ARG COMPLIANCE MANUAL - Rathi Online

COMPLIANCEMANUAL

INDEXSr.No Particulars Pg No1. Activity Schedule for Branch Opening 3-42. Display of Notice Board 5-113. Contract Notes & Appointment of Authorised Signatories 12-154. Allotment of Back office login ID 16-165. Allotment of Terminal ID 17-226. Client Information Sheet (One Pager) 23-237. CRF Procedure (KYC, Documentary Requirement, Checklist) 24-308. UCC Procedure & Client category 31-329. Shifting & Closure of Client 33-3510. Guidelines to be followed before trade 36-3711. RMS Process 38-54WEB RMSMargins and LimitsAuto Square off Procedure12. Grievance Redressal Mechanism 55-5513. Surveillance and Recovery Notice Performa Letter 56-6014. Office Management 61-65ChecklistDealing with ClientBank accountBalance Confirmation with ClientMiscellaneous Matters15. Insurance Claim Pre-requisites 66-6616. Trade Modification Undertaking 67-6817. Reporting of Bulk & Block Deal 69-6918. F&O Increased Position 70-7019. Useful Web Sites 71-7120. Branch Audit Self Certification 72-7321. Insider/ Employee Trading Policy 74-7622. Business Code of Conduct 77-8323. Compliance Exchange Deadlines 84-9124. Sub-broker Registration Checklist 92-10525. PMLA Policy 106-12326. Compliance Training 124-19427. Commodities 195-2082

ACTIVITY SCHEDULE FOR BRANCH OPENINGSr.No.1 Capex approved by Management2 Manpower planning approved by VC3 Sanctioned amount of Manpower4 Working structure done at the branchParticularsComputer & Printer installation/Wiring work doneFixing of DP(for fixing cables)outside and Inside for fixation of internet and telephone linesEarthing for VPNFlex installationSign board installationReliance phone (……… nos)2 BSNL / Other landline connectionsInternet Connection (serivce provider)5 Whether copy of Rent Agreement has been received - Not required incase of Regd. SB's office6 NOC copy received by the branch7 Intimation given to HECL8 Site survey Conducted9 Schduled date of the materail to reach the site10 Checklist for connectivity to HECL11 Connectivty done12 Whether details of NCFM Approved User alongwith copy of certificate has been received13 Board Resolution for -- For opening Branch- For opening Bank A/c- For signing Contracts/Bills14 Whether Clients Bank A/cs have been opened for NSE & BSE transactions separately. Pleasemention Bank A/c No.15 Whether DP A/cs have been opened with NSDL / CDSL. Please mention DP A/c No.16 Software installation & training at Branch location completed17 CTCL IDs uploaded/intimated to NSE18 Branch opening mail19 Whether SEBI Certification has been despatched for displaying20 Whether Notice Board has been despatched for displaying in the format as prescribed by NSE21 Whether Email Id of the Branch has been created. Please mention email id23 Prefix code22 IPO Code23 Mutual Fund Code24 Date of commencement of business3

ACTIVITY SCHEDULE FOR FRANCHISEE OPENINGSr.No.Particulars1 NOC copy received by the branch2 Intimation given to HECL3 Site survey Conducted4 Schduled date of the materail to reach the site5 Checklist for connectivity to HECL6 Connectivty done7 One pager info. Received alongwith MOU/AP agreement8 NCFM Approved User alongwith copy of certificate has been received9 Copy of Signed MOU and agreement sent to the branch along with the signing papers10 BSE & NSE DD nos submitted with the papers to the compliance11 Sub-broker/AP application has been prepared and sent to exchange for Regn.12 Whether Remisier/AP application has been prepared and sent to exchange for Regn.13 Board Resolution for -14 - For opening Bank A/c/CMS authority(seg to be mentioned) and from which bank15 - For signing Contracts/Bills16 Whether Clients Bank A/cs have been opened for NSE & BSE transactions separately. Pleasemention Bank A/c No.17 Whether DP A/cs have been opened with NSDL / CDSL. Please mention DP A/c No.18 Software installation & training at Branch location completed(backoffice,a/c's ,DP training)19 CTCL IDs uploaded/intimatedBSE /NSE /F&O/NCDEX/*MCX20 Whether SEBI Certification has been despatched for displaying21 Whether Notice Board has been despatched for displaying in the format as prescribed by NSE22 Whether Email Id of the Branch has been created. Please mention email id23 Prefix code23 IPO Code24 Mutual Fund Code25 Date of commencement of businessSignatures1 Business Development2 Operations3 Compliance4

DISPLAY OF NOTICE BOARDNote: 1. All the notice Board BSE/NSE/MCX-SX/MCX/NCDEX are a mandatory display inthe branch. The ideal size should be 4‟× 3‟ but due to space constraints it can be reducedbut in any case will not be in A4 size.2. Details that are blank (pertaining to branch) have to be filled by respective branch.3. To be displayed in the main / branch office of the trading member and office of the Subbroker/ Franchise of the trading memberSEBI Registration certificates to be displayed on the notice BoardAs per the Bye Laws of the Exchange all offices of the Broker have to display the SEBIRegistration certificates on their Notice Board.With regards to the same, all branches are instructed to make sure that the certificatesattached are displayed at their branch. The attached certificates are mentioned below:1. SEBI Registration for NSE Cash2. SEBI Registration for NSE F&O3. SEBI Registration for NSE CD4. SEBI Registration for BSE cash5. SEBI Registration for MCX-SX6. Registration for NCDEX7. Registration for MCX8. Registration for NMCE9. Registration for NSEL10. Registration for ICEX11. Notice Board for BSE12. Notice Board for NSE.13. Notice Board for MCX-SX14. Notice Board for MCX/NCDEX5

All the branches are required to take the printouts and laminate the certificates beforedisplaying on the notice board.6

NOTICE BOARD:BSE1. Name of the Trading Member ofBSE (SEBI Registration No.)2. Address & Tel. No. of the Mainoffice of the trading member (AlsoName & Tel. No of the contact personin the main officeAnand Rathi Share and Stock Brokers Limited4th Floor, Silver Metropolis,Jay CoachCompound, Opp. Bimbisar Nagar,Goregaon(E), Mumbai - 400 063.Jugal Mantri022-40013700INB011371557/INF0106769313. SEBI Registration No. of the tradingmember4. BSE Investor Service Cell Tel. No. 022 - 22721233/34Do’sa. Always deal with market intermediaries registered with SEBI/Exchanges.b. Give clear and unambiguous instructions to your broker/agent/depository participant.c. Always insist on contract notes for all the transactions from the main broker (name tobe specified) within 24 hours of the trade execution. In case of doubt of thetransactions, verify the genuineness of the same on the Exchange websitewww.bseindia.com.d. Always settle the dues through the normal banking channels with the marketintermediaries.e. Always make payment directly to the main broker (name to be specified).f. Always give delivery of shares directly to the main broker (name to be specified).g. Adopt trading/investment strategies commensurate with your Risk bearing capacityas all investments carry risk, the degree of which varies according to the investmentstrategy adopted.h. Always sign a Member-Client Agreement or the tripartite agreement with the tradingmember & SEBI registered sub-broker of the trading member of BSE as the casemay be.i. Please carry out due-diligence before registering as client with any Intermediary.Also, carefully read and understand the contents stated in the Risk DisclosureDocument, which foRMS the part of client registration for dealing throughintermediaries in the Stock Market.Don’tsa. Don‟t deal with unregistered brokers/sub-brokers, intermediaries.b. Don‟t leave the custody of your Demat Transaction slip book in the hands of anyIntermediary.c. Don‟t fall prey to promises of guaranteed returns.d. Don‟t blindly imitate investment decisions of others who may have profited from theirinvestment decisions.7

AnandRathiDETAILS OF MCX-SX TRADING TERMINALName of theTrading Member ofMCX-SXAddress & Tel. No. of the Mainoffice of the trading memberSEBI Registration No. of thetrading memberAddress and Tel. No. of thebranch office where tradingterminal is locatedName & Designation of the personin-charge/managing themain/branch officeName, designation & Tel. No. ofthe contact person in the Mainoffice of the trading memberAnand Rathi Share and Stock brokersLimited4th Floor, Silver Metropolis,Jay CoachCompound, Opp. BimbisarNagar,Goregaon (E), Mumbai - 400 063.CD : INE 260676935Mr. Deepak Kedia - Compliance HeadTel. No.: 40013700Fax No.: 40013770Important points to be noted by constituents/investors‣ Please deal only through a SEBI registered trading member and ensure to carry out duediligence before registering as a constituent of any trading member‣ Please read carefully and then execute registration documents viz. Know Your Clientform, Member-Constituent Agreement and Risk Disclosure Document, before startingdealing with trading member‣ Insist on contract note of the trading member for all trades done by you, within 24 hoursand bring any discrepancies to the notice of trading member immediately‣ Please make payments by account payee cheque / DD in favour of trading member orfunds transfer through banking channel and do not involve in cash dealings‣ For further details on the rights and obligations of investors and other related issues,kindly contact the trading member or the Investor Service Centers of MCX StockExchange LimitedNOTICE BOARD:MCX9

1 Name of the Trading Member(Commodity Broker) of MCXM/s Anand Rathi Commodities Ltd2 Name of the Exchange Multi Commodity Exchange of IndiaLtd3 Address & Telephone No. of the Main 4th Floor, Silver Metropolis,Jay Coachoffice of the trading memberCompound, Opp. BimbisarNagar,Goregaon (E), Mumbai - 400 0634 Registration No. of the trading member FMC : MCX/TCM/CORP/ 0525MCX: 108755 Name & Designation of the contactperson in the Main office of the tradingmemberMr. Deepak Kedia – Compliance HeadAdditional details to be displayed in the Branch office1 Address of the Branch office wheretrading terminal is located2 Name & Designation of the person incharge/ managing the branch officeAdditional detail to be displayed in the Sub-broker / Franchise office1 Name of the Sub-broker /Franchise2 Address of the Sub-broker‟s /Franchise office, where tradingterminal of above TM is located10

NOTICE BOARD:NCDEX1 Name of the Trading Member(Commodity Broker) of MCXM/s Anand Rathi Commodities Ltd2 Name of the Exchange NATIONAL COMMODITY & DERIVATIVESEXCHANGE LIMITED3 Address & Telephone No. of theMain office of the trading member4th Floor, Silver Metropolis,Jay CoachCompound, Opp. Bimbisar Nagar,Goregaon(E), Mumbai - 400 0634 Registration No. of the tradingmember5 Name & Designation of thecontact person in the Main officeof the trading memberFMC : NCDEX/TCM/CORP/0178NCDEX : 00147Mr. Deepak Kedia – Compliance HeadAdditional details to be displayed in the Branch office1 Address of the Branch officewhere trading terminal is located2 Name & Designation of the personin-charge / managing the branchofficeAdditional detail to be displayed in the Sub-broker / Franchise office1 Name of the Sub-broker /Franchise2 Address of the Sub-broker’s /Franchise office, where tradingterminal of above TM is located11

CONTRACT NOTES (CN) & APPOINTMENT OF AUTHORISEDSIGNATORIES1. CN must be issued to ALL the clients within 24 hours.2. Duplicate acknowledged copy of CN to be maintained.3. CN No. must bear running serially no. by software starting with no. 1 everycalendar/financial year.4. PAN of the Client must be printed on the CN mandatory.5. Signature of client must be taken on duplicate copy/counterfoil of CN and Properrecords showing dispatch of CN be maintained.6. CN to be signed by an Authorised Signatory duly authorized with a Board Resolutionto be passed by HO and the same after being signed by the authorized signatory willbe submitted to the exchange for their records and approval and only after the sameis intimated by the HO the Authorised Signatory will start signing and issue contracts.Authorised Signatory would be appointed once the request is made by the branch, namingthe authorized person12

Authorised Signatory FormatNote: Print On respective letterheads (BSE – ARSSBL; NSE – ARSSBL; Commodities –Anand RathiCommodities Ltd) -2 copies. Send original copies with specimen signatures to HO- NSE-AUTHORISATION FOR SIGNING CONTRACT NOTES, BILLS ETC.Pursuant to the resolution passed by the Board of Directors of Anand Rathi Share & Stock BrokersLtd. at their meeting held on 10 th January 2007 the undersigned persons are authorized to modify,add to and delete the list of authorized signatories for signing and issuing Contract Notes and Bills.APPOINTMENT OF AUTHORISED SIGNATORIESUnder the authority delegated by the said resolution we hereby authorize the following persons toSEVERALLY deal, sign, and execute the Agreements, Bills, Contract Notes, Debit Notes etc. onbehalf of the Company,with effect from (date)_______________ in respect of transactions executedon the National Stock Exchange of India Ltd. whereat the Company is a member.Branch Name Authorised Persons Specimen Signatures.....................Branch .......................... .................................REMOVAL OF AUTHORISED SIGNATORIES.....................Branch .......................... .................................For Anand Rathi Share & Stock Brokers Ltd.Deepak Kedia/ Narendra Jain.Authorised Signatories13

- BSE-AUTHORISATION FOR SIGNING CONTRACT NOTES, BILLS ETC.Pursuant to the resolution passed by the Board of Directors of Anand Rathi Share and Stock BrokersLtd . at their meeting held on 22 nd Mar 2010 the undersigned persons are authorized to modify, addto and delete the list of authorized signatories for signing and issuing Contract Notes and Bills.APPOINTMENT OF AUTHORISED SIGNATORIESUnder the authority delegated by the said resolution we hereby authorize the following persons toSEVERALLY deal, sign, and execute the Agreements, Bills, Contract Notes, Debit Notes etc. onbehalf of the Company, with effect from (date)_______________ in respect of transactionsexecuted on the Bombay Stock Exchange Ltd. whereat the Company is a member:Branch Name Authorised Persons Specimen Signatures.....................Branch .......................... .................................REMOVAL OF AUTHORISED SIGNATORIES.....................Branch .......................... .................................For Anand Rathi Share and Stock Brokers LtdDeepak Kedia/ Narendra Jain.Authorised Signatories14

ALLOTMENT OF TERMINAL ID1. Persons operating the trading terminal (NEAT/CTCL) must have compulsorilypassed the NCFM certification exam for Cash/ Derivatives/ Commodities.2. Prior approval of HO/NSE is required to be taken before allotment of NEAT/CTCLterminal Id‟s.3. Operation of trading terminal without passing NCFM exam leads to heavypenalty being charged by NSE including suspension.4. Change in person operating the NEAT/CTCL terminal required to be informed toHO/NSEBSE Ids Cash: Certificates to be providedAs per our earlier mail with reference to BSE Notice No.20070522-25 dated 22nd May 2007it has been made clear that all the BSE CASH Ids (BOLT TWS / IML(CTCL) IDS) running inrespective branches will have to provide the mandatory BCSM certificate for their respectiveUser Ids.Incase of failure to provide the same their respective Ids will be deactivated. All existing Iddetails in IML format available in Intra.rathi.com FAQ- Excel along with their relevantcertificate/marksheet should be mailed to krishnavenichava1@rathi.com ;rupalikadam@rathi.comThe details of registration and examination centre along with the contact details have beenprovided below.All are instructed to get in touch with their nearest centre and get their users registered andsend across the certificates/marksheet along with the said format before the due date. Thelist of your respective User Ids along with the User Names will be mailed to you shortly.17

Procedure to be followed by branches to get through BCSM ExamThere are 6 centers available all over India.Branches can directly co-ordinate with nearest center of that region.http://www.bseindia.com/training/zedca.asp1. Visit site bseindia.com/Bse Training institute/BTI Information/BCFMcertification/BCSM module/ at the end of page will see link for registration form andadmit cardhttp://www.bseindia.com/training/bccsmtest.asp2. Rs. 843/- as fees for each candidate/ cheque at payable at par or D. D. payable atMumbai for all over India candidates. (Member‟s cheque is acceptable)3. Group of 20 or more candidates can apply together with single cheque payment.4. Schedule for exam isa. Monday to Friday between 11 a.m. to 4 p.m.b. Saturday between 11 to 15. http://www.bseindia.com/training/faqcert.asp for more questions related to BCSMExam18

Connectivity LayoutONLINEBSE NSE MCX /NCDEXNESTOMNEYSISNESTOMNEYSISODINDIET- FTCTCLDEALERCLIENTCTCLDEALERCLIENTCTCLDEALERCLIENTONLINECLIENTSONLINECLIENTSONLINECLIENTSOFFLINEBSE NSE MCX NCDEXTWSBOLTVPNCTCLODINNEATUSER IDVPNCTCLODINUSER IDVPNCTCLODINUSER IDVPNCTCLODIN19

Trading terminals to be located at -LOCATION OF TRADING TERMINALS1. Members‟ Office -- Rented/Owned/Licensed premises2. Members‟ Branch Office3. Registered Sub-Brokers Office4. Terminal located at place other than above mentioned places, will be deemedto be office of MemberInternet trading terminals used by clients may be located at the clients place.TWS Bolt ID – Details to be provided1 TWS(0)2 PIN CODE3 TWS ID4 USER ID5 PROG-TRAD6 VENDOR-CODE7 BCSM Reg. No8 Validity of BCSM9 Reg Office Address10 Office City11 Office State12 Office Pin13 Nature of Office14 Phone/Fax No15 Employee Code/ Franchisee Code16 First Name17 Middle Name18 Last Name19 Mapin Id20 Sebi Reg No21 Relation with approved user22 Date of Birth23 Date of Activation24 Date of Deactivation25 Residence Address26 Residence City27 Residence Stat28 Residence Pin29 Active Terminal30 Mode of Connectivity20

NSE CTCL ID :- Details to be provided1. Market Segment2. NEAT User Id3. CTCL Terminal Id4. CTCL LogIn Id5. Purpose of CTCL6. Date of Allotment7. Date of Disablement8. Office Status9. Office Address110. Office Address211. Office Address312. State13. City14. Office Pin Code15. Telephone No.16. Connectivity Mode17. NCFM Reg. No.18. Employee Code/ Franchisee Code19. Approved Person Name20. Approved Person's Father Name21. Date of Birth22. validity Date23. MAPIN No.24. PAN No.25. Relation26. Sub-Broker SEBI code27. Sub-Broker name28. Authorised Person name29. CTCL Status21

