ensure that all client and transaction records and information are made available on a timely basis to the competent investigating authorities.
Retention of Records:
The following document retention terms should be observed:
a. All necessary records on transactions, both domestic and international, should be maintained at least for the minimum period of ten years (10) from the date of cessation of the transaction.
b. Records on customer identification (e.g. copies or records of official identification documents like passports, identity cards, driving licenses or similar documents), account files and business correspondence should also be kept for the ten years from the date of cessation of the transaction.
c. Records shall be maintained in hard and soft copies.
In situations where the records relate to on-going investigation or transactions, which have been the subject of a suspicious transaction reporting, they should be retained until it is confirmed that the case has been closed.
Monitoring of transactions:
Regular monitoring of transactions is required for ensuring effectiveness of the Anti Money Laundering procedures.
Special attention required to all complex, unusually large transactions / patterns which appear to have no economic purpose. Internal threshold limits to specify for each class of client's accounts and pay special attention to the transaction, which exceeds these limits.
Should ensure that the records of transaction is preserved and maintained in terms of the PMLA 2002 and that transaction of suspicious nature or any other transaction notified under section 12
of the act is reported to the appropriate authority. Suspicious transactions should also be regularly reported to the higher authorities / head of the department.
Further the Compliance Department should randomly examine select transaction undertaken by clients to comment on their nature i.e. whether they are in the suspicious transactions or not.
¾ Suspicious Transaction Monitoring & Reporting:
Whether a particular transaction is suspicious or not will depend upon the background, details of the transactions and other facts and circumstances. Followings are the circumstances, which may be in the nature of suspicious transactions:-
a. Clients whose identify verification seems difficult or clients appears to be not co-operating. b. Asset management services for clients where the source of the funds is not clear or not in
keeping with client's apparent standing / business activity;
c. Clients in high-risk jurisdictions or clients introduced by banks or affiliates or other clients based in high risk jurisdictions;
d. Substantial increases in business without apparent cause.
e. Unusually large cash deposits made by an individual or business;
f. Clients transferring large sums of money to or from overseas locations with instructions for payment in cash;
g. Transfer of investment proceeds to apparently unrelated third parties;
h. Unusual transactions by “Client of special category (CSCs)” and businesses undertaken by shall corporations, offshore banks / financial services, business reported to be in the nature of export-import of small items.
Any suspicion transaction need to be notified immediately to the designated Principal Officer. The notification may be done in the form of a detailed report with specific reference to the client's transactions and the nature / reason of suspicion. However, it should be ensured that there is continuity in dealing with the client as normal until told other wise and the client should not be told of the report /suspicion. In exceptional circumstances, consent may not be given to continue to operate the account, and transactions may be suspended, in one or more jurisdictions concerned in the transaction, or other action taken.
In accordance with Designated Principal Officer for Compliance with the provisions of “Prevention of Money Laundering Act, 2002 (PMLA):”
SUB-BROKER & REMISIER REGISTRATION PROCEDURE:
REQUIREMENTS FOR INDIVIDUALDocuments to be submitted at the time of the Sub broker / Remisier registration PAN CARD : Photocopy of Permanent Account No. (PAN Card) of Proprietor require
EDUCATION : Must Be HSC Pass (10+2) or Graduate
(Copy of HSC Mark sheet or Graduation Certificate is acceptable only)
Incase the Applicant’s education is below H.S.C., require to submit the experience certificate to Capital Market { Minimum 2 years experience in stock broking issued by registered Broker/Sub
Broker with copy of 10th Passed mark sheet.}
AGE : Completed 21 years and not more than 65 years
OFFICE ADDRESS: As per Proof of office address which is provided by you.
¾ Light Bill, Telephone Bill, Municipal Tax Bill etc. (Trade Name),
¾ valid ration Card, Valid Passport, Valid Driving License and bank statement of the last one
month from a Nationalized Bank only.
Address Proof-Where Terminal To Be Located. (Telephone, Light Bill, Nationalized Bank Statement only, Rent agreement along with owner proof)
Telephone No. & Mobile No. of Applicant
Email Address of Applicant
Residential Address: As per Proof of resident which is provided by you.
Residential Telephone No.
Married Female applicant ( As per attached format – Annexure - C)
¾ Change of name proof required. Marriage Certificate/Affidavit on Rs. 20/- non-judicial stamp
paper & it’s notarized by the Notary.
¾ Photocopy of the same required.
