Dealings between a client and a stock broker (trading members included)
Summary
This circular mandates stock brokers to comply with specific requirements for dealings with clients to ensure transparency and discipline. It outlines mandatory registration procedures, including the execution of Member Client Agreements and Know Your Client forms. The document further regulates running account authorizations, electronic contract notes, and general disclosure obligations.
Text
stock brokers shall comply with the requirements as annexed to this circular
ensure its full compliance in respect of all clients – existing or new – at the latest by 31st March 2010
The Stock Exchanges are directed to: a. bring the provisions of this circular to the notice of the Stock Brokers... b. make necessary amendments to the relevant bye-laws... c. communicate to SEBI, the status of the implementation...
The stock broker shall register a client by entering into an agreement with him... Once signed, a copy of the same shall be made available to the client
The mandatory documents are: a. Member Client Agreement (MCA)/Tripartite Agreement... b. Know Your Client (KYC) Form c. Risk Disclosure Document (RDD)
The Client shall indicate the stock exchange as well as the market segment where he intends his trades to be executed. He shall do so in the KYC form in his own hand and sign against these
The stock broker shall have documentary evidence of financial details provided by the clients who opt to deal in the derivative segment
The Stock Broker shall also capture details of action taken against a client by SEBI or other authorities during the last 3 years
There shall be a mandatory document dealing with policies and procedures for each of the following under appropriate headings: a. refusal of orders for penny stocks... i. deregistering a client
Any such contravening clause shall be null and void
the authorization shall be renewed at least once a year... signed by the client only... contain a clause that the Client may revoke the authorization at any time
The actual settlement of funds and securities shall be done by the broker, at least once in a calendar quarter or month... send to the client a ‘statement of accounts’
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Source: SecMarx — Dealings between a client and a stock broker (trading members included). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.