NCDEX CTCL ID :- Details to be Provided1 SR NO2 RECORD TYPE3 SEGMENT4 VPN/LEASED LINE ID5 USER ID6 TERMINAL ADDRESS 17 TERMINAL ADDRESS 28 TERMINAL ADDRESS 39 CITY10 PIN CODE11 STATE12 TEL NO13 FAX NO14 EMAIL ID15 CONTACT PERSON16 DESIGNATION17 MODE18 Employee Code19 APPROVED PERSON20 FATHERS NAME21 DOB22 RES ADD 123 RES ADD 224 RES ADD 325 CITY26 PIN CODE27 PERMANENT ADD 128 PERMANENT ADD 229 PERMANENT ADD 330 CITY31 PIN CODE32 RELATIONSHIP with A P33 CTCL ID34 DATE OF ACTIVE35 DATE OF DISABLE36 PAYMENT37 NCFM REGN38 VALID UPTO39 PURPOSE40 AUTH PERSON41 VENDOR42 STATUS22

CLIENT INFORMATION SHEET (ONE PAGER)1. Branch to obtain information of client in one pager form i.e. Client Information Sheet (CIS).2. Client Code to be allotted based on the said information and respective prefix allotted to branch.Name of the ClientClient CodeStatus of the ClientClient AddressResidencePhone no Res.OfficeCLIENT INFORMATION SHEETExchanges Applicable: BSE NSE F&OIndividual/HUF/Firm/Corporates IndividualOffice no. / Mobile no.PAN No.EmailDate of Birth Passport No Date Of IssueExpiry DatePlace of IssueClient Bank DetailsClient DP DetailsBank NameName of the DPBranchDP IDBank A/c No.Client IDARSPL Bank DetailsNCSPL Bank DetailsName of the HDFC Bank Name of the HDFC BankBankBankBranch Mumbai Branch MumbaiBank A/c No. 0‟123200003 Bank A/c No. 0‟60034000509743Broker DP DetailsDP Name ARSPL NCSPLDP ID 10600(C IN301803(NS IN 301803DSL) DL)CM BP ID 030 IN651983(NS IN 559169(CMID) DL)Brokerage StructureSquare Up _______% _______MinDelivery _______ % ________Min(Both Sides / Single Side)+ Other Charges *+ Other Charges *Service Tax (as per applicable) presently 10.2%,(* Other charges include Turnover tax, Transaction Charges & Stamp duty )Specific Instructions for OperationsDate : Signature :Prepared by : Signature :Name of EDP dept person : Signature :Name of Authorised person : Signature :23

IF NOT SATISFIEDCRF PROCEDURE - OFFLINESTARTCRF to AOT fromBranchesWith Excel format of KYCmailed to AOT Dept.And Pending CRF statusFully checked withthe mandatory fieldsand proofs.IF SATISFIEDAOT . updated on dailybasis about the file no andthe CRF in that file.Entered in the system,CRF to be filed,Alloted a file no.For permanent recordFollow upwithBranchesFor proofs,completeddocumentsand pendingCRF statusEND24

CRF PROCEDURE1. CRF will be dispatched to branches / Franchisee out of Mumbai on the receipt of theirrequisition letter via e-mail. For Branches and Franchisee situated in Mumbai region,the respective branch office personnel‟ can collect the CRF from the HO onSaturday’s before 2.30 PM, on producing properly filled and duly signed [by thebranch head] requisition letter.2. CRF’s shall be dispatched by branches / Franchisee to HO on daily basis, to belowmentioned address with email of KYC format [ of those CRF‟s which are sent to usthrough courier ] at, krishnavenichava1@rathi.com ,and rupalikadam@rathi.comAddress to send CRF:Anand Rathi Share and Stock Brokers LimitedCompliance dept.4th Floor, Silver Metropolis,Jay Coach Compound, Opp. BimbisarNagar,Goregaon (E), Mumbai - 400 063Tel: (B) :+91-022-40013 700 (D) :+91-022-4001 3894/3752, (F) :+91-022-4001 37703. On the receipt of the CRF‟s, the confirmation will be made to the branch / Franchiseethrough the KYC mail received earlier by branch / Franchisee [ Without KYC Check]4. Kindly send CRF details in KYC format as ( soft copy and hard copy of KYC format),while sending it to HO.5. On the receipt of CRF at HO, it shall be franked [Without KYC Check]. Please ensurethat the client does not trade before the CRF gets franked at our ends.6. After franking, CRF KYC check shall take place. KYC checklist attached.7. For the CRF‟s completed in all respect, confirmation receipt [KYC Check] shall bemade to branches / Franchisee by the Account opening Team[AOT] via e-mail.8. Incomplete CRF‟s [ in any respect ] shall be returned by HO to the respective Branch/ Franchisee and the same shall be intimated via www.intrarathi.com.9. Follow up for the incomplete CRF‟s would be done by AOTAOT shall check, audit and keep a track on the CRF.You may find attached the CRF procedure, email audit format and KYC format, which will bepracticed at HO, Mumbai, by the AOT. Further, it is proposed that all the branches have toscan the CRF [KYC only] along with the supporting documents and upload it onwww.intrarathi.com as per the Unique Client code allotted.25

FORMAT FOR CRF REQUISITIONDate :To,Head OfficeCompliance DeptDear Sirs,Subject: Requisition Letter – Offline SegmentWe require Client Registration Form. The details are mentioned below.Particulars BSE NSE/CD/MCX-SX COMBINE BSE/NSE COMMODITYInd Non Ind Ind Non Ind IndStock as on date - NILLess: CRF sent to HOBalance CRF -Add : Requirement -Total Stock -Note: Kindly give BSE & NSE/CD/MCX-SX Franking forms separately.Kindly give the CRF‟s who holds this requisition letter.Regards,Name of the BranchName & Signature of Branch Manager26

KYC CHECKLIST1. The AOT shall check the CRF’s in totality with proofs. No mandatory field should beleft blank and necessary supporting documents should be attached. List of mandatoryfields and supporting documents attached.2. All the supporting documents shall be self attested by the client.3. NO CRF SHALL BE ACCEPTED WITHOUT COPY OF PAN CARD (both sides) [verified with the original by the branch / franchisee ]4 AOT shall audit and any incomplete CRF shall be returned back and be treated asnot received. Those branches sending incomplete CRF‟s will be kept a track of andthe management will take a strict action against the defaulting branches.5. AOT shall maintain KYC in excel format of all the completed CRF‟s.6. CRF‟s complete in all respect shall be allotted a file number and be placed in thesame for future references7. Follow up with branches for pending CRF‟s8. Monthly audit report shall also be sent to respective Branches / Franchisee9. Under mentioned are the mandatory fields:1. Name2. Date of Birth3. Residential Status4. Residential Address/Office Address(City & State, Country, Nationality, PinCode)5. Details of Bank Account (Bank Name, Address, Account No., Nature ofAccount)6. Details of Depository Participant7. Details of Introducing Client8. Check Signatures of the client wherever (x) is marked and also crosssignature on photograph9. Franked page should be fully filled up with date, name and address.10. Generally Branch manager‟s are being authorized to act and sign asauthorized signatory and thus should sign on the member – client agreement.In exceptional circumstances any other authorized signatory from the branchmay do so. Check Client‟s signature on the MCA. One witness each shouldsign from our side and client side.27

DOCUMENTARY REQUIREMENTS[ check the Supporting Documents as per the list ]For IndividualPAN card (2 Copies)[ both sides ]One color passport size photographBank Proof and Income ProofAddress proof [ List of documents acceptable as Add. Proof mentioned below ]For Sole ProprietorshipPAN card (2 Copies)Proof of Address [ List of documents acceptable as Add. Proof mentioned below ]One color passport size photograph of the ProprietorLetter from the banker, certifying the Account NumberFor Partnership Firm :PAN card copy of the firm and of atleast 2 partners (2 Copies each) [both sides]One color passport size photograph of atleast each of the two PartnersCopy of Partnership Deed. [ Duly certified ]Sharing pattern [revised to be submitted every six month ].Declaration on the letterhead of the Partnership firm, signed by all partners,agreeing to open a trading account with members and stating the authorizedSignatory to deal with membersCopies of Annual Report of last three years. [audited]Networth Certificate [of minimum two partners ]Letter from the banker, certifying the Account NumberCopy of Income Tax Return of the Firm and of minimum two partners.Personal Details of Partners [ to be filled in the CRF at the space provided ]Address proof of Office and Residence proof of minimum two partnersOther mandatory requirements for opening partnership accounts:1) Investment clause to invest in commodities [ in the partnership deed]2) Demat account in the name of the partner.28

For Corporate accounts:Copy of PAN card of company and of atleast two Directors(2 Copies each)One color passport size photograph of atleast each of the two DirectorsCopy of MOA and Copies of balance sheet for last 3 financial years.Share holding Pattern [ revised to be submitted every six month ]Copy of the resolution of board of directors approving participation in commoditytrading and naming authorized persons for dealing in commodities.Address proof of company and Residence proof of minimum two DirectorsLetter from the banker, certifying the AccountNetworth Certificate [of the company and of minimum two Directors.]Personal Details of Promoters/Directors [ to be filled in the CRF at the spaceprovided ]GENERAL INSTRUCTIONPlease ensure that the form is properly filled up, attached with the copies of therequired documents and complete in all respect [ please do not leave any columnblank ]Please check weather full signature are affixed where ever an “X” mark is found.Check initials where ever blank space is filled in by the hand in the “member-clientagreement”.Each client should use separate registration form.Individual has to affix 6 full signatures where “X” marks is found and 1 initial at thebeginning of the “Member-Client Agreement” where “X” mark is found i.e a total of 7signatures [ excluding signatures across the photograph ]Each Partner has to affix 7 full signatures where “X” marks is found and 1 initial atthe beginning of the “Member-Client Agreement” where “X” mark is found i.e a total of8 signatures [ excluding signatures across the photograph ]. Please put the rubberstamp of the Partnership on every full signatureEach Director has to affix 7 full signatures where “X” marks is found and 1 initial atthe beginning of the “Member-Client Agreement” where “X” mark is found i.e a total of8 signatures [ excluding signatures across the photograph ]. Please put the rubberstamp of the company on every full signature.29

List of documents approved as Address proof.ParticularsDriving License (name, address andphoto page)Passport (copy of name, address andphoto pages)Voter‟s Identity Card (front and back)Bank Passbook / Bank StatementRation CardElectricity BillTelephone BillLeave- License AgreementFlat Maintenance BillFlat AgreementAddressProofYesYesYesYesYesYesYesYesYesYesFORMAT FOR DISPATCH OF CRFDate of DispatchP.O.D No.Courier NameEmail Id:Total FormsBranch NameSr NoDateCRFSeriesNo.ClientCodeNameofClientPANNoBSE NSE F&O COMMODITYTRADEDATERemark30

UCC PROCEDURE & CLIENT CATEGORY1. NSE & BSE UCC will be uploaded at HO, branches will be required to upload properUCC details in Pradnya (Back Office) for the same. In addition the name of the clientshould be uploaded as per the name in PAN card , copy of the Pan card should be sentto HO.2. NCDEX & MCX UCC will also be uploaded from HO. Branch has to provide all therelevant UCC details while adding a clientTo make it a successful implementation, you all are requested/instructed to enter proper details of theclient at the time of adding the client into Pradnya. The following fields are to be entered compulsorilyand properly at the time of adding the client:1. Branch code2. Client type3. Party code4. Name (Long Name and Short Name)5. Residential Address (Permanent / correspondence) (City & State, Country, Pin Code)6. PAN Card No7. Sub broker code,8. Trader code9. Client Status10. Region code11. Area code12. Dealer code13. Details of Bank Account (Bank Name, Address, Account No., Type of Account)14. Details of Depository Participant15. Date of Birth16. Gender17. Introducer DetailsPlease note that getting successfile of the client codes uploaded at exchangelevel purely depends upon the data entered into Pradnya. Therefore branches willbe held responsible for rejection of the codes and the penalty levied by theexchange would thus be passed on to the defaulting branch.31

Appropriate UCI category to be allotted to client in PradnyaWith reference to the circular issued by National Stock Exchange (NSE/INVG/2006/32) ithas been made mandatory for displaying the appropriate UCI status of the client to theexchange. Acting on the same the necessary changes have been made in Pradnyasoftware.All the branches are required to upload the details of the client with the appropriate UCIcategory status of the client from the table mentioned below:CategoryCodeIndividuals 1Partnership Firms 2HUF 3Public & Private Companies / BodiesCorporate 4Trust / Society 5Mutual Funds 6Domestic Financial Institutions (Other thanBanks & Insurance companies) 7Banks 8Insurance Companies 9Statutory bodies 10NRIs 11FIIs 12Overseas Corporate Bodies 13The client mapping in Cash and F&O will not take place for all the branches failing to do soas the codes will be rejected by Exchange. Please comply with immediate effect.The queries in this regard can be addressed to the Compliance Department32

SHIFTING & CLOSURE OF CLIENTNote:1. Incase a client is shifting from one branch to other the formalities to be carried outby the branch is provided in this format. Account closure format must be collected in case ofclient shifting2. Branch manager in the Old as well as New has to make sure all the formalities arecompleted before shifting. Activation and deactivation will take place on the same day oncea mail is sent with the Old and New client codes along with the scan copy of the format toEDP; RMS and Settlement Dept.3. Printout on plain paper. CRF will be collected only if Old CRF is missing. All the fields inthe format are to be filled before submission of the scanned copy to all concerneddepts..(mapping@rathi.com (RMS); crcedp@rathi.com (EDP);crcsettlement@rathi.com (Settlement) and cc to accountopeningib@rathi.com ). Ifany field is empty the form will be rejectedFORMAT FOR APPLICATION FOR SHIFTING OF CLIENTDate :To,Anand Rathi Financial Services Ltd/ Anand Rathi Share & Stock Brokers Ltd/ AnandRathi Commodities LtdDear Sir,I _________ (Name of Client) having trading account with you, _______ (Client Code) would like to shift mytrading account from your _______(Branch) to _______(Branch) dueto___________________________________________________(Reason for change).I authorize you to deactive my earlier account and issue a new client code________ as per _____Branch.Thanking You,(Name of Client & Signature)Branch Manager33

Checklist to be confirmed by Branch Manager before submission to compliance Dept:Sr NoParticularsConfirmFromYes /No1. CRF Confirmed by the Branch Branch2 Client code Deactive from Mapping RMS3Old Client Code & DP details Deactive inBack Office Software.EDP4 Letter from the Client for closing of Trading A/c Client5 Account must be Zero Branch6 Shares must be Transfer to Client A/c Branch7 New client Code ------------------ New BranchNote: If all the answers are not Yes the transfer will not be valid from Compliancepoint of view.34

ACCOUNT CLOSURENote: 1. Incase a client is closing his account the formalities to be carried out by the branch isprovided in this format.FORMAT FOR REQUEST LETTER FOR CLOSURE OF TRADING ACCOUNTToThe Branch ManagerBranch:Dear Sir,I am having a trading a/c with *(Anand Rathi Financial Services Ltd/ Anand Rathi Share & StockBrokers Ltd/Anand Rathi Commodities Ltd.) vide client code ____________ and D-Mat ID____________________. I would like to close my trading account asReasons:Unhappy with service.Moving residence, no Anand Rathi Branch near residence/ office.Moving from the city, no convenient branch in new city.OthersIf Others: --------------------------------------------------------------------I request to please close my account bearing client code __________ with immediate effect.Client DetailsNameAddressContact No.I certify that there are no dues pending w.r.t funds and securities in my account.Yours truly,Signature of Client:Verification by branch Manager:Branch:Dated:Remark On Date Confirmed by Yes/NoCRF Collected * BSE/NSE/F&O/Commodities BranchDeactivated from RMS & EDP By …………By …………RMS & EDPDept.Complaint pending (if any)Branch HeadLedger Balance Amount: Rs Branch HeadShares TransferredBranch HeadRemarks:Branch HeadIf Client shifting (New code)New BranchStrike out if not applicable.Note: If all the answers are not Yes the transfer will not be valid from Compliance point ofviewSignature & Name of branch manager:35

Guidelines to be followed before trade in Client CodesKind Attn: OPM/ Branch Managers Especially Dealers/ Backoffice StaffThe term „Branch‟ wherever mentioned includes own branch as well as franchisees.For NEAT(Direct terminal for NSE Cash & F&O Codes): Use F12 : Supplementarymenu/ Client Master Maintenance: Add all the active list of clients in NSE (or Fileupload facility)For BOLT (Direct terminal for BSE cash): Use Shift+F12: Add clients active in BSE (orFile upload facility)No trade should be carried out in codes which are not available in the list.Instructions:1. Ensure that all the data entered in Backoffice software (PRADNYA) & WEBX are crosschecked and verified with relevant supporting documents (self attested by client)accepted along with CRF (Registration/ Trading forms) (CRF should be completely filledin all respects) E.g. Verify Name of Client with PAN card; PAN details with the websitehttp://incometaxindiaefiling.gov.in/challan/enterpanforchallan.jsp.ORhttps://onlineservices.tin.nsdl.com/TIN/PANVerification.doIncome slab with Salary slip (for Individuals) / Net worth certified by CA(for Non-Individuals) every 6 months For more go through the circular folder available inintra.rathi.com / ComplianceAny discrepancies found at this level should be immediately reported.2. Mapping of clients to respective terminals should be carried out after success receivedfrom the respective Exchanges. Active list of clients should be checked before mapping.3. Any changes to be made in PRADNYA(to EDP..) or Exchange (to Compliance in UCCformat to pan@rathi.com ) will have to be sent in format already stipulated.4. No special request will be entertained to allow trade in a code that is not there in theactive list5. Any client who wants to discontinue his account and dispose his shares but has noproper mandatory details like PAN will have to rematerialize his shares. But no trademust be allowed in the client codes.6. Any shifting or account closure of client will be done as per procedure available inIntra.rathi.com / Compliance folder.7. Branches are requested to go through the attachments thoroughly before placing a callto HO. Also keep yourself updated on a daily basis with the circulars and details providedin Intra.rathi.com / Compliance folder as per the path mentioned below.36