SEBI Registration Fees :- exchange 10,000/-
[As per new SEBI rules, they collect registration fees for Block of 5 years at the time of fresh registration.]
Processing Fees : - Rs. 2,500/- (As per attached circular)
Reference letters
¾ From Banks (Banker) (As per attached annexure – A)
It is desired that the Applicant should arrange to submit Bank’s introductory letter of such a nature that where the Bank would state that it is known of the Applicant.
¾ Third Party (C.A./C.S./Advocate/Notary/Other Trading Member)
As per attached annexure – B
Four photographs of the Applicant.
REMISIER
Other documents except PAN & Education proof.
Ration Card/Electricity Bill mandatory for address proof for remisier registration.
Other proof require except above.
A. passport B. Driving License C. Ration Card Only one proof from
D. Voters Identity Card E Copy of Income Tax Return. this List.
¾ Bank a/c. No. & address (along with Pin code & Tel No.)
¾ Bank opening Date
Current occupation of Applicant.
REQUIREMENTS FOR PARTNERSHIP FIRM/PARTNERSHIP
Documents to be submitted at the time of the Sub broker / Remisier registration PAN CARD : Photocopy of Permanent Account No. (PAN Card) of All Partners & Firm require.
PARTNERSHIP DEED: Photo Copy of Partnership Deed. Capital Amount of Partners with Date
REGISTRATION OF FIRM (Form – G)
EDUCATION : Must Be HSC Pass (10+2) or Graduate of All partners (Copy of HSC Mark sheet or Graduation Certificate is acceptable only)
Incase the each of Applicant’s education is below H.S.C., require to submit the experience certificate to Capital Market { Minimum 2 years experience in stock broking issued by registered
Broker/Sub Broker with copy of 10th Passed mark sheet.}
AGE : Completed 21 years and not more than 65 years.
OFFICE ADDRESS : As per Proof of office address which is provided by you.
¾ Light Bill, Telephone Bill, Municipal Tax Bill etc. (Trade Name),
¾ valid ration Card, Valid Passport, Valid Driving License and bank statement of the last one
month from a Nationalized Bank only.
Address Proof-Where Terminal To Be Located. (Telephone, Light Bill, Nationalized Bank Statement only, Rent agreement along with owner proof)
Telephone No. & Mobile No. of all Partners & office.
Email Address of All partners & Firm
Residential Address: As per Proof of resident which is provided by you. (All partners)
Residential Telephone No. of All partners
Married Female applicant ( As per attached format Annexure - C)
¾ Change of name proof required. Marriage Certificate/Affidavit on Rs. 20/- non judicial stamp
paper & it’s notarized by the Notary.
¾ Photocopy of the same required.
SEBI Registration Fees :- 10,000/-
[As per new SEBI rules, they collect registration fees for Block of 5 years at the time of fresh registration.]
Exchange Processing Fees : - Rs. 2,500/- (As per attached circular)
Reference letters
¾ From Banks (Banker) (As per attached annexure – A)
It is desired that the Applicant should arrange to submit Bank’s introductory letter of such a nature that where the Bank would state that it is known of the Applicant.
¾ Third Party (C.A./C.S./Advocate/Notary/Other Trading Member) As per attached annexure – B
REMISIER
Other documents except PAN & Education proof.
Ration Card/Electricity Bill mandatory for address proof for remisier registration of Partners & Firm.
Other proof require except above. (All Partners)
A. passport B. Driving License C. Ration Card Only one proof from
D. Voters Identity Card E Copy of Income Tax Return. this List.
Bank Details (All partners & Firm) – As per provided proof of Bank account.
¾ Bank a/c. No. & address (along with Pin code & Tel No.)
¾ Bank opening Date
Current occupation of All Partners.
REQUIREMENTS FOR COMPANY
Documents to be submitted at the time of the Sub broker registration
PAN CARD : Photocopy of Permanent Account No. (PAN Card) of Company & All Directors require.
Memorandum / Articles of Association:
¾ Board Resolution for Authority Signatory
¾ Form no. 32 ( for registration of company)
¾ Form no. 1 & 18
EDUCATION : Must Be HSC Pass (10+2) or Graduate of All Directors (Copy of HSC Mark sheet or Graduation Certificate is acceptable only)
Incase the each of Applicant’s education is below H.S.C., require to submit the experience certificate to Capital Market { Minimum 2 years experience in stock broking issued by registered
Broker/Sub Broker with copy of 10th Passed mark sheet.}
AGE: Completed 21 years and not more than 65 years.
