Compliance requirements for stock brokers: The Bombay Stock Exchange Ltd

Extract

[...] in the back office and not registering these codes in the BOLT database Dealing with intermediaries sub broker brokers not done their trades through the BOLT without sub broker being registered as sub brokers without registering such person as Remisier member of another member or with a person who is forbidden to trade of the exchange the BOLT TWS terminal by a person other than an approved person unregistered intermediaries or terminal unauthorized extension of trading terminals entered with errors of the exchange exchange for proprietary trading with intimating the exchange another exchange for proprietor additional broker with trading whom trades have been executed suspended broker without prior permission from the exchange trading activities Margins disclosing the risk management system Others clarification certificate regarding implementation of suggestions made at the time of inspection than in the prescribed format certificate without the approval of the exchange questionnaire duly filled in by the expiry of the specified member within the specified time as time till the mentioned in the letter addressed to questionnaire is the member whose inspection has been submitted ordered incomplete or wrong information accounts not made available for expiry of the specified inspection time till the records and documents are submitted Margin Trading the clients without obtaining prior information from the exchange providing margin trading facility providing margin trading facility otherwise than in the prescribed format clients giving details of margin trading facility availed from any broker in any exchange or rejection of the clients requests for margin trading with any broker accounts for every client for holding client wise securities purchased under margin trading system the movement of securities from his or her demat account through the internet details of funds used for the purpose of margin trading using funds other than own funds and borrowings from scheduled commercial banks and NBFC's regulated by the RBI member for the purpose of margin worth, calculated as prescribed by the SEBI providing margin trading facility to another client initial margin and maintenance margin amount of in cash from the clients availing short margin trading facility collection be levied on the trading member for other cases trading member exceeding the borrowed the trading member's lendable resources the clients in securities other than those prescribed Subsidiaries of Regional Stock Exchanges the nominal value of the equity share capital of the trading members trades done in its own account subject to a governing board of the trading member to the SEBI lacks the prescribed composition not segregated from the functions of to the SEBI the parent stock exchange Post Compliance Inspection certificate regarding implementation of suggestions made at the time of inspection Derivatives Segment The inspection strategy suggested by the SEBI is as follows:- At least 20% of the members having the highest average daily turnover should be taken up for inspection and preference should be given to those members who have not been inspected previously so as to ensure that all trading members are inspected at least once in a few years. [...]

[...] Need for Compliance The Indian stock market has seen substantial growth since the early 90's. With this it has also witnessed various scams. This shows various loopholes in the functioning of the capital market. Therefore it is necessary that a regulatory system be placed to control the market. The entire compliance strategy includes Risk Management, Client funding, Unique Client codes, online supervision, Inspection etc. Compliance not only provides a comfort zone for to the investors but it also provides encouragement to the member brokers to trade effectively. [...]

[...] is not maintained OR record is incomplete and not as per the prescribed format used for other purposes or transferred to own account Certificate not submitted by documents are submitted the due date two months of non submission deactivation of DTWS after four months Penalties for Procedures format Networth Certificate not in the prescribed format If the total late, fines and penalties fee exceeds Rs during an inspection the matter will me placed before the Disciplinary Action Committee Debt Segment Books of Accounts To be provided to the clients Extracts of relevant provisions governing the rights and obligations of the clients Relevant manuals Notifications Circulars Amendments of the Exchange or the regulatory authority Other documents Order confirmations slips Instruction should be obtained from the clients before placing the order Order Modification or Cancellation instructions have to be obtained in writing All clients must be provided with the trade confirmation slips Books of transactions Register of commodities Dealing with Clients Brokerage must not be charged at a rate exceeding the rate prescribed by the exchange All the orders entered in the system should always be the right price Contract Notes All market deals must be reported correctly to the exchange Settlement of trades have been reported to the exchange Membership Requirements The member must not be involved in any fund-based activities The member must not trade through another member of the same exchange either for himself or on behalf of his clients The members have not dealt with more than one trading member of another exchange for proprietor trading If such dealing has taken place, it should have been done after intimating the name of such broker to the exchange Advertisements No advertisements should be released for business purposes without prior approval of the exchange and the advertisement code has to be adhered with Member brokers have to comply with the following The content of the advertisement should relate only to the nature of the service that the stock broker provides The advertisement should not contain any recommendations The advertisement can be published by an individual member broker or jointly with other member brokers. [...]

[...] The stock exchange will maintain a database of client details submitted by the broker It has been made mandatory to use the unique client code for the cash segment for clients having order values of Rs 1 lakh or more. Modification of Client Codes If client codes are wrongly entered in the BOLT during trading they can be modified. This can be done in the post closing session. The Client ID of the executed trades or orders can be changed. [...]

[...] Products and Services Bombay Stock exchange offers the following products & services to its investors: Equity Debt Equity The equity market is divided into: Primary market Fresh issue of shares and other securities are affected through the primary market. It provides the issuers opportunity to issue securities, to raise resources to meet their requirements of business. Equity issues can be effective at face value or at a premium or discount. Issues at discount are rare and almost unheard of. Secondary market Investors can buy and sell securities in the secondary market. [...]