Branches failing to comply to these instructions will be strictly dealt with byCompliance dept. including termination of BOLT & NEAT of defaulting brancheswithout any further notice. The action taken by the department will be binding.Guidelines to be followed for mapping Clients in commoditiesThis is to bring to your notice that all the clients in MCX & NCDEX that are sent to the EDPdept. for mapping will be taken for uploading on same day to the Exchange only if the detailsare received before 5 pm every day.Any client details received thereafter will be added for upload to the Exchange the next day.The success of all the codes is received by the Exchange in a day if not rejected byExchange.Thus any client details provided i.e fed in Pradnya before 5 pm will be activated thenext day in MCX & NCDEX following the Exchange success file received around11am.The reject codes will be intimated to branches. Inorder to reduce the rejection rates pleasenote the mandatory fields in Commodities as under:1. Segment2. Client Name3. Client Code4. Complete Address including STATE ;COUNTRY & PINCODE5. PAN details (without any special characters or space and after verification withIncome tax site. http://incometaxindiaefiling.gov.in/challan/enterpanforchallan.jsp.)6. Date of Birth incase of Individual and Registration date for Corporates along withPlace of registration.7. Select similar client Status & Category (e.g:If status Is HUF the category will bydefault be HUF)All Branches are instructed to follow procedure for smooth operation of the account openingprocess. No special request will be entertained for activation of new clients without propersuccess received from Exchange.37

RMS PROCESS FLOWMARGINS AND LIMITSAUTOSQUAREOFF PROCEDURECOMMON RMSLimit Calculation for online client & offline clientAll exchange limit - Sum of Following (For all Online / Offline client)o Clear Cash balanceo 1/3 of unclear cheque and CMS in Cash segmento NSECDS and F&O Ledgero NSECDS and F&O Collateralo CMS in F&O and NSECDS segmento Minus Unsettle sale valueo Collateral benefit on holding lying in DP. Pool and BTSTNSECDS and F&O Limit – Only for NON LOA (Offline):Sum of Followingo NSECDS and F&O Ledgero NSECDS and F&O Collateralo NSECDS and CMS in F&O segmentSome point to be noted:o Non Loa client will able to take Cash market position on the basis of free F&O and CDSLimit.o Non LOA client couldn‟t take position in F&O or in CDS segment on the basis of freecash balance.o No separate F&O and CDS limit is calculated for LOA client.o Client can use free F&O and CDS deposit for additional buying in cash segment and viceversa.Summary of Limit StatusClient TypeLOA TypeCombined Limit( Cash + F&O + NSECDS ) F&O Limit CDS LimitOnline LOA YES NO NOOnline NON LOA YES NO NOOffline LOA YES NO NOOffline NON LOA YES YES YES38

o Limit consumption of online client will be same as per offline client..Proposed System of Online clientClient Type Scrip which is to be bought Intraday Limit Delivery LimitLOA Client / Non VAR +ELM < 25% 25% 25%LOA Client VAR +ELM > 25% Actual Margin % Actual Margin %Calculation of Collateral Benefit (Online / Offline)Collateral benefit will be available on the basis of scrips which are lying in Client DP, Pooland BTST. Hair cut will be actual VAR +ELM Margin but Minimum of 25 %.39

AUTO SQUARE OFF – BSE AND NSE CASH SEGMENT (AGEING BASED)Applicability1. Client having net debit balance on t+4 th working day will be squared off on t+5 th morning(irrespective of coverage).2. Minimum Ageing / Square off amount will be Rs. 5000.3. Auto Square off orders will be generated at 105% of required Square off/ Debit amount.However, actual square off amount could be less than or equal to the actual square offamount depending on market price.Criterion1. Will be considering F&O free ledger balance while calculation of square off amount.2. CMS entries entered in WEBRMS by branches until 8.15 a.m. on T+5 th day will be takeninto consideration while calculation of square off amount.3. Any shortfall amount remaining after square off has to be collected by the branches.Procedure:1. RMS will generate Square Off report at 6.30 pm on t+4 th day’ evening and Final Squareoff report will be generated on t+5 th day morning around 8.30 am. Simultaneously, thesereports shall be made available to front offices on WebRMS.2. Ho- RMS will carry-out square off as per final Square Off report between 9.00 am to 9.20am via file upload on direct terminal.3. Square off Client codes’ holding which is to be squared off will not be uploaded into theOmnesys.4. Scrip identification: Scrip identification for auto square off, will be on the basis of leastimpact cost ** with adequate quantity nearest to the square off amount. In case ofinsufficient value of scrip having least impact cost, the scrip having next least impact cost(nearest to the square off amount) will be selected for square off.5. Holding location :POA client- Order priority to square off will be Pool, DP and BTST respectively.Non POA Client: order priority to square off will be Pool and BTST respectively.Scrip identification process will be in the given order in each holding location.6. Pool and BTST holding will be squared off in respective exchange at which purchases aremade by the client. In case client having both segment rights then DP (POA) holding willbe squared off in NSE segment and otherwise DP (POA) will be squared off in thesegment where client has right to trade.**Meaning of Impact Cost =Impact cost is calculated by taking four snapshots in a day from the order book in the past six months. These foursnapshots are randomly chosen from within four fixed ten-minutes windows spread through the day.The impact cost is the percentage price movement caused by an order size of Rs.1 Lakh from the average of thebest bid and offer price in the order book snapshot. The impact cost is calculated for both, the buy and the sell sidein each order book snapshotThe buy side impact cost (or sell side impact cost) is the simple average of the buy side impact cost (or sell sideimpact cost) computed for all the snapshot observations in the past 6 months.Impact cost for the purpose of all computations shall be Mean of such buy side impact cost and sell side impact cost.40

AUTO SQUARE OFF – FUTURE & OPTION SEGMENT: (similar to present procedure inCommodity Market)POLICY CHART(A) (B) AUTO SQUARE OFF AMOUNTREPORTABLE MARGIN(includes Ledger balance inF&O, ledger balance in BSECash Market, Ledger balancein NSE cash market,collaterals accepted by us,family a/c credits - mapped inback-office at the end of dayor CMS entries receivedbefore 8.15 a.m. on thesquare off day)REQUIRED MARGIN(includes initial margin/exposure margin/ M TOM /any other Adhoc orspecial margin imposedby Exchange on time totime at the end of day)1. Reportable margin (A) is less than 30% of RequiredMargin (B) Auto Square will take place to the extent ofshortfall, in the morning between 9.00 a.m. to 10.00a.m. on next day2. Reportable margin (A) is below 75% of RequiredMargin (B) for 3 consecutive days ; Auto Square willtake place to the extent of 50% of shortfall in theafternoon between 2.00 p.m. to 2.45 p.m. on 4th dayType of Risk Reports:Square off Report – This report will include list of clients in Auto square-off categories.Priority & procedure:1. The branch has to enter CMS Slip No. in Webrms before the cut off time for square off.Additional collateral given by the client has to be confirmed by the branch via an email fornecessary exclusion of the client from the auto square off list.2. RMS will take out the square off report at around 9.00 a.m and 1.45 p.m once the collection ofcheques / Securities collateral is updated in the back office system.3. Square off will be done in morning and afternoon session on the Basis of F&O Square offreport.4. Scrips consuming higher margins will be squared off from OMNESYS Admin terminal to thenearest tradable lot size covering the shortfall amount.5. In case the overall margin required is short by Rs. 20000 or less then the client will beexcluded from the Square off list.6. The amount of square off will be the amount remaining after the difference of Reportablemargin and the Total Margin required.Information to the branches:1. Auto Square Report will be informed to Regional Director and Operation Manager at 8.30a.m.2. The squared off position will be informed to the branches after position squared off throughintranet.Format of Square off Report:Followings details will be provided in the reports –41

Square Off ReportOtherSegCreditTotalRepMarginTotalMarginRequiredMarginAvailability %PartyCodeRepMarginBSEBalNSEBalFamilyCreditShortfallClient A -88979 0 13626 13626 -5819 -75353 938196 -1013549 0 MorningClient C 193891 8227 20000 28227 0 222118 405902 -183784 54.72 Afternoon1. party code2. Rep. Margin - (ledger bal + cash collateral +non cash collateral )3. bse bal – ledger balance of bse segment4. nse bal – ledger balance of nse segment5. other segment Credit – col. 3+46. Family credit – sum of ledger balances of client’s familyNote: only family credit will be considered in calculation of shortfall.Family means – those clients which will exist in back office as family members andalso include his parentsBalances – as per above calculation for bse ,nse, fno, mcx, ncdex7. Total Rep .margin – col. 2+5 total available deposit of client against open position.8. total margin required – total margin consumed by open position of the client (initialmargin + exposures margin(if any))9. shortfall – (col. 7 minus col. 8) PLUS col. 610. margin availability % - (col. 7 plus col.6(if credit) / col.8 . total margin available againstthe margin requiredNOTE: if we click on any row than there is display of family members of that client with freebalances of the entire segment.Overall position Report --Above details regarding overall position of the clients, which are shown in square off clientreport –Overall Position ReportMorning/AfternooPartyCodeClient AClient ANo.OfLotsclosingValuePer LotMarginPerLotTotalMarginRequiredsymbolinstrument_typeoption_typeExpiryDateTradeable LotAvailableQuantityclosingRateContractValueMargin%MAHSEAM FUTSTK 29-Nov-07 600 13 7800 480 287850 3742050 20.31 58462 760010ORCHIDCH FUTSTK 29-Nov-07 1050 5 5250 224 235253 1176263 15.78 37123 185614Client A TOTAL 945624Client B CAIRN FUTSTK 29-Nov-07 2500 1 2500 210 524875 524875 18.54 97312 97312DIVISLAClient B B FUTSTK 29-Nov-07 310 1 310 1551 480717 480717 25.77 123881 123881Client B HCC FUTSTK 29-Nov-07 1400 1 1400 193 270760 270760 24.55 66472 66472Client B IDFC FUTSTK 29-Nov-07 2950 1 2950 173 511088 511088 24.67 126085 126085KTKBANClient B K FUTSTK 29-Nov-07 1250 1 1250 216 269375 269375 16.96 45686 45686Client B OMAXE FUTSTK 29-Nov-07 650 1 650 296 192205 192205 20.47 39344 39344Client B TOTAL 498780ESCORTClient C S FUTSTK 29-Nov-07 2400 1 2400 109 260640 260640 24.13 62892 62892Client C IDBI FUTSTK 29-Nov-07 2400 1 2400 152 363720 363720 25.22 91730 91730Client C RPL FUTSTK 29-Nov-07 3350 1 3350 210 704003 704003 35.96 253159 253159Client C TOTAL 4077811. party code42

2. symbol – scrip name3. Inst_type – futstk (future) or Optstk (option)4. Option type - ca/ce or pa/pe5. expiry date – expiry of the scrip6. trade able lot – minimum qty of scrip which can be trade7. no of lot – no of lot retain by clients ( net qty / tradable lot)8. Available qty – open position of the client in back office9. Closing rate – closing price of the respective scrip .10. closing value per lot – closing price of the scrip x tradable lot11. contract value – closing value of all contract12. margin % - margin % as per previous day Scrip wise margin report13. margin value per lot – col 11 x col. 1214. total margin required – col. 13 x col. 715. total rep. Margin – total reportable margin plus other segment credit(if credit)16. margin shortfall – total margin required minus total rep margin17. margin availability % - col. 15 / col.14 margin available against the margin requiredSquare off position Report – Followings details showing overall position of the clients withthe square off qty which will be square off by HO.Time of Display - beginning of the day -– 8.30 a.mSquare Off PositionPartyCode symbol inst_typeClient A MAHSEAMLES FUTSTKClient A ORCHIDCHEM FUTSTKOptiontypeExpirydateAvailableQuantityContractValueQtySq OffSquareOffValueMarginPercentageMarginvalue29-Nov-07 7800 3742050 7800 3742050 20.31 76001029-Nov-07 5250 1176263 5250 1176263 15.78 185614ShortFallClient A TOTAL 945624 -1013549Client B IDFC FUTSTK29-Nov-07 2950 511088 2950 511088 24.67 126085Client B DIVISLAB FUTSTK29-Nov-07 310 480717 310 480717 25.77 123881Client B TOTAL 249966-133653.5Client C RPL FUTSTK29-Nov-07 3350 704003 3350 704003 35.96 253159Client C TOTAL 253159 -918921. party code2. symbol – scrip name3. inst_type – position in future or option4. option type - option type index option(ce/pe) and stock option (ca/pa)5. expiry date – expiry of the scrip6. Available qty – open position of the client in back office7. contract value – closing value of all contract8. Qty square off - Qty which are to be square off later in the day (calculated as per shortfall ofthe clients)9. Square off value – square off qty x closing rate of the scrips10. margin % - margin % as per previous day Scrip wise margin report11. margin value – col. 9 x col. 1012. shortfall - shortfall of the client43

Final Auto Square Off Report - followings details will be shown regarding Actual qty square off by HOPartyCode symbolExpirydate Inst_type Option typeAvailableQuantitySquare OffQuantityActual Sq. OfQuantityClient A MAHSEAMLES FUTSTK 29-Nov-07 7800 7800 780Client A ORCHIDCHEM FUTSTK 29-Nov-07 5250 5250 525Client A TOTALClient B IDFC FUTSTK 29-Nov-07 2950 2950 295Client B DIVISLAB FUTSTK 29-Nov-07 310 310 31Client B CAIRN FUTSTK 29-Nov-07 2500 2500 250Client B TOTALClient C RPL FUTSTK 29-Nov-07 3350 3350 335Client C TOTAL1. party code2. symbol – scrip name3. expiry date – expiry of the scrip4. inst_type – position in future or option5. option type - option type index option(ce/pe) and stock option (ca/pa)6. Available qty – open position of the client in back office7. Qty square off - Qty which are to be square off later in the day (calculated as per shortfallof the clients)8. today‟s square off Qty – Actual square off qty by Ho9. shortfall - shortfall of the clientSome Points1. Calculation of scrip wise margin in overall position report is on the basis of FNO Daily margin reportuploaded on intra rathi.com. There could be a minor difference from actual total margin calculated by theexchange at the time of actual square off.2. Family includes member clients and parent.3. The clients whose trades have been executed on direct terminal due to connectivity problem will getsquared off on the direct terminal only.B. Square off PoliciesB. 1. AUTO SQUARE OFF – BSE AND NSE CASH SEGMENT:Category of client:4. Client having debit bal. more than 3 days will be squared off on 4 th day morning.Important terms:Square off Amount – Ageing bal. for more than 3 days OR Actual Debit Bal. 4th day (Which everis lower)44

Criteria & Condition4. Consideration of Free Ledger balance in F&O segment assessing the risk.5. Client having square off amount less than 5 thousand will be excluded.6. Loan against Shares (LAS) clients will be excluded.Priority & procedure:1. Respective branches/Region has to take up responsibility to clear up the debit of all suchclient whose debit is outstanding for more than 3 days within the period covered underthis report.2. RMS will take out the final square off report at around 9.30 am on 4 th days morning aftercollection status updated in the back office system upto 9.30 A.M3. Square off Client A/c will remain suspended from Odin up to 10.30 A.M. in morning andReactivate by 11.00 A.M.4. Scrip which will be picked up for auto square up balances will be calculated on the basisof highest value of shares held in our beneficiary.In case the shares are not sufficient tocover the square off amount then the scrips under BTST (unsettled) will be considered.5. The file updated on 3 rd day at night 10.00p.m will be considered finally for auto sq. at 4 thday Morning.6. The square off transaction will be done on the direct terminals via a file upload as theODIN system doesn’t provide any file upload facility at present.7. There will not be any buying limit available for the client on the day of square off.8. The square off report of the branches and their franchisees will be emailed to the regionalhead at the beginning of the day which will consist of the latest square off clients as wellas report. The entire square off reports for the next days consecutively will not beemailed to them.Information to the branches / Regions:3. Branches will be informed square off reports from 3 rd day to 4 th day for each day’s squareoff clients.4. The HO squared off position will be informed to the branches at around 11.15 p.m againabout the position squared off through intranet.Note:1. Square off report consist of the clients having a debit balance for more than 2 days whichremained unpaid till 4 th day. This report will reduce the amount of sell done by the branch on 3thday but before the square off day.2. CMS Entry against square off Client will be only considered up to 4 th day.3. Fake Cms entries will be considered seriously.4. The clients whose other segment balance is considered for the purpose of auto square off transfer.The fund of client will be directly moved by RMS.5. Further exposures to square off clients will be seriously monitored.B .2 AUTO SQUARE OFF – FUTURE & OPTION SEGMENTPOLICY CHART(A) (B) AUTO SQUARE OFF AMOUNT45

REPORTABLE MARGIN(includes Ledger balance inF&O, ledger balance in BSECash Market, Ledger balancein NSE cash market,collaterals accepted by us,family a/c credits - mapped inback-office at the end of dayor CMS entries receivedbefore 9.30 a.m. on thesquare off day)REQUIRED MARGIN(includes initial margin/exposure margin/ M TOM /any other Adhoc orspecial margin imposedby Exchange on time totime at the end of day)1. Reportable margin (A) is less than 30% of RequiredMargin (B) Auto Square will take place to the extent ofshortfall, in the morning between 9.55 a.m. to 10.30a.m.on next day2. Reportable margin (A) is between 30 to 60% ofRequired Margin (B); Auto Square will take place to theextent of 50% of shortfall in the afternoon between2.00 p.m. to 2.45 p.m.on next day3. Reportable margin (A) is below 75% of RequiredMargin (B) for 3 consecutive days ; Auto Square willtake place to the extent of 50% of shortfall in theafternoon between 2.00 p.m. to 2.45 p.m. on 4th dayType of Risk Reports:Square off Report – This report will include list of clients in Auto square-off categories.Priority & procedure:7. The branch has to enter CMS Slip No. in Webrms before the cut off time for square off.Additional collateral given by the client has to be confirmed by the branch via an email fornecessary exclusion of the client from the auto square off list.8. RMS will take out the square off report at around 9.30 a.m and 1.45 p.m once the collection ofcheques / Securities collateral is updated in the back office system.9. Square off will be done in morning and afternoon session on the Basis of FNO Square offreport.10. Client will be suspended from ODIN in FNO segment for 35 minutes in morning (Between9.55 – 10.30 a.m.) and 45 minutes in Afternoon. (Between 2:00 – 2.45 p.m.)11. Scrips consuming higher margins will be squared off from ODIN Admin terminal to thenearest tradable lot size covering the shortfall amount.12. In case the overall margin required is short by Rs. 20000 or less then the client will beexcluded from the Square off list.13. The amount of square off will be the amount remaining after the difference of Reportablemargin and the Total Margin required.14. The client will be reactivated again at 10.30 a.m and 2.45 p.m respectively.46