OFFICE ADDRESS: As per Proof of office address which is provided by you.
¾ Light Bill, Telephone Bill, Municipal Tax Bill etc. (Trade Name),
¾ valid ration Card, Valid Passport, Valid Driving License and bank statement of the last one
month from a Nationalized Bank only.
Address Proof-Where Terminal To Be Located. (Telephone, Light Bill, Nationalized Bank Statement only, Rent agreement along with owner proof)
Telephone No. & Mobile No. of all Directors & office.
Email Address of All Directors & Firm
Residential Address: As per Proof of resident which is provided by you. (All Directors)
Residential Telephone No. of All Directors
Married Female applicant ( As per attached format Annexure - C)
¾ Change of name proof required. Marriage Certificate/Affidavit on Rs. 20/- non judicial stamp
paper & it’s notarized by the Notary.
¾ Photocopy of the same required.
SEBI Registration Fees :- 10,000/-
[As per new SEBI rules, they collect registration fees for Block of 5 years at the time of fresh registration.]
Exchange Processing Fees : - Rs. 2,500/- (As per attached circular)
Reference letters
It is desired that the Applicant should arrange to submit Bank’s introductory letter of such a nature that where the Bank would state that it is known of the Applicant.
¾ Third Party (C.A./C.S./Advocate/Notary/Other Trading Member) As per attached annexure – B
Four photographs of all Directors.
REMISIER NOTE:
Company and HUF not eligible for Remisiership.
INVESTOR'S RIGHTS AND OBLIGATIONS:
• You should familiarize yourself with the protection accorded to the money or other property you may deposit with you member, particularly in the event of a default in the stock market or the Broking firm's insolvency or bankruptcy.
• Please ensure that you have a documentary proof of your having made deposit of such money or property with the member, stating towards which account such money or property deposited.
• Further ,it may be noted that the extent to which you may recover such money or property may be governed by the Bye-laws and Regulations of NSE and the scheme of the investors' protection fund in force form time to time.
• Any dispute with the member with respect to deposits, margin money, etc., and producing an appropriate proof thereof, shall be subject to arbitration as per the Rules, Byelaws/Regulations of NSE or its Clearing Corporation / Clearing House.
• Before you begin to trade. , you should obtain a clear idea from your member of all brokerage, Commissions, fees and other charges which will be levied on you for trading. These charges will affect your net cash inflow or outflow.
• You should exercise due diligence and comply with the following requirements of the NSE and or SEBI:
.1 Please deal only with and through SEBI registered members of the Stock Exchange and are enabled to trade on the Exchange. All SEBI registered members are given a registration no., which may be verified from SEBI. The details of all members of NSE and whether they are enabled to trade may be verified from NSE website (www.nseindia.com).
.2 Demand any such information, details and documents form the member, for the purpose of verification, as you may find it necessary to satisfy yourself about this credentials.
.3 Furnish all such details in full as are required by the member as required in "know Your Client" form, which may also include details of PAN or Passport or Driving License or Voters ld, or Ration card, bank account and depository account, or any such details made mandatory by SEBI/NSE at any time, as is available with the investor.
.4 Execute a broker-client agreement in the form prescribed by SEBI and /or the Relevant Authority of NSE or its Clearing Corporation/Clearing House from time to time, because this may be useful as a proof of your dealing arrangements with the member.
1.3.5 Give any order for buy or sell of a security in writing or in such form or manner, as may be mutually agreed. Giving instructions in writing ensures that you have proof of your intent, in case of disputes with the member.
.1 Ensure that a contract note is issued to you by the member which contains minute records of every transaction. Verify that the contract note contains details of order no., trade number, trade time, trade price, trade quantity, name of security, client code allotted to you and showing the brokerage separately. Contract notes are required to be given/sent by the member to the investors latest on the next working day of the trade. Contract note can be issued by the member either in electronic form using digital signature as required, or in hard copy. In case you do not receive a contract note on the next working day or at a mutually agreed time, please get in touch with he investors Grievance Cell of NSE, without delaying.
.2 Facility of Trade Verification is available on NSE website (www.nseindia.com), where details of trade as mentioned in the contract note may be verified form the trade date up to five trading days. Where trade details on the website, do not tally with the details mentioned in the contract note, immediately get in touch with the investors Grievance Cell of NSE.