PartyCodeInformation to the branches:5. Branches and their business heads will be informed vide Auto Square Report at9.30 a.m.6. The squared off position will be informed to the branches at 3.00 p.m again about the positionsquared off through intranet.Format of Square off Report:Followings details will be provided in the reports –Square Off ReportRepMarginBSEBalClient A -88979 0-22197 19739 0Client BClient C193891 8227NSEBal13626OtherSegCreditFamilyCreditTotalRepMarginTotalMarginRequired13626 -5819 -75353 93819624590 4860 -68422000 28220 7 0MarginAvailability %Shortfall-1013549 0 MorningMorning/Afternoon226839 494146 -267307 45.91 Afternoon222118 405902 -183784 54.72 Afternoon11. party code12. Rep. Margin - (ledger bal + cash collateral +non cash collateral )13. bse bal – ledger balance of bse segment14. nse bal – ledger balance of nse segment15. other segment Credit – col. 3+416. Family credit – sum of ledger balances of client’s familyNote : only family credit will be considered in calculation of shortfall.Family means – those clients which will exist in back office as family members andalso include his parentsBalances – as per above calculation for bse ,nse, fno, mcx, ncdex17. total Rep .margin – col. 2+5 total available deposit of client against open position.18. total margin required – total margin consumed by open position of the client (initialmargin + exposures margin(if any))19. shortfall – (col. 7 minus col. 8) PLUS col. 620. margin availability % - (col. 7 plus col.6(if credit) / col.8 . total margin available againstthe margin requiredNOTE: if we click on any row than there is display of family members of that client with freebalances of all the segment.Overall position Report --Above details regarding overall position of the clients, which are shown in square off clientreport –47

PartyCodeClient AClient AOverall Position ReportsymbolMAHSEAMORCHIDCHinstrument_typeFUTSTKFUTSTKoption_typeclosingValuePer Lot48TotalMarginRequiredExpiryDateTradeable LotNo.OfLotsAvailableQuantityclosing RateContract ValueMargin %MarginPerLot29-Nov-07 600 13 7800 480 287850 3742050 20.31 58462 76001029-Nov-07 1050 5 5250 224 235253 1176263 15.78 37123 185614Client A TOTAL 94562429-Nov-Client B CAIRN FUTSTK07 2500 1 2500 210 524875 524875 18.54 97312 97312DIVISLA29-Nov-12388Client B B FUTSTK07 310 1 310 1551 480717 480717 25.77 1 12388129-Nov-Client B HCC FUTSTK07 1400 1 1400 193 270760 270760 24.55 66472 6647229-Nov-12608Client B IDFC FUTSTK07 2950 1 2950 173 511088 511088 24.67 5 126085KTKBAN29-Nov-Client B K FUTSTK07 1250 1 1250 216 269375 269375 16.96 45686 4568629-Nov-Client B OMAXE FUTSTK07 650 1 650 296 192205 192205 20.47 39344 39344TotalReportable_MarginShortFallMarginAvailability%Morning/Afternoon-75352.93 -1013549 0 MorningClient B TOTAL 498780 226838.9 -267307 46 AfternoonClient CESCORTS FUTSTK29-Nov-07 2400 1 2400 109 260640 260640 24.13 62892 62892Client C IDBI FUTSTK29-Nov-07 2400 1 2400 152 363720 363720 25.22 91730 91730Client C RPL FUTSTK29-Nov-07 3350 1 3350 210 704003 704003 35.96253159 253159Client C TOTAL 407781 222118 -183784 54 Afternoon18. party code19. symbol – scrip name20. Inst_type – futstk (future) or Optstk (option)21. Option type - ca/ce or pa/pe22. expiry date – expiry of the scrip23. trade able lot – minimum qty of scrip which can be trade24. no of lot – no of lot retain by clients ( net qty / tradable lot)25. Available qty – open position of the client in back office26. Closing rate – closing price of the respective scrip .27. closing value per lot – closing price of the scrip x tradable lot28. contract value – closing value of all contract29. margin % - margin % as per previous day Scrip wise margin report30. margin value per lot – col 11 x col. 12

31. total margin required – col. 13 x col. 732. total rep. Margin – total reportable margin plus other segment credit(if credit)33. margin shortfall – total margin required minus total rep margin34. margin availability % - col. 15 / col.14 margin available against the margin requiredSquare off position Report – Followings details showing overall position of the clients with the square off qty which will besquare off by HO.Time of Display - beginning of the day – 9.30 a.m- Before square off -- 1.45 p.m.Square Off PositionPartyCode symbol inst_typeClientA MAHSEAMLES FUTSTKOptiontypeExpirydateAvailableQuantityContractValueQtySq OffSquareOffValueMarginPercentage29-Nov-07 7800 3742050 7800 3742050 20.31 760010Marginvalue ShortFall Morning/AfternoonClientA ORCHIDCHEM FUTSTK29-Nov-07 5250 1176263 5250 1176263 15.78 185614ClientA TOTAL 945624 -1013549 MorningClientB IDFC FUTSTK29-Nov-07 2950 511088 2950 511088 24.67 126085ClientB DIVISLAB FUTSTK29-Nov-07 310 480717 310 480717 25.77 123881ClientB TOTAL 249966-133653.5 AfternoonClientC RPL FUTSTK29-Nov-07 3350 704003 3350 704003 35.96 253159ClientC TOTAL 253159 -91892 Afternoon13. party code14. symbol – scrip name15. inst_type – position in future or option16. option type - option type index option(ce/pe) and stock option (ca/pa)17. expiry date – expiry of the scrip18. Available qty – open position of the client in back office19. contract value – closing value of all contract20. Qty square off - Qty which are to be square off later in the day (calculated as per shortfall of the clients)49

21. Square off value – square off qty x closing rate of the scrips22. margin % - margin % as per previous day Scrip wise margin report23. margin value – col. 9 x col. 1024. shortfall - shortfall of the clientFinal Auto Square Off Report - followings details will be shown regarding Actual qty square off by HOTime Of Display – 3.00 p.m.PartyCode symbolExpirydate Inst_type Option typeAvailableQuantitySquare OffQuantityActual Sq. OffQuantity ShortFallClient A MAHSEAMLES FUTSTK 29-Nov-07 7800 7800 7800Client A ORCHIDCHEM FUTSTK 29-Nov-07 5250 5250 5250Client A TOTAL -1013549Client B IDFC FUTSTK 29-Nov-07 2950 2950 2950Client B DIVISLAB FUTSTK 29-Nov-07 310 310 310Client B CAIRN FUTSTK 29-Nov-07 2500 2500 2500Client B TOTAL -267307.1Client C RPL FUTSTK 29-Nov-07 3350 3350 3350Client C TOTAL -18378410. party code11. symbol – scrip name12. expiry date – expiry of the scrip13. inst_type – position in future or option14. option type - option type index option(ce/pe) and stock option (ca/pa)15. Available qty – open position of the client in back office16. Qty square off - Qty which are to be square off later in the day (calculated as per shortfall of the clients)17. today‟s square off Qty – Actual square off qty by Ho18. shortfall - shortfall of the clientSome Points1. Calculation of scrip wise margin in overall position report is on the basis of FNO Daily margin report uploaded on intra rathi.com. There could bea minor difference from actual total margin calculated by the exchange at the time of actual square off.2. Family includes member clients and parent.3. The clients whose trades have been executed on direct terminal due to connectivity problem will get squared off on the direct terminal only.50

B.3 AUTO SQUARE OFF – COMMODITY SEGMENT:Important terms:Reportable Margin = Ledger + Cash Collateral+ Non Cash CollateralTotal Margin = Initial Margin + Exposure MarginCriteria:1. Consideration of Ledger as well as securities balance in other segment & also family accounts forassessing the risk.Category of client:Category A:Reportable margin is less than 50% but not below 25% of the total margin required (Initial plus exposure)then the position of these clients will be squared off on T+2 day only if the Reportable margin of the clientis less than 75% of the total margin required.Category B:Reportable margin is less than 25% of the total margin required (Initial plus exposure) then the squareoff the position on the day when it occurs.Type of Risk Reports:Shortfall Report – This report will include the list of the clients available in Category A.Square off Report – This report will include the list of the clients who are from Category B as well as theCategory „A‟ clients who have not cleared their margin shortfall before T+2 day.Priority & procedure:1. The branch has to enter the cheque received from the clients in the back office system immediately.2. RMS will take out the square off report at around 3:45 p.m once the collection of cheque / Securitiescollateral is updated in the back office system.3. Client is to be suspended from ODIN for an hour. (Between 4-5 p.m.)4. Scrips consuming higher margins will be squared off from ODIN Admin terminal to the nearesttradable lot size covering the shortfall amount.5. The amount of square off will be the amount remaining after the difference of Reportable margin andthe Total Margin required.6. The client will be reactivated again at 5:15 p.m.Information to the branches:1. Branches will be informed certain reports at morning 9.30 a.m.2. The squared off position will be informed to the branches at around 5:15 p.m again about the positionsquared off through intranet.51

For e.g - Client AParticularsTradedayTrade day +2+1 Situation 1 Situation 2Reportable margin (a) Rs. 8,00,000 Rs. 10,00,000 Rs. 12,00,000Other segment credits (b) Rs. 1,50,000 Rs. 2,00,000 Rs. 2,00,000Total Margin Required (c) Rs. Rs. 20,00,000 Rs. 20,00,00020,00,000Additional fund deposit (d) Nil Rs. 2,00,000 Rs. 2,00,000Total Av. Rep. Margin (e) Rs. 9,50,000 Rs. 14,00,000 Rs. 16,00,000Margin Availability (%) (f) 47.50 70 80Auto square off (Yes/No) (g) Yes Yes NoAmount of Auto Square off (h) Nil Rs. 600000 NilFormat of Shortfall Report / Square off Report:Followings details will be provided in both the reports --PartyCodeRepMarginBSEBalNSEBalFNOBalMCXBalOtherSegCreditFamilyCreditTotalRepMarginTotalMarginRequired ShortfallMarginAvailability%ClientA -8643 0 0 0 15290 15290 0 6647 24641 -17994 26.98ClientB 8675 0 0 0-113059 0 0 8675 24779 -16104 35.01ClientC -40203 0 0 0 59775 59775 0 19572 53570 -33998 36.54ClientD 40383-120002 0 0 0 0 0 40383 105216 -64833 38.38ClientE 206656 -57713 0 63732 0 6019 49280 212675 645255 -383300 40.6ClientF 3596 0 0 0 2613 2613 0 6209 14793 -8584 41.97ClientG -12699 0 0 0 19900 19900 0 7201 15216 -8015 47.33ClientH 23549 0 0 0 0 0 0 23549 48876 -25327 48.18Client I 3978 -6220 0 0 18348 18348 0 22326 44755 -22429 49.881. party code2. Rep. Margin - (ledger bal + cash collateral +non cash collateral )3. bse bal – ledger balance of bse segment4. nse bal – ledger balance of nse segment5. fno bal - (ledger bal + cash collateral +non cash collateral ) minus (initial margin+ exposuresmargin)6. mcx / ncdex - (ledger bal + cash collateral +non cash collateral ) minus (initial margin+exposures margin)7. other segment total – col. 3+4+5+6(cash +fno+mcx/ncdex)8. Family credit – sum of ledger balances of client’s familyi. Note : only family credit will be considered in calculation of shortfall.ii. Family means – those clients which will exist in backoffice as family members andalso include his parentsiii. Balances – as per above calculation for bse ,nse,fno,mcx,ncdex9. total Rep .margin – col. 2+7+8 total available deposit of client against open position.52

10. total margin required – total margin consumed by open position of the client (initial margin +exposures margin(if any))11. shortfall – col. 9 minus (col. 7 PLUS col. 8)12. margin availability % - (col. 9 plus col.8(if credit) / col.10 . total margin available against themargin requiredNOTE : if we click on any row than there is display of family members of that client withfree balances of all the segment.Overall position Report --Followings details regarding overall position of the clients, which are shown in square off clientreport –1. party code2. symbol – scrip name3. expiry date – expiry of the scrips4. trade able lot – minimum qty of scrip which can be trade5. no of lot – no of lot retain by clients ( net qty / tradeable lot)6. Available qty – open position of the client in backoffice7. closing rate – closing price of the respective scrip .8. closing value per lot – closing price of the scrip x tradeable lot9. contract value – closing value of all contract10. margin % - margin % as per previous day Scripwise margin report11. margin value per lot – col 11 x col. 812. total margin required – col. 11 x col. 913. total rep. Margin – total reportable margin plus other segment credit(if credit)14. margin shortfall – total margin required minus total rep margin15. margin availability % - col. 13 / col.14 margin available against the margin requiredSquare off position Report – Followings details showing overall position of the clients with the squareoff qty which will be square off by HO.Time of Display - beginning of the day – 9.30 a.m- before square off -- 3.30 p.martyode symbol ExpirydateAvailableQuantityContractValueQtySqOffSquareOffValueMarginPercentageMarginvalueShortFalllient ASTLINGGZB 20-Mar-08 -30 835200 -10 278400 5.53 15396lient A TOTAL 15396 -11920COCUDClient B AKL 20-Mar-08 -100 863200 -40 345280 6.07 20960lient B TOTAL 20960 -1767553

lient CSYBEANIDR 20-Mar-08 -10 227450 -10 227450 6.53 14852lient C TOTAL 14852 -85841. party code2. symbol – scrip name3. expiry date – expiry of the scrips4. Available qty – open position of the client in backoffice5. contract value – closing value of all contract6. Qty square off - Qty which are to be square off later in the day (calculated as per shortfall of theclients)7. Square off value – square off qty x closing rate of the scrips8. margin % - margin % as per previous day Scripwise margin report9. margin value – col. 7 x col. 810. shotfall - shortfall of the clientFinal Auto Square Off Report - followings details will be shown regarding Actual qty square off by HO.Time Of Display -- 5.30 p.mPartyCode symbol ExpiryDate shortfallAvailableQuantitySquare OffQuantityTodays Square OffQuantityDSREL003 SILVERM 29-Feb-08 -28430 -10 -10 -5LU12P1 COPPER 30-Apr-08 -15079 -1 -1 -1PCHN0125 GOLD 05-Apr-08 -44676 -1 -1 -11. party code2. symbol – scrip name3. expiry date – expiry of the scrips4. shortfall - shortfall of the client5. Available qty – open position of the client in backoffice6. Qty square off - Qty which are to be square off later in the day (calculated as per shortfall of theclients)7. Todays square off quantity – Actual square off qty out of available qty54

GRIEVANCE REDRESSAL MECHANISMAll Exchange level grievances are being handled by Compliance Department. All Branch level Grievances arebeing handled by Branch Heads / Regional Heads and all telephonic grievances are being handled byCustomer support department, after going through the pros & cons of nature of the issues involved.All India Toll Free no. for Customer support : 1800 - 222 - 234Email ID for Grievance Redressal : grievance@rathi.comEmail ID for Customer support : customersupport@rathi.comIn the interest of justice, equity and good conscience, and as a organization,as we observe high standards ofcommercial honour of just and equitable commitment to business ethics,We are glad to announce that we are in the process of building a comprehensive investor grievancesmechanism to carry out the entire operations seamlessly at all levels towards a more systematic andprofessional service to customers.Kindly send us the copy of complaint register maintained at your ends alongwith pending grievances. Further,you are required to send this report on a bimonthly basis (as per format Attached) to ensure complete clientsatisfaction.Format for Grievance Register to be maintained by each BranchSR.NO.COMPLAINTDATERECEIPTDATESEGMENTCOMPLAINANT'SNAMENATURE OFGREVIANCEAMT OFCLAIMREPLYSENTREMARKS55

Undertaking to be procured from client as a Surveillance MeasureClient Code : _______From _____________Address :__________________________________________________________Date : ___________________To,Anand Rathi Share and Stock Brokers Ltd /4th Floor, Silver Metropolis,Jay Coach Compound,Opp. Bimbisar Nagar,Goregaon (E),Mumbai - 400 063Dear Sir / MadamSub. : Trades done in Scrip Name on trade dateI/ We hereby confirm that I / We, our associate(s), relatives, sister companies, Partner(s), Promoter(s) /relative(s) and / or directors are not in any manner counter party to the buy /sell trades of __________ shares inthe scrip of _____________________ listed on BSE – Cash Segment and / or NSE – Cash Segment nor I/weam/are acting on behalf of any third party and/ or purchase of the shares is from our own funds.I/We hereby confirm with, that we have complied with all the guidelines and circulars issued by SEBI andExchanges or any other regulatory authority in this regard.I/We also declare that I / We am / are not trading in above mentioned security for influencing any change inprice, but purely for the Investment purpose. The same is / was bought from my / our own funds.I/We further declare that I/We am/are not associated with the promoter of the aforesaid company.I/We furthermore assure you that the trading in the aforesaid scrip does not tantamount to any unfair tradingpractice and I/we am/are not involved in any circular trading and not trading with a view to create false marketI/We will be submitting you or concerned agency(s) any information asked within 24 hours of receipt ofnotice.I/We further agree to indemnify and keep indemnified Anand Rathi Share and Stock Brokers Ltd /Anand RathiFinancial Services Ltd. in case of any query / liability or action taken by the Exchange / SEBI or any otherregulatory authority in this matter.Yours Truly,Authorised Signatory56

Client Code : _______PERFORMA LETTER FOR DEBT RECOVERY FROM CLIENT(On letter head of ARSSBL / ARCL as the case may be)By Courier / By Hand DeliveryTo,M/s/Mr. / Ms.________Date: __ / __ / 10(Complete Name and Address of Client)Dear Sirs/Madam,Ref: Non- Payment of outstanding dues/ debit balances in yourunder client code No. ________=================================================account** strike whichever is not applicableYou are aware that pursuant to the Member – Client Agreement signed by you, we are operating your tradingaccount as per your instructions in ** shares / securities / contacts and other instruments through ** BSE / NSE /MCX / NCDX till ______ under your aforesaid client code. The contract notes/ bills in respect whereof havebeen delivered to you in due course, which you have received and accepted by you without anyobjection whatsoever.In respect of the aforesaid transactions, your ledger account is showing debit balance of Rs._________/- due and payable by you.You are therefore, requested to pay to us the aforesaid outstanding dues / debit balance of Rs. ______/-with in seven days from the date of receipt of this letter by you in order to maintain cordial businessrelations between us.Thanking you,Yours truly,For ** M/s. Anand Rathi Share and Stock Brokers LtdM/s. Anand Rathi Commodities Ltd(Authorised Signatory / Branch Manager)57

Under Certificate of PostingDate: __ / __ / 10To,M/s/Mr. / Ms.________(Complete Name and Address of Client)Dear Sirs/Madam,Sub. : Non- Payment of outstanding dues/ debit balances in youraccount under client code No ________=================================================** strike whichever is not applicablePlease refer to our letter dated ______________, on the captioned subject.We regret to note that in spite of sufficient time has since elapsed; you have failed and neglected to pay to us theoutstanding dues / balances lying in your aforesaid account till date.Our representative has made numerous (Check) visits and telephonic calls to you to pay and clear the said outstandingdues but you have failed and neglected to pay the amount of outstanding dues or any part thereof. It is, therefore, clearthat you had absolutely no intention ab initio to make the payment but to cheat us.You are therefore, once again called upon to pay to us the aforesaid outstanding dues / debit balance of Rs.______/- immediately on the receipt of this letter failing which we will adopt such legal proceedings againstyou as may be advised to us to recover the said outstanding dues, which please note.Yours truly,For ** M/s. Anand Rathi Share and Stock Brokers LtdM/s. Anand Rathi Commodities Ltd(Authorised Signatory / Branch Manager)58

By Regd. Post A/DDate: __ / __ / 10To,Mr. /Mrs. /Ms. _____________(Complete Name and Address of Client)Dear Sirs,Ref: Non- Payment of outstanding dues/ debit balances in yourunder client code No. ________=================================================account** strike whichever is not applicable1. You approached our Company **M/s. Anand Rathi Securities Limited / M/s. Navratan Capital and SecuritiesLimited., / Navratan Commodities Limited with a request / desires of investing / trading in shares / securities / contactsand other instruments admitted to deal on the Exchange as per the Rules, Bye-laws and Regulations of the Exchange andcirculars issued thereunder from time to time and strictly in accordance with the terms and conditions mentioned inmember-client agreement executed between yourself and my clients as well as risk disclosure documents and annexureattached thereto.2. As per your instructions we have effected transactions through ** BSE / NSE (cash as well as F&O) / MCX /NCDX under your above stated client code No ________ on your behalf in shares / securities / contacts and otherinstruments your account from _______ to _______ and the contract notes/ bills in respect whereof have beendelivered to you in due course, which you have received and accepted by you without any objectionwhatsoever.3. In respect of the aforesaid transactions an aggregate sum of Rs. ___________/- is due and payable by you to myclients. Pursuant to the Member- Client agreement, you were to pay my clients the amount due by you to meet yourobligations immediately.4. We have demanded the aforesaid amount from time to time, and you promised to clear the said outstanding dueswithin short period, however you have failed and neglected to pay the amount of the outstanding dues or any part thereof.We state that from the aforesaid, it is apparent that you have intentionally, deliberately and with malafide intention notpaid the said outstanding dues for the transactions done on your behalf.59

5. We further state that believing your representations to be true, we acted upon in good faith and provided you thetrading facilities as aforesaid, which have been availed by you without paying your legitimate dues. It is thus, very clearfrom your representations and subsequent conduct that you have misrepresented the facts to us and by deceitful meansobtained lawful gain to yourself/yourselves and caused corresponding loss to us and thereby committed breach of trust.6. In the circumstances, we hereby call upon you to pay the aforesaid sum of Rs.____ /- (Rupees___________only) towards outstanding dues / debit balance in your account together with interest thereon @18%per annum from its due date till payment within 7 (seven) days from the date of receipt of this notice by you. Indefault, we will be constrained to adopt criminal proceedings or other appropriate legal proceedings includingarbitration under the Rules, Bye-laws and Regulations of the Exchange as we may be advised at your entirerisk as to costs and consequences, which please note.Yours faithfully,For ____________________** (Authorised Signatory)(Branch Manager)60

OFFICE MANAGEMENTSr.NoCustomerServiceStandardsConfirmationof transactionto client byFax / PhoneConfirmationof entire daystransactionsContract Noteto be given toclient -dispatchthrough handdelivery orcourier:Cash MarketAnand Rathi GroupCustomer Service Standards (Branches to their clients)HNIWithin 10minutes ofexecuting thetransactionMNIWithin 10minutes ofexecuting thetransactionRetail Investor -SmallWithin end of DayRetail TradersWithin 10minutes ofexecuting thetransactionBy 5.00 PM By 5.00 PM By 5.00 PM By 5.00 PM7:30 PM 7:30 PM 7:30 PM 7:30 PMF&O segmentOutstandingPosition toClients -Payment aswell as sharesScrip wiseOpen Positionin F&OsegmentMarginstatement /Dues to clientsin F&OsegmentPayoutcheques toclientsPayoutdeliveries toclients7.00 PM 7.00 PM 7.00 PM 7.00 PMNext day before9:30 AMNext day before9:30 AM61Next day before9:30 AM7:30 PM 7:30 PM 7:30 PM 7:30 PMOn payout day -before 6:00 PMOn payout day -before 7:30 PMOn payout day -before 6:00 PMOn payout day -before 7:30 PMOn payout day -before 6:00 PMOn payout day -before 7:30 PMNext day before9:30 AMOn payout day -before 6:00 PMOn payout day -before 7:30 PM

Sr.NoCustomerServiceStandardsLedger toclients:WeeklyMonthlyDaily Notes onE - mailsOtherimportant andrelevantmessages tobe forwardedto the clienteither onphone oremail, whichever ispreferred bythe clientFrequency ofvisit to clientsplace byBranch Head /FPFrequency oftelephone callsby BranchHead / FPHandling /Solving queryHNIEvery Saturdaybefore 10:00 AM2 nd of next monthbefore 6:00 PMEvery day before9:45 AMAtleast thrice adayAtleast thrice amonthAtleast thrice aweekCommunicatewithin 2 workinghours, and solvethe query within 2working daysMNIEvery Saturdaybefore 10:00 AM2 nd of next monthbefore 6:00 PMEvery day before9:45 AMAtleast twice adayAtleast twice amonthAtleast twice aweekCommunicatewithin 3 workinghours, and solvethe query within 3working daysRetail Investor -SmallNil2 nd of next monthbefore 6:00 PMEvery day before9:45 AMAs and whenrequiredAtleast Twice amonth (meetingin our office)Atleast once aweekCommunicatewithin 4 workinghours, and solvethe query within 2working daysRetail TradersEvery Saturdaybefore 10:00 AM2 nd of next monthbefore 6:00 PMEvery day before9:45 AMThrough noticeboard in office orby email ifrequiredAtleast once aweek (meeting inour office)Atleast twice aweekCommunicatewithin 4 workinghours, and solvethe query within 2working daysAll relevantinteractions andaction pointsshould be One or two Through common Through commonDocumentatiodocumented in common file dairy for all dairy for allnfile/folder could be clientsclientsprepared for each preparedindividual client toavoid evaporationEmpathy All All All All62

Sr.NoCustomerServiceStandardsMonthlyMeetingsHNIrecommendations should be madekeepingourselves in theclients shoesHave monthlymeetings withkey clients todiscussproceduralmattersMNIrecommendations should be madekeepingourselves in theclients shoesHave monthlymeetings withkey clients todiscussproceduralmattersRetail Investor -Smallrecommendations should be madekeepingourselves in theclients shoes-Retail Tradersrecommendations should be madekeepingourselves in theclients shoes-Other Customer Service parameters:All clients and prospectives to be offered water, tea or coffee in officeNo guest should be left unattended in officeEmployees should have high degree of courteousness while interacting with clientsOffice Ambience:Reception area and lady receptionistMain sign board (as per design enclosed)Office to be air conditioned or air cooledPhysical Appearances:Uniform to be provided to all office boysStaff to be dressed in formals, preferably in ties. Saturday – CasualsIdentity cards to be given to all employeesSEBI Registration Certificate should be displayed63

DEALING WITH CLIENTS1. Branch must make full payment/delivery from/to clients within 24 hours of receipt ofcheque/shares from HO.2. All payments shall be received / made by the Branch from/to the clients strictly by accountpayee crossed cheque/demand draft only.3. No payments/receipts be made/accepted in CASH from clients.4. Each clients ledger A/c to be made NIL atleast once in a Year by way of actualpayment/receipt of funds.5. Funds/Delivery of shares must not be made/accepted to/from third party‟s demat A/c.6. Securities due to one client should not be transferred to other clients A/c and vice-versa.7. Securities due to clients should not be used for meeting own/other clients pay-in obligations.8. Payments/delivery due to BSE clients should be made from BSE Bank (Clients)/DP A/c andpayments/delivery due to NSE clients should be made from NSE Bank (Clients)/DP A/c. only.9. Shares of clients may be kept on hold by the Branch if there is any debit balance in clientsA/c.10. In case payment is not received from clients in spite of repeated written reminders (records ofreminder sent be maintained), shares of clients can be sold by the BRANCH after taking priorapproval of HO to recover its dues. The same is permissible by SEBI/Exchanges.11. Dividend amounts to be paid/credited to clients A/c as and when received.12. Branch to ensure that his clients are not acting as un-registered intermediaries (unregisteredsub-brokers)..64

BANK ACCOUNTS1. As per SEBI, all operational expenses to be made from own bank account. Example –Salary expenses, telephone expenses, printing & stationery expenses, etc.2. Payments may be made to clients from Clients A/c only.3. Amount received from clients NOT to be deposited in Own A/c.4. Amount received as Margin from clients to be deposited in to Clients A/c.Pay-out Cheques received from ARSFL/ARSSBL to be deposited in Clients A/c ONLY.5. In case of funds shortage in Own A/c for incurring operational expenses, amount to theextent of Brokerage Income may be transferred from Clients A/c to Own A/c.Weekly/Monthly transfers may be made.BALANCE CONFIRMATION WITH CLIENTS1. Branch to reconcile their accounts with HO on a day-to day basis.2. Ledger confirmation to be taken from clients for Funds/Securities at the end of each quarterwithin 10 days of the end of the quarter.3. Statement of Accounts for funds and securities would be sent from HO to all the clients on aquarterly basisMISCELLANEOUS MATTERS1. Branch should not release any mode of advertisement for business purpose without priorwritten approval of HO..2. Off-Market trades (i.e trades not executed on terminal) not permitted in any securities.65

ISSUES PERTAINING TO INSURANCE CLAIMWe are in the process of creating general awareness amongst us all with reference to the InsuranceClaims that are being requested by branches for punching errors in trading activities to the InsuranceCompany; as there is an urgent need to impart know how about the claim procedures generalrequirements list has been provided below for the benefit & interests of the companyAll are requested to kindly go through the mandatory list mentioned below and follow the same.Incase there are any amendments that needs to be carried out by the branch to bring the branchprocedures in line with the mandatory requirements; you can contact the Compliance Dept.List of mandatory requirements for Insurance claim: Pre- requisites1. Name of the Dealer who committed error along with proof of employment in the name of thesame company and also screen print out of the USER ID registered in his NCFM certificate2. When the order was put, when and how the mistake was realized, what actions were takensubsequently and supporting the facts mentioned therein with documentary evidences.3. Client agreement (CRF) and know your clients (KYC) form – Very Important4. Brief history and profile of your employee who had done fraud. (furnish his Bio-data andphotograph)5. Intimation to the exchange for cancellation of the said transaction6. In case of Sub-broker / Franchisee & Pro- Trade only Rate claim is acceptable7. New branch / Franchisee should be informed to the Insurance company immediately to getcovered.8. Insurance company will not be liable to pay more than one claim in respect of the action ofany one employee.9. System failure is not covered under the policy from current year10. Branches are to be covered on all or none basis11. Voice recording system (to identify the person responsible for the error dealer mistake orclient mistake)12. Punishment to the Dealer.13. Transaction to be squared Up immediately on realization if not possible on the same day verynext day in the morning.14. In case of error in option transaction for illiquid option you may square up in future market tominimize the loss66

TRADE MODIFICATION UNDERTAKINGAnnexure 1We hereby declare that no trade will be executed by us (Branch Name) in any of the segmentswithout getting the success of the codes from the respective Exchange from any of the BOLT / NEAT/ ODIN terminals allotted to us by HO. Incase of any discrepancy like wrong punching or erroneoussauda executed by us we will intimate as well as clarify the same to HO (Compliance team) onimmediate basis.We will be solely responsible for any penal action taken against us incase of deviation from the saiddeclaration.Certified by Branch ManagerName of BM67

REPORTING OF BULK DEAL / BLOCK DEALWith reference to Circular No.: NSE/CMO/0092/2004 it is informed to allthat Branches shall make disclosures to the Head Office with respect to all transactions in a scripBulk Deal: where total quantity of shares bought / sold is more than 0.5% of the number ofequity shares of the company listed on the Exchange.Block Deal: All transactions where the total quantity of shares is equal to or greater than 5lakhs or in total value equal to above 5 Crores whichever is earlierThe price should be within +/- 1% of the last traded price or previous closing price.The details of the same will be reported on the same day of the transaction between 3 pm to3.45 pm in the format attached to krishnavenichava1@rathi.com/rupalikadam@rathi.com . Thesubject of such deal sent through mail must be BULK DEAL- NSE corresponding to the segmentin which the transaction has been carried out.Any branch failing to report such transactions on the same day will be penalized at Rs 5000 pertransaction.The queries in this regard can be addressed to the Compliance Department and also can bediscussed with the under mentioned.Details to be provided for Bulk Deal Reporting1 Exchange2 Client3 Client Name4 Instrument Type5 Symbol6 Scirp Code7 Scrip Name8 Buy Qty9 Buy Val10 Buy Avg.11 Sell Qty12 Sell Val13 Sell Avg.14 Net Qty15 % of Equity16 Equity Of Company69

INCREASED POSITION IN F&O MARKETWIDE LIMITAs per the Bye Laws of the Exchange and Circular No. NSCC/F&O/C&S/365 dated August 26,2004 wherein inter-alia it is specified that when the open interest in an underlying crosses 95% ofthe specified Market Wide Position Limit, clients / members shall trade only to decrease theirpositions through offsetting positions, till normal trading in the scrip is resumed.You are advised to take due caution that no new positions are taken by the client/constituent andthat the client/constituent trades only to decrease his positions through offsetting positions till themarket wide open interest in the aforesaid underlying comes down to 80% or below of the marketwide position limit.Hence it has been amended that with effect from 9 th May 2006 the branch will directly beresponsible for the open positions and for every penalty imposed by the Exchange the followingaction would be taken:Penalty Levied = Debit to Dealers Salary A/c (Rs.1000) + Debit to Branch Managers A/c /Franchisee A/c(Balance Amount Against Incentive.70

USEFUL WEB SITESwww.bseindia.comwww.nseindia.comwww.sebi.gov.inwww.fmc.gov.inwww.mcxindia.comwww.ncdex.comwww.nmce.comwww.mcx-sx.com71

BRANCH AUDIT CHECKLISTInaugarationdateActiveSegmentsSr No Particular Remarks Complied(Y/N)1 Registered2 Certificates3 Notice Board4 Terminals5 AgreementIncase of registered Subbrokers6 KYC7 CRF8 Missing CRF9 PAN10 Authorised SignatoryCheque1112131415161718192021222324CashSecuritiesPaymentF & O TradingComplaint RegisterPay-in of FundPay-Out of FundF & OF & OContract NotePay in of SharesPay Out of sharesFamilyBranch registered under the Shops &Establishment Act/ Local AuthorityRelevant SEBI & FMC registrationcertificates displayed at branchRelevant Notice Board displayed at Branch(BSE/NSE/MCX/NCDEX)All terminals alloted are used by relevantemployee dealers registered in their namewith their NCFM having validity for next 3monthsClient agreements executed;maintained &intimated to HO for all clients and confirmedby HOTripartite agreements executedTrack of all clients details maintained insoftcopyTotal Clients = Total CRF; NO CRF noUCC;One client one codeNew CRF collected from existing client asper HO listPAN copy of clients maintained afterverification with original card & income taxsite and screenprint attached with CRFAS appointed in Branch and intimated toHO in relevant format for ExchangeSubmissionPayment must be received / paid in chequein the name of Broker Company/Client notin the name of any other company/partyNo broker shall receive / pay cash to theclientsNot to accept / issue third party securitiesNot to issue / recd payment from third partyTrading in Ban period – Rs 5000 Penaltycharges by NSE (Increase in open positionover 95%)RMS alertsBranch/Sub-Broker must maintain - Clientcomplaint Register.To send it bimonthly toCompliance Dept– HOClient should issue us a cheque same dayof Purchases of Shares ( Trading Day)Branch should issue cheque on T+2 to theClientsUpfront Margin must be collected by thebranch before executing the sauda in caseof F & O SegmentM To M Margin should be collected on adaily basisContract Note must be issued to the clientwithin 24 hours of trading.Acknowledgement register maintained forthe same.Client should deliver the shares to thebroker same day of sales or maximum T+1dayClient should receive shares from thebroker within 24 hours from the payout recdfrom the ExchangeNo family Adjustment allowed72Reason forNonCompliance

25262728Statement of accounts Securities ledger and Account / FundStatement to be sent to the Client onQuarterly basisReporting of bulk deal To report bulk deal to us on or before 3.30pm on a daily basis (BSE)MinorUCC registrationNot to open minor trading account/ trustaccountTrade carried out in Code only afterExchange successful registration of UCCNote: Employees are requested to update themselves regularly via http://intra.rathi.com/Compliance folderIncome tax Link:http://incometaxindiaefiling.gov.in/challan/enterpanforchallan.jsp73