.3 Ensure that payment/delivery of securities against settlement is given to the concerned member within one working day prior to the date of pay-in announced by NSE or it's Clearing Corporation /Clearing House. Payments should be made only by account payee cheque in favor of the firm/company of the trading member and a receipt or acknowledgement towards what such payment is made be obtained form the member delivery of securities is made to the pool account of the member rather than to the beneficiary account of the member.
.4 In case pay-out of money and/or securities is not received on the next working day after date of pay-out announced by NSE or its Clearing Corporation / Clearing House, please follow-up with the concerned member for its release. In case pay-out is not released as above form member within five working days, ensure that you lodge a complaint immediately with the investors' Grievance Cell of NSE.
.5 Every member is required to send a complete 'statement of Accounts', for both funds and securities settlement to each of its constituents, at such periodicity as may be prescribed by time to time. You should report errors, if any, in the Statement immediately, but not later than 30 calendar day of receipt there of, to the member. In case the error is not rectified or there is a dispute, ensure that you refer such matter to the investors Grievance Cell of NSE, without delaying.
.6 In case of a complaint against a member/registered sub-broker, you should address the complaint to the Office as may be specified by NSE from time to time.
• in case where a member surrenders his membership, NSE gives a public notice inviting claims, if any, from investors. in case of a claim, relating to "transactions executed on the trading system" of NSE, ensure that you lodge a claim with NSE/NSCCL/Clearing House within the stipulated period and with the supporting documents. • in case where a member is expelled from trading membership or declared a defaulter, NSE gives a public notice
inviting claims, if any, from investors. In case of a claim, relating to "transactions executed on the trading system" of NSE, ensure that you lodge a claim with NSE within the stipulated period and with the supporting documents.
• Claims against a defaulter/expelled member found to be valid as prescribed in the relevant Rules/Bye –laws and the scheme under the investor's Protection Fund (IPF) may be payable first out of the amount vested in the Committee for Settlement of Claims against Defaulters, on pro-rata basis if the amount is inadequate. The balance amount of claims, if any, to a maximum amount of Rs. 10 lakhs per investor claim, per defaulter/expelled member may be payable subject to such
claims being found payable under the scheme of the IPF.
Notes:
1. The term' Constituent' shall mean and include a client, a customer or an investor, who deals with a trading member of NSE for the purpose of acquiring and/or selling of Securities through the mechanism provided by NSE.
2. The term 'member' shall mean and include a member or a broker or a stock broker, who has been admitted as such by NSE and who holds a registration certificate as a stock broker from SEBI. 3. NSE may be substituted with names of the relevant exchanges, wherever applicable.
COMBINED RISK DISCLOSURE DOCUMENT FOR CAOITAL MARKET /CASH SEGMENT AND FUTURES & OPTIONS SEGMENT (TO BE GIVEN BY THE BROKER TO THE CLIENT)
This document is issued by the member of the National Stock Exchange of India (hereinafter referred to as “NSE”) / (here to) which has been formulated by the Exchanges in coordination with the Securities and Exchange board of India (hereinafter referred to as “SEBI”) and contains important information on trading in Equities and F&O Segments of NSE .all prospective constituents should read this document before trading on capital Market/Cash Segment or F&O segment of the Exchanges.
NSE /SEBI dose neither singly or jointly and expressly nor impliedly guarantee nor make any representation concerning the completeness, the adequacy of this disclosure document nor has NSE/SEBI endorsed or passed any merits of participating in the trading segments. This brief statement does not disclose all the risks and other significant aspects of trading.
In the light of the risks involved, you should undertake transactions only if you understand the nature of the contractual relationship into which you are entering and the extent of your exposure to risk.
You must know and appreciate that investment in Equity shares, derivative or other instruments traded on the Stock Exchange(s), which have varying element of risk, is generally not an appropriate avenue for someone of limited resources/limited investment and/ or trading experience and low risk tolerance. And low risk tolerance. You should therefore carefully consider whether such trading is suitable for you in the light of your financial condition. in case you
trade on NSE and suffer adverse consequences or loss, you shall be solely responsible for the same and NSE, its Clearing Corporation/Clearing House and /or SEBI shall not be responsible, in any manner whatsoever, for the same and it will not be open for you to take a plea that no adequate disclosure regarding the risk involved was made or that you were not explained the full risk involved by the concerned member. The constituent shall be solely responsible for the losses while executing orders for purchase and/or sale of a security or derivative being traded on NSE,
it must be clearly understood by you that your dealings on NSE through a member shall be subject to your fulfilling certain formalities set out by the member, which may inter alia include your filling the know your client form, client registration form, execution of an agreement, etc., and are subject to the Rules, Byelaws and Regulations of NSE and its Clearing Corporation, guidelines prescribed by SEBI and in force from time to time and Circulars as may be issued by NSE or its Clearing Corporation/ Clearing House and in force from time to time.