23 August 2006Policy for Trading in Shares & Commodities by Employees of AnandRathi GroupEmployees of AnandRathi Group their spouses, dependent parents and dependent children wishing to deal in securities are requiredto abide by the following code of conduct:As per SEBI Guidelines:1. An order of value greater than Rs. 25 Lakhs or 25000 shares whichever is lower for any single day should be placed onlyafter prior written approval from the Compliance department (Mr.kapila Kabra/ Mr.Pravin Kamble – 022 40013951/3958,(Deepakkedia@rathi.com, kapilakabra@rathi.com , pravinkamble@rathi.com ). Approval shall be validfor one week from the date of approval.2. Secondary market trading in shares of FPOs (Follow up Public Offers) Lead Managed by us would not be allowed for aperiod of 30 days prior to date of opening of FPO. Investment Banking Division would inform all employees about this 45days prior to date of opening of FPO.3. All the employees shall maintain the confidentiality of all Price Sensitive Information. (Price sensitive information in ourbusiness will be bulk trades of Clients/Institutions executed in our office, any information acquired during the course ofconducting research which may not be available to general public and any information acquired during the course ofbusiness which otherwise would not have been available to general public)4. Department & persons for whom restrictions for buying and selling of securities is applicable (Directors, Heads ofdepartments (VP & above), Compliance, Equity dealing Department, Derivative dealing department, Research Department,Risk Management Department) would strictly follow „Code of Conduct for Prevention of Insider Trading‟ (as per sheetenclosed)Organizations Guidelines:5. Dealing in securities must be only through Anand Rathi Group. However, exceptions shall be allowed in case of the spouseof a staff member who is working in some other broking house where similar policy is in place. Such exceptions shall begranted only after prior approval is obtained from Compliance Officer at Anand Rathi Group.6. DP account should be with Anand Rathi Group only and would be provided at a discount of Rs. 50 per account.7. All the trades should be executed only through the Employee Central Dealing Desk in Mumbai; orders may be sent to Mr.Kalpesh Pandey / Mr. Chintan through telephone (022 4001 3803) or email (employeetrading@rathi.com). Dealers at theCentral Dealing Desk would send confirmation of all the transactions executed through email on same day.8. Concessional Brokerage Rates to be decided from time to time would be charged. Current rates would be 0.10% for cashsegment and 0.02% each side on F &O segment.9. Buying and selling shares of the same company within the same settlement shall normally not be allowed.10. Trading in F & O, would be permitted only for the limited purpose of hedging / arbitrage. Trading in commodities would beallowed through investment in arbitrage – structured products.11. Concerned Business Head / Head of Department should be vigilant about policy implementation by his/her team membersand should inform relevant authorities in case the policy is violated. However, the compliance officer shall have the right tocall for relevant information from any staff member. All the employees would submit a self certification of following thispolicy to HR department; this would be coordinated by HR department.12. If any employee is found to be breaking this policy, management may take strict disciplinary action, which may includereflecting in the appraisal and even termination of services from the company.74

Code of conduct for Prevention of Insider Trading for ARG Employees (as per SEBI guidelines)Departments and persons for whom further restrictions for buying and selling of securities is applicable:DirectorsAll Head of the Departments (VP & Above)ComplianceDealing DepartmentResearch DepartmentRisk DepartmentFor Applicable PersonsNot to communicate any Price Sensitive Information to any non-applicable person. In exceptional circumstancesconfidential information can be given to non-applicable person on the basis of "need to know" criteria, under intimation tothe compliance officer.Not to use Price Sensitive Information to buy or sell securities of any sort, whether for their own account, their relative‟saccount, Company's account or a client's account. (Relative to include self, spouse, dependant children and their spouses,dependant parents, dependant grand parents, dependant brothers, sisters and their spouses)Not pass on such information directly or indirectly by way of making a recommendation for the purchase or sale ofsecurities.To transact in securities only after pre clearance from compliance officer in case of transaction value is Rs. 25 Lakh or moreor the number of securities is 25000 or more. This will include even to IPO‟s. Approval from Compliance shall be valid fora period of one week.Hold their investments for a minimum period of 30 days this will include even to IPOs. (From the date of allotment forIPOs)In case the sale of securities is necessitated by personal emergency before the minimum period, obtain confirmation fromthe compliance officerDeclare all holdings in securities at the time of joining the organization or for existing persons on introduction of this codeto the Compliance Department.Compliance Department would take record of all transactions and holdings of employees through DP AC on Quarterly andAnnual Basis.For Research TeamTo intimate compliance officer of all existing companies on which the research activity is carried out on the date ofintroduction of this codeTo intimate compliance officer any addition to the above list on initiation of research.To disclose their share holdings/ interest in companies on which they are conducting research to the compliance officer.Analysts who prepare research report of a listed company shall not trade in securities of that companyfor 30 days from preparation of such report.75

For Dealers:To intimate the compliance officer immediately upon the execution of the order where the traded quantity either buy or sellon account of any trade (client / proprietor) is more than 0.5% (Bulk Deal) of the number of equity shares of the companylisted on the stock exchange.76

SECURITIES AND EXCHANGE BOARD OF INDIA(STOCK BROKERS AND SUB-BROKERS) REGULATIONS, 1992CODE OF CONDUCT FOR STOCK BROKERS (REGULATION 7)A. GENERAL(1) Integrity: A stock-broker, shall maintain high standards of integrity, promptitude and fairness inthe conduct of all his business.(2) Exercise Of Due Skill And Care: A stock-broker, shall act with due skill, care and diligence in theconduct of all his business.(3) Manipulation: A stock-broker shall not indulge in manipulative, fraudulent or deceptivetransactions or schemes or spread rumours with a view to distorting market equilibrium or makingpersonal gains.(4) Malpractices: A stock-broker shall not create false market either singly or in concert with others orindulge in any act detrimental to the investors interest or which leads to interference with the fair andsmooth functioning of the market. A stock-broker shall not involve himself in excessive speculativebusiness in the market beyond reasonable levels not commensurate with his financial soundness.(5) Compliance With Statutory Requirements: A stock-broker shall abide by all the provisions of theAct and the rules, regulations issued by the Government, the Board and the stock exchange fromtime to time as may be applicable to him.B. DUTY TO THE INVESTOR(1) Execution Of Orders: A stock-broker, in his dealings with the clients and the general investingpublic, shall faithfully execute the orders for buying and selling of securities at the best availablemarket price and not refuse to deal with a Small Investor merely on the ground of the volume ofbusiness involved. A stock-broker shall promptly inform his client about the execution or nonexecutionof an order, and make prompt payment in respect of securities sold and arrange forprompt delivery of securities purchased by clients.(2) Issue Of Contract Note: A stock-broker shall issue without delay to his client 42* [or client of subbroker]a contract note for all transactions in the form specified by the stock exchange.(3) Breach Of Trust: A stock-broker shall not disclose or discuss with any other person or makeimproper use of the details of personal investments and other information of a confidential nature ofthe client which he comes to know in his business relationship.(4) Business And Commission:(a) A stock-broker shall not encourage sales or purchases of securities with the sole object ofgenerating brokerage or commission.77

(b)A stock-broker shall not furnish false or misleading quotations or give any other false ormisleading advice or information to the clients with a view of inducing him to do business in particularsecurities and enabling himself to earn brokerage or commission thereby.(5) Business Of Defaulting Clients: A stock-broker shall not deal or transact business knowingly,directly or indirectly or execute an order for a client who has failed to carry out his commitments inrelation to securities with another stock-broker.(6) Fairness To Clients: A stock-broker, when dealing with a client, shall disclose whether he isacting as a principal or as an agent and shall ensure at the same time, that no conflict of interestarises between him and the client. In the event of a conflict of interest, he shall inform the clientaccordingly and shall not seek to gain a direct or indirect personal advantage from the situation andshall not consider clients' interest inferior to his own.(7) Investment Advice: A stock-broker shall not make a recommendation to any client who might beexpected to rely thereon to acquire, dispose of, retain any securities unless he has reasonablegrounds for believing that the recommendation is suitable for such a client upon the basis of thefacts, if disclosed by such a client as to his own security holdings, financial situation and objectivesof such investment. The stock-broker should seek such information from clients, wherever he feels itis appropriate to do so.43* [(7A) Investment Advice in publicly accessible media –(a) A stock broker or any of his employees shall not render, directly or indirectly, any investmentadvice about any security in the publicly accessible media, whether real - time or non real-time,unless a disclosure of his interest including the interest of his dependent family members and theemployer including their long or short position in the said security has been made, while renderingsuch advice.(b) In case, an employee of the stock broker is rendering such advice, he shall also disclose theinterest of his dependent family members and the employer including their long or short position inthe said security, while rendering such advice.](8) Competence Of Stock Broker: A stock-broker should have adequately trained staff andarrangements to render fair, prompt and competent services to his clients.C. STOCK-BROKERS VIS-A-VIS OTHER STOCK-BROKERS(1) Conduct Of Dealings: A stock-broker shall co-operate with the other contracting party incomparing unmatched transactions. A stock-broker shall not knowingly and willfully deliverdocuments which constitute bad delivery and shall co-operate with other contracting party for promptreplacement of documents which are declared as bad delivery.(2) Protection Of Clients Interests: A stock-broker shall extend fullest co-operation to other stockbrokersin protecting the interests of his clients regarding their rights to dividends, bonus shares,right shares and any other right related to such securities.78

(3) Transactions With Stock-Brokers: A stock-broker shall carry out his transactions with other stockbrokersand shall comply with his obligations in completing the settlement of transactions with them.(4) Advertisement And Publicity: A stock-broker shall not advertise his business publicly unlesspermitted by the stock exchange.(5) Inducement Of Clients: A stock-broker shall not resort to unfair means of inducing clients fromother stock- brokers.(6) False Or Misleading Returns: A stock-broker shall not neglect or fail or refuse to submit therequired returns and not make any false or misleading statement on any returns required to besubmitted to the Board and the stock exchange.44* [D (1) A stock broker shall enter into an agreement as specified by the Board with his client.(2) A stock broker shall also enter into an agreement as specified by the Board with the client of thesub-broker.]SECURITIES AND EXCHANGE BOARD OF INDIA(Stock Brokers and Sub-Brokers) Regulations, 1992CODE OF CONDUCT FOR SUB-BROKERS(Regulation 15)A. GENERAL(1) Integrity : A sub-broker, shall maintain high standards of integrity, promptitude and fairness in theconduct of all investment business.(2) Exercise Of Due Skill And Care : A sub-broker, shall act with due skill, care and diligence in theconduct of all investment business.B. DUTY TO THE INVESTOR(1) Execution Of Orders : A sub-broker, in his dealings with the clients and the general investingpublic, shall faithfully execute the orders for buying and selling of securities at the best availablemarket price. A sub-broker shall promptly inform his client about the execution or non-execution ofan order 45* [******]46* [(2) A sub-broker shall render necessary assistance to his client in obtaining the contract note fromthe stock broker]79

(2) A. Issue of Purchase or Sale Notes :(a) A sub-broker shall issue promptly to his clients purchase or sale notes for all the transactionsentered into by him with his clients.(b) A sub-broker shall issue promptly to his clients scripwise split purchase or sale notes andsimilarly bills and receipts showing the brokerage separately in respect of all transactions in thespecified form.(c) A sub-broker shall only split the contract notes client-wise and scripwise originally issued to himby the affiliated broker into different denominations.(d) A sub-broker shall not match the purchase and sale orders of his clients and each such ordermust invariably be routed through a member-broker of the stock exchange with whom he is affiliated.(3) BREACH OF TRUST : A sub-broker shall not disclose or discuss with any other person or makeimproper use of the details of personal investments and other information of a confidential nature ofthe client which he comes to know in his business relationship.(4) BUSINESS AND COMMISSION :(a) A sub-broker shall not encourage sales or purchases of securities with the sole object ofgenerating brokerage or commission.(b)A sub-broker shall not furnish false or misleading quotations or give any other false or misleadingadvice or information to the clients with a view of inducing him to do business in particular securitiesand enabling himself to earn brokerage or commission thereby.(c)A sub-broker shall not charge from his clients a commission exceeding one and one-half of onepercent of the value mentioned in the respective sale or purchase notes.(5) BUSINESS OF DEFAULTING CLIENTS : A sub-broker shall not deal or transact businessknowingly, directly or indirectly or execute an order for a client who has failed to carry out hiscommitments in relation to securities and is in default with another broker or sub-broker.(6) FAIRNESS TO CLIENTS : A sub-broker, when dealing with a client, shall disclose that he isacting as an agent 47* [******] ensuring at the same time, that no conflict of interest arises betweenhim and the client. In the event of a conflict of interest, he shall inform the client accordingly and shallnot seek to gain a direct or indirect personal advantage from the situation and shall not considerclients' interest inferior to his own.80

(7) INVESTMENT ADVICE : A sub-broker shall not make a recommendation to any client who mightbe expected to rely thereon to acquire, dispose of, retain any securities unless he has reasonablegrounds for believing that the recommendation is suitable for such a client upon the basis of thefacts, if disclosed by such a client as to his own security holdings, financial situation and objectivesof such investment. The sub-broker should seek such information from clients, wherever they feel itis appropriate to do so.48* [7A – Investment Advice in publicly accessible media –(a) A sub-broker or any of his employees shall not render, directly and indirectly any investmentadvice about any security in the publicly accessible media, whether real – time or non real-time,unless a disclosure of his interest including his long or short position in the said security has beenmade, while rendering such advice.(b) In case, an employee of the sub-broker is rendering such advice, he shall also disclose theinterest of his dependent family members and the employer including their long or short position inthe said security, while rendering such advice.](8) COMPETENCE OF SUB-BROKER : A sub-broker should have adequately trained staff andarrangements to render fair, prompt and competent services to his clients and continuouscompliance with the regulatory system.C. SUB-BROKERS VIS-A-VIS STOCK BROKERS(1) CONDUCT OF DEALINGS : A sub-broker shall co-operate with his broker in comparingunmatched transactions. A sub-broker shall not knowingly and willfully deliver documents whichconstitute bad delivery. A sub-broker shall co-operate with other contracting party for promptreplacement of documents which are declared as bad delivery.(2) PROTECTION OF CLIENTS INTERESTS : A sub-broker shall extend fullest co-operation to hisstock-broker in protecting the interests of their clients regarding their rights to dividends, right orbonus shares or any other rights relatable to such securities.(3) TRANSACTIONS WITH BROKERS : A sub-broker shall not fail to carry out his stockbrokingtransactions with his broker nor shall he fail to meet his business liabilities or show negligence incompleting the settlement of transactions with them.49* [(4) Agreement between sub-broker, client of the sub-broker and main broker: A sub-broker shallenter into a tripartite agreement with his client and with the main stock broker specifying the scope ofrights and obligations of the stock broker, sub-broker and such client of the sub-broker](5) ADVERTISEMENT AND PUBLICITY : A sub-broker shall not advertise his business publiclyunless permitted by the stock exchange.(6) INDUCEMENT OF CLIENTS : A sub-broker shall not resort to unfair means of inducing clientsfrom other brokers.81

D. SUB-BROKERS VIS-A-VIS REGULATORY AUTHORITIES(1) GENERAL CONDUCT : A sub-broker shall not indulge in dishonourable, disgraceful or disorderlyor improper conduct on the stock exchange nor shall he wilfully obstruct the business of the stockexchange. He shall comply with the rules, bye-laws and regulations of the stock exchange.(2) FAILURE TO GIVE INFORMATION : A sub-broker shall not neglect or fail or refuse to submit tothe Board or the stock exchange with which he is registered, such books, special returns,correspondence, documents, and papers or any part thereof as may be required.(3) FALSE OR MISLEADING RETURNS : A sub-broker shall not neglect or fail or refuse to submitthe required returns and not make any false or misleading statement on any returns required to besubmitted to the Board or the stock exchanges.(4) MANIPULATION : A sub-broker shall not indulge in manipulative, fraudulent or deceptivetransactions or schemes or spread rumours with a view to distorting market equilibrium or makingpersonal gains.(5) MALPRACTICES : A sub-broker shall not create false market either singly or in concert withothers or indulge in any act detrimental to the public interest or which leads to interference with thefair and smooth functions of the market mechanism of the stock exchanges. A sub-broker shall notinvolve himself in excessive speculative business in the market beyond reasonable levels notcommensurate with his financial soundness.Foot notes42. The words “or client of sub-broker” in sub-clause (2) of clause B were inserted by the SEBI(Stock Brokers & Sub Brokers) (Amendment) Regulations, 2003, published in the Official Gazette ofIndia dated 23.09.2003.43. Clause 7A in clause C in Schedule II was inserted by the SEBI (Investment Advice byIntermediaries) (Amendment) Regulations 2001, published in the Official Gazette of India dated29.05.2001.44. Clause D in Schedule II was inserted by the SEBI (Stock Brokers & Sub Brokers) (Amendment)Regulations, 2003, published in the Official Gazette of India dated 23.09.2003.82

45. Following part of clause B in Schedule II was deleted by the SEBI (Stock Brokers & SubBrokers) (Amendment) Regulations, 2003, published in the Official Gazette of India dated23.09.2003“and make payment in respect of securities sold and arrange for prompt delivery of securitiespurchased by clients. “46. Sub-clause (2) to clause B in Schedule II was inserted by the SEBI (Stock Brokers & SubBrokers) (Amendment) Regulations, 2003, published in the Official Gazette of India dated23.09.2003.47. The words in sub-clause (6) of clause B “ and shall issue appropriate purchase/sale note” weredeleted by the SEBI (Stock Brokers & Sub Brokers) (Amendment) Regulations, 2003, published inthe Official Gazette of India dated 23.09.2003.48. Clause 7A in clause C of Schedule II was inserted by the SEBI (Investment Advice byIntermediaries) (Amendment) Regulations 2001, published in the Official Gazette of India dated29.05.2001.49. Following sub-clause (4) in clause C was substituted by the SEBI (Stock Brokers & Sub Brokers)(Amendment) Regulations, 2003, published in the Official Gazette of India dated 23.09.2003.“ (4) LEGAL AGREEMENT BETWEEN BROKERS : A sub-broker shall execute an agreement orcontract with his affiliating brokers which would clearly specify the rights and obligations of the subbrokerand the principal broker. “83

Compliance Deadlines :BSE:Sr.No.Name of thereport/statement/certificate/dataDue Dates ResponsibleDept.1 ANNUAL SUBMISSIONHalf yearly AccountsAudit ReportNetworth CertificateNetworth Certificate - PCMAudited Accounts2 SSL Certificate for IBT Services 31-Jul Network3 Net worth certificate for the halfyearended March 31 / September304 Networth Certificate for MarginTrading facility5 Margin Trading ComplianceCertificate30-Jun31-Dec84Accounts30-AprAccounts31-Oct30-AprAccounts31-Oct6 Statement of Accounts Accounts7 Client Funding details 7 days from Operation TeamEOM8 Client details for Margin TradingOperation TeamFacilityBetween 9.00am to 12:00 amon next Tradingday9 Client Margin Reporting Between 9.00am to 12:00 amon next Tradingday10 Obligation Transfer File (OTR)* I upload 6.00pm, On T dayII upload 6.30pm, On T dayIII upload 9.30am, On T+1 day11 Client Direct Payout File (CPD)* On T+2 day by9.30 am12 CP Code Modification (CP)* On T day by4.45 pm13 Early Pay In (CEP) Clientallocation file*On T+2 day upto 10.30 am14 Pay in of Securities On T+2 day by10.30 am15 Pay in of Funds On T+2 day by10.30 am16 Bulk deals Execution (CM) On the sameday of trade17 Block Deals Reporting (CM) Between 5:30pm to 6:00 pm18 Unique Client Code (UCC) Prior tocommencementBO ProcessingTeamInstitutional BOProcessingTeamSettlementsTeamInstitutional BOProcessingTeamSettlementsTeamSettlementsTeamAccountsRiskManagementRiskManagementAccount OpeningTeam

19 Contract notes have been issuedto all constituentsof TradingWithin 24 hrsBO ProcessingTeam20 Trading terminal details Prior toactivation oftrading terminal21 Application for Approved User Prior Approvalrequired22 Upload of CTCL IDs Activation /Deactivation /Shifting of CTCL Ids23 Members trading through othermembers24 Change in Shareholding/profitsharing pattern / directors. Priorapproval(CM & F&O)25 Advertisement. Prior approvalrequired.(CM &F&O)Prior ApprovalrequiredIntimation /Prior ApprovalrequiredPrior ApprovalRequiredseven days inadvance beforeits publication.26 Change in status and constitution Prior Approvalrequired27 Appointment of Authorized Prior Approvalpersonal in F&O segment requiredNetworkCTCL Team /NetworkCTCL TeamN. A.AccountsComplianceAccountsAccount OpeningTeam /OperationCompliance28 Appointment and change ofCompliance OfficerIntimation toExchange29 Appointment and change of Intimation to CompliancePrincipal OfficerExchange30 Adoption of written procedures toComplianceimplement the anti moneylaundering provisions asenvisaged under the Anti MoneyLaundering Act, 200231 Margin Trading in Cash Segment Prior Approval Compliancerequired32 CTCL Facility Prior Approval CTCL Teamrequired33 Activation / Deactivation of Prior Approval N. A.Proprietary trading facilityrequired34 Application for providing IBT Prior Approval Networkrequired35 Display of Notice Board Compliance36 Display Copy of SEBI RegistratoinComplianceNo.37 Client Financial informationperiodically reviewed and updatedin KYC38 Maintainance of InvestorGreviance Register39 Payment of SEBI fees40 Statistics on Internet TradingAccount OpeningTeamCompliance85

NSE:Sr.Name of theDue Dates ResponsibleNo. report/statement/certificate/dataDept.1 Systems Audit Report Half yearly Compliance2 ANNUAL SUBMISSION30-SepAccounts*Annual Accounts - Balance Sheet, P&L,Annual report, Auditors report*C-1 Networth Certificate alongwith therelevant computationC-2 Details of Stock Exchange membershipC-3 Details of directors/proprietorC-6 Details of shareholding pattern/sharingpattern*C-7 Details of Dominant GroupC-8 Undertaking for Relative Support to theDominant GroupC-9 Listing details of trading membercorporates*mandatory3 Proof of Indemnity Insurance cover 31-Jul Accounts4 SSL Certificate for IBT Services 31-Jul Network5 Annual Compliance Report as on March 31 30-Jun Compliance6 Renewal of Certificate of Membership fromAccountsNSE7 Net worth certificate for the half-year ended 30-JunAccountsMarch 31 / September 3031-Dec8 Networth Certificate for Margin Trading facility 30-AprAccounts31-Oct9 Margin Trading Compliance Certificate 30-AprAccounts31-Oct10 Statement of Accounts to Clients Accounts11 Client Funding details 7 days from EOM OperationTeam12 Client details for Margin Trading Facility Before 9:00 pmon the trade dayOperationTeam13 Client Margin Reporting Within two daysfrom trade dateBOProcessing14 Obligation Transfer File (OTR)* I upload 6.00 pm,On T dayII upload 6.30 pm,On T dayIII upload 9.30am, On T+1 day15 Contraction of custodial Trades file (CC)* I upload 6.30 pm,On T dayII upload 9.30 am,86TeamInstitutionalBOProcessingTeamInstitutionalBOProcessing

On T+1 day16 Client Direct Payout File (CPD)* On T+2 day by9.30 am17 Reallocation of custodial Trades file (RC)* On T+1 day by9.30 am18 CP Code Modification (CP)* On T day by 4.45pm19 Client Code Modification File (CLD)* On T day by 4.45pm20 Early Pay In (CEP) Client allocation file* On T+2 day up to10.30 am21 Pay in of Securities On T+2 day by10.30 am22 Pay in of Funds On T+2 day by10.30 am23 Bulk deals Execution (CM) On the same dayof trade24 Block Deals Reporting (CM) Between 5:30 pmto 6:00 pm25 Unique Client Code (UCC) Prior tocommencementof Trading26 Contract notes have been issued to all Within 24 hrsconstituents27 Trading terminal details Prior to activationof trading terminal28 Application for Approved User Prior Approvalrequired29 Upload of CTCL IDs Activation / Deactivation Prior Approval/requiredShifting of CTCL Ids30 Members trading through other members Intimation / PriorApproval required31 Change in Shareholding/profit sharing pattern Prior Approval/ directors. Prior approval(CM & F&O)Required32 Advertisement. Prior approval required.(CM&F&O)seven days inadvance beforeits publication.33 Change in status and constitution Prior Approvalrequired34 Appointment of Authorized personal in F&O Prior Approvalsegmentrequired35 Appointment and change of ComplianceOfficerIntimation toExchange36 Appointment and change of Principal Officer Intimation toExchange37 Adoption of written procedures to implementthe anti money laundering provisions asenvisaged under the Anti Money LaunderingAct, 200238 Margin Trading in Cash Segment Prior ApprovalrequiredTeamSettlementsTeamInstitutionalBOProcessingTeamInstitutionalBOProcessingTeamBOProcessingTeamSettlementsTeamSettlementsTeamAccountsRiskManagementRiskManagementAccountOpeningTeamBOProcessingTeamNetworkCTCL Team/ NetworkCTCL TeamN. A.AccountsComplianceAccountsAccountOpeningTeam /OperationComplianceComplianceComplianceCompliance87

39 CTCL Facility Prior Approval CTCL Teamrequired40 Activation / Deactivation of Proprietary trading Prior Approval N. A.facilityrequired41 Application for providing IBT Prior Approval Networkrequired42 Display of Notice Board Compliance43 Display Copy of SEBI Registratoin No. Compliance44 Client Financial information periodicallyAccountreviewed and updated in KYCOpening Te45 Maintainance of Investor Greviance Register Compliance46 Inspection of the active sub-brokers InternalAuditor47 Payment of SEBI fees48 Internet volumes - ENIT88

SEBI-PMSSr.No.Name of thereport/statement/certificate/data1 Monthly report on Portfolio ManagementServices2 Half yearly report on Portfolio ManagementServices3 Half yearly Disclosure document of PMS tobe filed with SEBIPeriodityMonthlyHalfYearlyHalfYearlyDueDate3rd ofeverymonthWithinonemonthWithinonemonthRemarksLettersubmitted byComplianceOfficerLettersubmitted byComplianceOfficerLettersubmitted byComplianceOfficerHalfyearly89

NCDEX:Sr.No. Name of the report/statement/certificate/data Periodity Remarks1 Unique Client Code (UCC) Daily ElectronicUpload2 Annual Compliance Report as on March 31 Yearly Physicalcertificate3 Audited Annual Statement of Accounts (which includesBalance sheet, P&L account, directors and auditors report) forthe year ended March 314 Net worth certificates duly cert by auditor for the year endedMarch 315 Change in Shareholding/profit sharing pattern / directors. PriorapprovalYearlyYearlyCase tocasebasis6 Details of Compliance Officer to be intimated Case tocasebasis7 Advertisement. Prior approval required. Case tocasebasisPhysicalcertificatePhysicalcertificateLetter signed byDirectorLetter signed byDirectorLetter signed byAuthorisedSignatory8 Statement of accounts every three months Quarterly Electronic ifDigitally signedotherwise hardcopy9 Investor Grievance Register is maintained Case tocasebasis10 Uploading Of CTCL activation -deactivation prior to actualactivation - deactivation11CTCL Volume reportingCase tocasebasisFortnightSoft copybefore 7th &22nd90

MCX:Sr.No. Name of the report/statement/certificate/data Periodity Remarks Apr-071 Unique Client Code (UCC) Daily ElectronicUpload2 Annual Compliance Repor for the year ended Yearly PhysicalMarch 313 Audited Annual Statement of Accounts (whichincludes Balance sheet, P&L account, directorsand auditors report) for the year ended March 314 Net worth certificates duly cert by auditor for theyear ended March 315 Change in Shareholding/profit sharing pattern /directors. Prior approval(CM & F&O)YearlyYearlyCase tocasebasis6 Details of Compliance Officer to be intimated Case tocasebasis7 Advertisement Prior approval required Case tocasebasiscertificatePhysicalcertificatePhysicalcertificateLettersigned byDirectorLettersigned byDirectorLettersigned byAuthorisedSignatory8 Statement of accounts every three months Quarterly Electronic ifDigitallysignedotherwisehard copy9 Investor Grievance Register is maintained Case tocasebasisSoft copyMay-07Half yearly91

SUB-BROKER REMISER AND AUTHORISED PERSONSREGISTRATION PROCESS1)Remiser Concept - Only in BSE - normally the exchange allots aRemiser registration in one montha)A member can employ a remiserb)A remiser has to operate from broker’s officec)A broker cannot remunerate with a share exceeding fifty percent of the brokerage charged to theclient introduced by remiserd)A Remiser cannot be a corporate bodye)A Remiser cannot be a sub broker elsewheref)There is no fees charged by the exchange.Reasons for rejectiona) Name mismatch in One Pager provided by the franchisee & his PAN no. We have tothereafter provide a affidavit and after doing so again the exchange takes one month to allotregistration2) Subbroker – In BSE – normally the exchange allots within 2 months ,In NSE – normally the exchange takes four to six monthsa)A sub-broker may be an individual, a partnership firm or a corporate. In case of corporate orpartnership firm, the directors or partners and in the case of an individual sub-broker applicant,each of them shall comply with the following requirements:b)They shall not be less than 21 years of age;c)They shall not have been convicted of any offence involving fraud or dishonesty;d)They shall have at least passed 12th standard equivalent examination from an institutionrecognized by the Government;e)They should not have been debarred by SEBIf)The corporate entities applying for sub-brokership shall have a minimum paid up capital of Rs. 5Lakh and it shall identify a dominant shareholder who holds a minimum of 51% shares either singlyor with the unconditional support of his/her spouse.g)There is a fees of Rs10000/- for a period of five yearsh)Broker cannot share a brokerage of more than 1.5% of the brokerage if charged maximum allowedto client which is 2.5%i)If the proposed subbroker is only 10 th pass then a experience prior to 1992 is required to besubmittedj)In case of a married woman desiring to become a subbroker requires to submit a marriagecertificate or a affidavit for name change on a fifty rupees stamp paper92

k) An undertaking should be submitted that applicant will deal directly with investors and notthrough any other sub-broker on being registered with SEBI.Reasons for rejectiona)After four months of submitting the application the exchange returns the whole application backfor revalidation of Demand Draft as the exchange requires a DD with four months of validityremaining. We are at total mercy of exchange and after revalidation again it is processed afresh. Wehave to also upload details in ENIT before filing the application again.b)After submission the exchange rejects it on the grounds that the proposed subbroker is alreadyregistered with some other broker.c)Mismatch in name in mark sheet given by the franchisee andOne pager.d)Proposed subbroker is debarred / restricted / prohibited by SEBI to do any kind business insecurities. After submission of Undertaking the exchange takes another two months to complete theprocedure.3)Authorised Person – in NSE Cash / F & O – normally the exchangetakes 15 days in confirming a AP subject to clearance of Sub-brokerregistration applicationin NSE u can very well be a AP in Cash & F & O without applying for SubbrokerFeatures of AP concept - NSE Cash & F & O w.e.f 4/12/091. It is carrying a branch model concept and would be treated as a Brokers' branch2. All acts and ommissions committed by our AP is Broker's responsibilty3. Bilateral agreement needs to be executed between clients of AP and Broker4. Gestation period of getting registered is only 7 days5. Existing Registered subbrokers can also apply for AP6. One time processing fee is Rs1000/- + tax for allotment of AP number7. Existing Registered AP's in F & O segment would continue to hold thier status tillfurther notice/consensus8. Cancellartion /Termination of AP would require one month notice and newspaper adalongiwth separate checklist to be adhered to9. Disputes of clients of AP would be thru NSE redressal machinery of IGC /Arbitration10. Broker can block/withhold AP' payments in case of recoveries pending from hisclients11. Broker can share fees/commission/salary with AP as mutually decided uponbetween them93

.ONE PAGERDate:_____________1)Segment for Registration(Tick)Approval LetterDatabaseREMISERPrefix Code :__________Branch Code:__________ORBSE NSE F &O NCDEX MCX2)Name of the Applicant:_____________________________________Trader Name :_____________________________________________Address Of the Branch:___________________________________________________________________________________City :____________ Pin code:_____________ State:_____________________Email id:_________________________ Tel.No._______________ Fax no:_______________Approval by Business Head: ________________ Sharing Ratio:____________3)a) Settlement/AccountDepartmentb)Account Departmentc)RMS Departmentd) IT DepartmentC) Compliance DepartmentNarendra Jain: :_______________________Narendra Taparia:__________Mahesh Bang:_____________________________Hemant Gandhi:____________________________Deepak Kedia : _________________94

Final ApprovalJugal Mantri(Group CFO)_______________________Date:_____________1)Registration No.Approval LetterFranchise- Database(Surrender of Franchise)1) Remiser ___________________________OR1) BSE ___________________________2) NSE ____________________________3) NCDEX _____________________________4) MCX _____________________________2)Name of the Applicant:Trader Name :Address Of the Branch:__________________________________________________________________________________________________________________________________________________________City :____________Pin code:_____________ State:_____________________Email id:_________________________ Tel.N0._______________ Fax n0:_____________3) Approval by Business Head: ________________ Sharing ratio ___________a) Settlement/AccountDepartmentb)Account Departmentc)RMS Departmentd) IT Departmente) Compliance DepartmentNarendra Jain: :_______________________Rajesh Bhutra :_________________________Mahesh Bang:_____________________________Hemant Gandhi:____________________________Deepak Kedia : _______________Final ApprovalJugal Mantri(Group CFO)_______________________95

Note:01 Cancellation of Authorised Person :- Give Name of the Person02 Cancellation of CTCL User id03 Surrender of Vsat/VPN04 Document give to the Compliance department for cancellation of franchises05 List of Clients and Details of Payment and Recd / Paid – Must be zero06 List of Clients and their CRF must be submit to the Compliance Department07 Undertaking from franchises for no claim due from clients if any claim will raise he will be responsible08 Deposit must be pay after 6 month of cancellation96

CHECKLISTFor Individuals/Sole ProprietorNSENo Completeness of Application Form Y/N1 Registration Fee of Rs 10000/- Favoring SEBI(Ensure DD is Valid for next 4 months)2 Application form for Registration with SEBI – „Form B‟3 Recommendation letter to be given by the Trading Member on Letterhead – Form C4 Copy of Agreement between trading member and sub-broker on stamp paper as per Cir. Ref. No. NSE/INSP/5387,Dt.27-08-20045 Reference letter from the Applicant‟s Banker6 Reference letter from any other Third Party (Such as CA or Lawyer/Notary/other Stock Broker)7 Declaration from Sub-Broker about Non-Conviction or presently not under trial for any offence (On the letterhead of thesub broker)8 Undertaking from Sub-Broker about Dealing directly with investors (On the letterhead of the sub broker)9 Confirmation from sub-broker that he has not applied through any other TM (On the letterhead of the sub broker)10 Annexure J or K – Letter from Trading Member to NSE giving Undertaking about dealing in fake and forged shares bythe sub-broker11 Annexure I – Letter from trading member undertaking to settle the obligations of the sub-broker12 Annexure O – Certificate from sub broker relating to shareholding pattern and crossholding as per Cir.Ref. No.NSE/MEM/7157, dt. 09-02-200613 Annexure 3– Undertaking for “Fit & Proper Person” as per Cir. Ref. No. NSE/MEM/7743, dt. 09-08-2006Eligibility Criteria13 Qualifications – Minimum HSC Passed or Equivalent14 Applicant should be Resident of India..15 Proof of age (Either School Leaving / Birth / SSC Certificate / PAN card) – To be above 21 years of age16 Proof of name change - if applicable (Certified Copy of Marriage Certificate/ Affidavit)17 Applicant holding more than 10% isNot a TM of the ExchangeNot a shareholder/ Partner of any other TMNot an Authorised Person of any other TMNot a Dominant shareholder/ partner of any other Authorised PersonNot a registered Sub-broker of any other TMNot a shareholder/ Partner of a registered Sub-brokerNot having a cross holding of 10% or more with any other TM/SB/APNot a director of the trading memberNot appearing in the JPC reportNot appearing in the NOC Excel Sheet18 Sub-Broker is:Not a defaulter in any other Stock Exchange.Not appearing in SEBI debarred Directors/ Vanishing Companies List20 TM is not disabled or suspended or any disciplinary action has been taken21 Not appearing in CIS and Non CIS list22 Not appearing in CIBIL database23 Check if the sub broker is an active AP in CM Segment & if applicant is registered/application is returned, cancel the APin CM SegmentChecked by: NOC Sent On: DSU on:BSECHECKLIST FOR SUBMITTING DOCUMENTS FOR SUB-BROKER REGISTRATION BY INDIVIDUAL/PARTNERSHIP/CORPORAPPLICANT1 Application in the prescribed format (available on website bseindia.com) for obtaining recognition as sub-broker withMember of BSE Ltd., duly signed/stamped by the applicant together with the DD of Rs.10000/- in favour of SEBI as aregistration fee of SEBI for the block of five years.97