NSE 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 trading member and/or sub-broker of NSE and /or any third party based on any information contained in this document. Any information contained this document must not be construed as business advice/investment 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 professional advice on the same.
In considering whether to trade or authorize someone to trade for you, you should be aware of or must get acquainted with the following:-
1. BASIC RISKS INVOVLED IN TRADING ON THE STOCK EXCHANGE (EQUITY AND OTHER INSTRUMENTS)
• Risk of Higher Volatility:
Volatility refers to the dynamic changes in price that securities undergo when trading activity continues on the stock Exchange. Generally, higher the volatility of a security/ contract, greater is its price swings. There may be normally greater volatility in thinly traded securities/contra than in active securities/contracts. As a result of volatility, your order may only be partially executed or not executed at all, or the price at which your order got executed may be substantially different from the last traded price or change substantially thereafter, resulting in notional or real losses.
• Risk of lower liquidity:
Liquidity refers to the ability of market participant to buy and /or sell securities/contracts expeditiously at a competitive price and with minimal price difference. Generally, it is assumed that more the numbers of orders available in a market, greater is the liquidity is important because with greater liquidity, it is easier for investors to buy and/or sell securities/contracts swiftly and with minimal price difference, and as a result, investors are more likely to pay or receive a competitive price for securities/contracts purchased or sold. There may be a risk of lower liquidity in some securities/ contracts as compared to active securities/contracts. As a result, your order may only be partially executed, or may be executed with relatively greater price difference or may not be executed at all.
.1 Buying/selling without intention of giving and/or taking delivery of a security, as part of a day trading strategy, may also result into losses, because in such a situation, stocks may have to be sold/purchased at a low/high prices, compared to the expected price levels, so as not to have any obligation to deliver/receive a security. • Risk of Wider Spreads:
Spread refers to the difference in best buy price and best sell price. It represents the differential between the price of buying a security 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 / contracts. This in turn will hamper better price formation.
• Risk-reducing orders:
Most Exchanges have a facility for investors to place “limit orders”, “stop loss orders” etc”. The placing of such orders (e.g., “stop loss” order, 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 t o execute such orders.
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 available price of outstanding orders, which satisfy the order quantity, on price time priority. it may be understood that these price may be significantly different from the last traded price or the best in that security.
A “limit” order will be executed only at the “limit” price specified for the order or a better price. However, while the customer receives rice protection, there is a possibility that the order may not be executed at all.
A “stop loss” order is generally placed “away “ from the current price of a stock / contract, and such order gets activated if and when the stock/contract reaches, or trades through, the stop order are entered ordinarily below the current price, and buy stop order are entered ordinarily above the current price. When the stock reaches the pre-determined price, or trades through such price the stop loss order converts to a market/ limit order and
is executed at the limit or better. There is no assurance therefore that the limit order will be executable since a stock/contract might penetrate the pre-determined price, in which case, the risk of such order not getting executed arises, just as with a regular limit order.
Risk of News Announcements:
Issuers mark news announcement that may impact the price of the securities/contracts. These announcements may occur during
trading, and when combined with lower liquidity and higher volatility, may suddenly cause an unexpected positive or negative
movement in the price of the security /contract
Risk of Rumors:
Rumors about companies at times float in the market through word of mouth, newspapers, websites or new agencies, etc. The
investors should be wary of and should desist from acting on rumors
System Risk:
High volume trading will frequently occur at the market opening and before market close. Such high volumes may also occur at any
point in the day. These may cause delays in order execution or confirmation.
During periods of volatility, on account of market participants continuously modifying their order quantity or prices or placing or placing fresh orders, there may be delays in order execution and its confirmations. Under certain market conditions, it may be difficult or impossible in the market at a reasonable price or at all, when there are no outstanding orders eight on the buy side, or the sell side, or if trading is halted in a security due to any action on unusual trading activity or stock hitting circuit filters or for any other reason.
System/Network Congestion:
Trading on NSE is in electronic mode, based on satellite/leased line based communication 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 half, or any such other problem/glitch whereby not being able to establish access to the trading system/network may be beyond the control of 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 to seller all executed transactions.
4. As far as Futures and Options segment is concerned, please note and get yourself acquainted with the following additional features:-
4.1 Effect of "Leverage" or "Gearing"
The amount of margin is small relatively to the value of the derivatives contract so the transaction 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 comparison with the principal investment amount. But transactions in derivatives carry a high degree of risk. You should therefore completely understand the following statement before actually trading in derivatives trading and also trade with caution while taking into account one's circumstances, financial resources, etc. if the prices move against you, you may lose a part of or whole margin equivalent to the principal investment amount in relatively short period of time .Moreover, the loss may exceed the original margin amount.
A. Futures trading involve daily settlement of all positions. Every day the open positions are market to base on the closing level of the index. If the index has moved against you, you will be required to deposit the amount of loss (notional) resulting from such movement. This margin will have to be paid within a stipulated time frame, generally before commencement of trading next day.
B. if you fail to deposit the additional margin by the deadline or if an outstanding debt occurs in your account, the broker /member may liquidate part of or the whole position or substitute securities. In this case, you will be liable for any losses incurred due to such close–outs.
C. Under certain market conditions, an investor may find it difficult or impossible to execute transaction. For example, this situation can occur due to factors such as illiquidity i.e. when there are insufficient bids or offers or suspension of trading due to price limit or circuit breakers etc.
D. In order certain maintain market stability; the following steps may be adopted: changes in the margin rate, increases in the cash margin rate or others. These new measures may also be applied to the existing open interests. In such conditions, you will be required to put up additional marg INS or reduce your positions.
E. You must ask your broker to provide the full details of the details of the derivatives contracts you plan to trade i.e. the contract specifications and the associated obligations.
4.2 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 option. If the price of the underlying does in the anticipated direction before the option expires to an extent sufficient to cover the cost of the option, the investor may loss all or a significant part of his investment in the option.
2. The exchange may impose exercise restrictions and have absolute authority to restrict the option writer runs the risks of losing substantial amount.
4.3 Risks of Option Writers
1. if the price movement of the underlying is not in the anticipated, the potion writer runs the risk of losing substantial amount.
2. The risk of being an potion write may be reduced by the purchase of other options on the same underlying interest and thereby and thereby assuming a spread position or by acquiring other types of hedging poisons markets or other market. However, even where the writer has assumed a spread or other hedging position, the risks may still be significant. A spread position is not necessarily less risky than a simple "long' or ' position.
3. Transactions that involve buying and writing multiple option in combination, or buying or writing options in combination with buying or selling short the underlying interests, present additional risk to investors. Combination transactions, such as option spreads, are more complex than buying or writing a single option. And it should be further noted that, as in any area of investing, a complexity not well understood is, in itself, a risk factor. While this is not to suggest that combination strategies should not be considered, it is advisable, as is the case with all investments in options, to consult with someone who is experienced and knowledgeable with respect to the risks and potential rewards of combination transactions under various market circumstances.
5. GENERAL
5.1 Commission and other charges
Before you begin to trade, you should obtain a clear explanation of all commission, fees and other charges for which you will be liable. These charges for which you will be liable. These charges will affect your net profit (if any) or increase your loss.
5.2 Deposited cash and property
You should familiarize yourself with the protections accorded to the money or other property you deposit particularly in the event of a film insolvency or bankruptcy. The extents to which you may recover you’re your money or property may be governed by specific legislation or local rules. In some jurisdictions, property which has been specifically identifiable as your own will be pro – rated in the same manner as case for purposes of distribution in the event of shortfall. In case of any dispute with the member, the same shall be subject to arbitration as per the byelaws/regulations of the Exchange.
• For rights and obligations of the clients, please refer to Annexure -1 enclosed with the document.
• The term 'constituent' shall mean and include a client, a customer or an investor, who deals with a member for the purpose of acquiring and/or selling of securities through the mechanism provided by NSE.
• The term 'member' shall mean and include a trading member, a broker or a stock broker who has been admitted as such by NSE and who holds a registration certificate as a stock broker from SEBI.
I hereby acknowledge that I have received and understood this risk disclosure statement and Annexure-1(Available at the HO containing my right and obligations.