2 Form-B (Original) in the prescribed format, duly signed and bearing rubber stamp/name of the applicant.3 Form-C (Original) in the prescribed format on the Member’s Letterhead, duly signed and bearing SEBI Registrationnumber stamp of the recommending member.4 Letter from the member in the prescribed format (available on website bseindia.com) for authorising the Exchange todebit member’s general charges account maintained with the clearinghouse for Rs.1000 per application as sub-brokerSEBI registration processing fee.5 Two original reference letters including one from the banker recommending the applicant.(In case of partnership/corporate all partners/directors names should be included in reference)6 Declaration from the applicant that he/she/they have not been convicted of any offence involving fraud or dishonesty andno trial is pending against them in court of law. (For all partners/directors in case of partnership/corporate)7 Two undertaking from the applicant (1) that he/she/they will deal directly with investors and not through any other subbroker(2) undertaking in the prescribed format (available on website bseindia.com).8 Confirmation/Declaration/undertaking by Recommending member on their letterhead as per the prescribed format(available on website bseindia.com).9 Certified true copy of agreement between Recommending Member broker and Sub-broker on Rs.100/- Stamp paper /Franked paper along with signatures of witnesses.10 Certified true copy of age & education proof of individual / all partners / all directors of applicant/s.(Minimum age & education qualification are 21 years and qualification should be HSC or equivalent to HSC).11 Market Experience Certificate in case of the education qualification of any Individual/Partners/Directors of the applicant isless than HSC (at least two years of experience in Capital Market required in hard & soft copy duly scanned in JPEG/BMPformat should be submitted).12 Details relating to Sharing of Profit ratio & No. of Partners in case applicant is partnership and Shareholding Pattern & No.of Directors in case applicant is corporate and details of office infrastructure like no. of computers, Fax, Scanning Machine,Printers, no. of employees etc should be submitted.13 In case applicant is a partnership/corporate, certified true copy of Partnership Deed (Duly certified by C.A/member) incase of partnership firm and Memorandum & Articles of Association in case of corporate to be submitted.14 In case applicant is a corporate, board resolution authorizing director/s of the applicant to sign documents for registrationof sub-broker signed by all directors and certified as true copy by a Chartered Accountant/Company Secretary/memberwith registration number and date.15 Certified true copy of ROC Form 32 (if applicable) in case of corporate application.16 In case the applicant is member of the regional/multiple stock exchange certified true copy of turnover figures of themembers (applicant) concerned intending to act as sub-brokers from the date of their registration as broker on theregional stock exchange & other stock exchanges if he is a multiple member till the date of submission of application foracting as a sub-broker. Turnover figures of such members (applicant) should be submitted as per SEBI's circularNo:SMD/POLICY/Cir-07/2002 dated 28th March,2002.17 In case the applicant is member of the regional/multiple stock exchange certified true copy of turnover figures of thetransferor also should be submitted as per SEBI's circular No:SMD/POLICY/Cir-07/2002 dated 28th march,2002 from thedate of their registration as a broker on the regional/multiple stock exchange in cases where member (applicant)concerned intends to act as sub-brokers. In case, there is no change in the constitution of the member (applicant) since1991-92, turnover figures of transferor is not applicable.18 Broker database certificate in case the applicant is a member of a regional stock exchange to be certified by theExchange.19 In case the applicant is member of the regional/multiple stock exchange a letter from the subsidiary/multiple Exchangestating whether, the applicant is entitled for continuity benefits as per SEBI's circular No. SMD/POLICY/CIR-4/98 dated 4thFebruary 1998.20 In case of individual/partnership/corporate applicant, individual / any partner/director is a Married female and there ischange of name, then, copy of marriage certificate / affidavit duly attested by notary supporting change of name shouldbe submitted.21 In case the applicant is already registered or applied as remiser with the Exchange, an undertaking in the prescribedformat (available on website bseindia.com) from the applicant for cancellation of remisership from the Exchange should besubmitted at the time of submitting an application for sub-broker registration.Updated on 30/05/200798

For Partnership/CorporatesSUB-BROKER APPLICANT NAME: ___________________________________________________________TRADING MEMBER AFFILIATED TO _________________________________________________________Completeness of Application FormRegistration Fee of Rs 10000/-Application form for Registration with SEBI – „Form B‟Recommendation letter to be given by the Trading Member on Letterhead – Form CCopy of Agreement between trading member and sub-broker on stamp paper as per Cir. Ref. No.NSE/INSP/5387, Dt.27-08-2004Reference letter from the Applicant‟s BankerReference letter from any other Third Party (Such as CA or Lawyer/Notary/other Stock BrokerDeclaration from Sub-Broker about Non-Conviction or presently not under trial for any offence#Undertaking from Sub-Broker about Dealing directly with investors#Confirmation from sub-broker that he has not applied through any other TM#Annexure J or K – Letter from Trading Member to NSE giving Undertaking about dealing in fake and forgedshares by the sub-brokerAnnexure I – Letter from trading member undertaking to settle the obligations of the sub-brokerDuly signed Copy of Board Resolution for appointment/ resignation of directors along with Form 32Annexure L – For Corporate - Shareholding PatternAnnexure L – For Firms – Sharing PatternAnnexure O – Certificate from sub broker relating to shareholding pattern and crossholding as per Cir.Ref.No. NSE/MEM/7157, dt. 09-02-2006#Registered Partnership Deed/ MoA & AoA Along with the Certificate of IncorporationEligibility CriteriaCompleteY/NCompliesY/NRemarksRemarksQualifications – Minimum HSC Passed OR SSC Passed along with Experience Certificate required inCapital Market for period not less than 2 years prior to 1992 for all the partners/directors/PAN card of the Firm/Corporate and all the partners/directorsProof of age (Either School Leaving / Birth / SSC Certificate / PAN card) – To be above 21 years of age forall the partners/ directorsProof of name change - if applicable (Certified Copy of Marriage Certificate/ Affidavit)Applicant/ Any Shareholder/ Partner/ or Director holding more than 10% isNot a TM of the ExchangeNot a Dominant shareholder/ Partner of any other TMNot an Authorised Person of any other TMNot a Dominant shareholder/ partner of any other Authorised PersonNot a registered Sub-broker of any other TMNot a dominant shareholder/ Partner of a registered Sub-brokerNot having a cross holding of 10% or more with any other TM/SB/APNot a director of the trading memberNot appearing in the JPC reportNot appearing in the NOC Excel SheetSub-Broker/ Any Shareholder/ Partner/ Director is:Not a defaulter in any other Stock Exchange.Not appearing in SEBI debarred Directors/ Vanishing Companies ListCleared by Investigation/InspectionTM is not disabled or suspended or any disciplinary action has been takenNot appearing in CIS and Non CIS listNot appearing in CIBIL databaseCheck if the sub broker is an active AP in CM Segment, if application is returned, intimate TM and get date of disassociation of AP inSegmento be signed by applicant/ all partners/ all directors * All photocopies Should be duly certified by the Trading Member/CA/TradingemberChecked by : NOC Sent On: DSU on:99

Form No 2Town / Location PotentialProposal for New Franchisee / Remiser SanctionProposed Town / Location: Cluster: Franchsiee / Remiser (strike one) Region:Potential (Associate)Client AcqTown Broking MF TotalLocationTown PopulationNo of NSDL/CDSL Accounts in townBanks (as applicable) HDFC / UTI /Other InformationOur Existing Branches (no)Our Existing Number Franchisees (no)Particulars of the AssociateNameOffice Owned / Rented / ARG Office (Pl mentionname of branch)Office SizeAny previous association as Franchisee withsome other broker*Investment CapabilityQualificationExisting occupationBrokerage Sharing TermsOther InformationTop 10 CompetitorsName of PlayerYes / NoNo of ClientsNo ofDealers3 months6 months12 monthsProposed Launch dateRevenueTo be filled only if the party is currently assocaited with some other brokerBroker nameCurrent Client baseMonthly revenueReason for change from assocaitionwith existing brokerRevenueBroking Distribution TotalOther RemarksSignatures: Franchisee Development Manager Cluster Head Regional DirectorRecommendations of Product Team:Approved by (signature):Note:Franchisee - Associate setting up a full fledged office to source and service clients. Would be registered as Sub broker in BSE & NSE cash and as Authorised Person in NSE F & ORemisers - Assocaites would not set up own office and would operate through ARG branch. Would be registered as Sub broker in BSE & NSE cash and as Authorised Person in NSE F & O or as100

Remiser in BSE Cash Segment101

Memorandum of Understanding – Sub Broker /Authorized Person (Franchisee)Date:Sub broker Name / AP:Contact No:Mail id:Pan No:Address:Sub: Memorandum of Understanding for associating as a Sub broker/ Authorized Person (AP)with Anand Rathi GroupBased on our discussions with you, you hereby agree to associate with ANAND RATHI GROUP(ARG).Registration:You will be registered with Anand Rathi Share and Stock Brokers Ltd (FormerlyKnown as Navratan Capital and Securities Ltd.) as a sub broker in the cash segment (forrevenue sharing purpose) and registered as an Authorized Person in F & O segment ofNSE. You will also be registered with as a Sub broker of Anand Rathi Share and StockBrokers Ltd. (Formerly known as Anand Rathi Securities Ltd.) in the Cash Segment ofBSE. There may be changes in registration process incase of any amendments in theregulations by the Exchanges or SEBI. You will also be registered in MCX as Sub brokerand with NCDEX as Authorized Person of Anand Rathi Commodities Ltd. (ARCL)ARG – Offering:Products Offered:o Broking - Equities, Derivatives, Commodities & Currencyo Internet Tradingo IPOo DPo Mutual Fundso Loans (As per tie up with External agencies/Companies)o Fixed Deposit(As per tie up with External agencies/Companies)o Other products as may be specified from time to time.BSE & NSE registration fee to be debited to Sub broker/AP ledgerSecurity Deposito 1 Lac for One Segment ment (Only Cash)o 2 Lac for More than One Segment (Minimum Cash deposit Rs. 1,00,000/- restdeposit can be Collateral – Shares)o Interest will be paid annually on Cash depositsDeposit Amount (Cash) Interest % p.a.1,00,001 to 2,00,000 62,00,001 to 3,00,000 7.53,00,001 and Above 9o Example: If the deposit is Rs. 4,00,000/-, then the interest % p.a will be paid on Rs.3,00,000/- i.e. Rs. 4,00,000-Rs.1,00,000 (on the base minimum cash deposit, we willnot provide any interest).So the deposit for interest calculations will be @ 7.5% p.a.on Rs. 3,00,000/- (not Rs. 3,00,001/-).a) Interest will be calculated on simple rate of interest method after reducing Rs.1 lac outof cash deposit available & the interest will be credited to brokerage account on financialyear basis.b) Waiver of interest in any client account will be reduced out of Interest calculatedabove.Note: In case of closing of Sub broker/AP, deposit will be released 3 months after102

completion of all the closure formalities.Revenue Sharing:Revenue Segment (Cash, Derivative, and Commodities & Currency Segment): TheBrokerage will be shared in the following ratio, post statutory cost.Sharing Ratio Brokerage to be generated per month(ARG : S.B) (Post Stat. Cost)50 : 50 Up to 25,000/-45 : 55 Rs. 25,001/- to Rs. 50,000/-40 : 60 Rs. 50,001/- to Rs.75,000/-35 : 65 Rs. 75,001/- to Rs.1,00,000/-30 : 70 Rs. 1, 00,001/- and above.Note: Any brokerage rate below 0.30% and 0.03% to be offered only with priorapproval from ARGo For both online and offline sharing will be same as mentioned in the above slab.o Payment will be made monthly as per the applicable slab for that particular month,however quarterly average will be taken at the end of every quarter for applicabilityof slab related to that quarter.o Internet trading clients would be required to transact as per standard risk managementand settlement procedures as applicable under the ARG Internet Trading clientpolicy.IPO : Depending on the IPO, remuneration to the Sub broker/AP could be in thefollowing ways:a). On a „Per Application basis‟ orb). Brokerage sharing in the ratio of 80:20 (80% of revenue to Subbroker/AP & 20% of revenue ARG)DP : Sub broker/AP will be paid Rs.100/- on renewal of AMC as well as Rs. 100/- onnew demat account opening. This policy is applicable for all schemes.Other Products:For Products offered to Sub broker/AP, other than the ones mentioned above, like MF,Loans, PMS etc. sharing ratio would be decided by HO and communicated to Subbroker/AP from time to time.o Present Product offering is as per the policy and on the sole discretion of AnandRathi Group. ARG reserves the right to change the structures at any time with noticeon immediate effecto Product offering can also change in future subject to prevailing policies of differentAuthorities.o In case of loans, the sharing will be given as per the sharing ratio applicable at thetime of disbursement of loan amount.o All Brokerages/incentives are gross and inclusive of all statutory levies includingservice tax & other taxes. Net amount after deducting the statutory levies will be paidto the Sub broker/AP.Expectations from Sub broker/AP:o Revenue:a) Starting the 4th Month onward, every Sub broker/AP is expected to generate netrevenue of Rs.50000/- for ARG.b) Sub broker/AP to start business on activation of 50 Accounts. ARG to providesupport to Sub broker/AP to source clients – Marketing Collaterals.o Sub broker/AP criteriaa) Clear NCFM exams for Cash, Derivatives as well as Commodities segment (ifactivated in respective segment)b) Get AMFI certified to sell Mutual Fund (Optional)c) Have a team of minimum 2 dealers and 1 BO executived) Minimum 250 Sq ft office and Office ambience to be in line with ARG office103

ambience standardse) Adherence to compliance normsf) Any brokerage rate below 0.30% and 0.03% to be offered only with priorapproval from ARGg) Should possess good relationship building skillsh) Understanding of equity broking businessSupport from ARG to Sub broker/APARG Newsletters (Wealth N Wisdom) - FreeBrochures - 50% cost to be borne by Sub broker/APFirst Flex (Glow sign Board) - 1 Free*Posters to decorate his office - FreeCanopy - 50% cost to be borne by Sub broker/APUmbrella for promotional activity- 50% cost to be borne by Sub broker/APNote: * First flex for “Main Glow Sign Board” would be provided by ARG (Free up to the size of 18 sq.feet only).Charges:You will be debited with charges for the following:Client Registration FormBills / Contract Notes stationery if provided from ARG officeOne side bank charges for fund transfer to Head Office in case of remote locations,not having HDFC networkInter settlement charges of the above depositoriesCertain marketing activities like investors conference would be on equal costsharing basis or as decided and mutually agreed on case to case basisRisk Management:Complete risk of the business is borne by the Sub broker/AP.Client wise risk monitoring –Upfront margins would be required for placing orders.Responsibility of managing client‟s risk, collections.Payment of delay pay-in charges in case not borne by client.Compliance:SEBI/Exchange registration must to commence the businessNCFM certification (NSE Cash, F&O, DP andNCDEX.Client registration must before trade execution.No Third party payments and securities, cash Transactions, unauthorized transfer offundsone client to other.All marketing and brand norms to be adhered to completely.Liabilities:You shall be fully responsible for your client‟s trades and will ensure that the clientfulfills all his settlement obligations (deliveries/payments) in respect of trades donethrough ARG.Other Points:You are expected to carry out ethical business practices while fully complying with therules applicable, regulations and byelaws of SEBI, NSE, BSE, MCX, NCDEX, FMC,ARG& other statutory authorities that may be issued from time to time.You must ensure that all your clients are registered with ARG.All the expenses such as rent, electricity, traveling, conveyance, staff salary & welfare etcfor your set up would be borne by you.In the due course of registration, you will submit to ARG duly filled clientenrollment form, Risk disclosure document, member - client agreement along104

with brokerages to be charged to client and letter of authority from the clientbefore the commencement of business.Client billing would be centralized from Mumbai. You would be responsible for printing theirbills and getting it delivered to them as per the customer standards that are set by ARG.If any dispute arises between the parties in relation to this MOU, then the parties shall meetto discuss the matter and shall negotiate in good faith to Endeavour to resolve the issue. Indefault, the parties to resolve the dispute under the provision of the Arbitration andConciliation Act, 1996 or through the arbitration mechanism of the respective stockexchange, as the case may be.This MOU shall be governed in accordance with the laws of India and shall be subject tothe exclusive jurisdiction of the courts in Mumbai only.Connectivity:Sub broker/AP to be provided connectivity through VPN (VSAT) & BroadbandConnectivity (VSAT & Broadband) Charges are given in Annexure IWe look forward to a continuing and fruitful association with you.Thanking YouFor Anand Rathi Group For Sub Broker/AP (Name of the Company)Authorized Signatory:___Date: Date:Annexure 1VPN (VSAT) ChargesScheme - I Scheme - II Scheme - BroadbandIII with ODIN /OmnesysOwn Your VSAT VSATVSAT Finance RentV-sat Purchase and Installation cost -Upfront 75,000 25,000 Nil NilMonthly Installments (Rs.) Nil 5,000 Nil NilNo. of Installments Nil 12 Nil NilVSAT Rent Nil Nil 1500 NilMonthly ChargesID Charges (Per ID Per Segment) 750 750 750 500Available Exchanges and Segment BSE (Cash), NSE (Cash & F&O), NCDEX and MCXShifting Charges (V- sat) As per Actual105

MANUAL FOR PREVENTION OF MONEY LAUNDERINGACT 2002 (PMLA)INDEXSr. No. Particulars Page No.Part I OVER VIEW 2-5A Introduction 2B Back Ground 3C Guiding Principles 4 -5Part II DETAILED GUIDELINES 6-13A Customer Due DiligenceI. One Pager Information 6II. Know Your Client 7III. Dealing With Clients 10BCode of conduct for Prevention of Insider Trading for ARGEmployees (as per SEBI guidelines)11C Employee TradingI. Policy for Trading in Shares & Commodities byEmployees of Anand Rathi Group12II. Dealing With Employee Clients 13Part III TRANSACTION MONITORING & REPORTING 14-17A Internal Report Generation 14B Monitoring & ReportingI. Cash Transaction 15II. Suspicious Transaction 16III. Branch / Associates Inspection 17Appendix 18106

PART -I OVER VIEWA. Introduction1.1. The Guidelines as outlined below provides a general background on the subject of moneylaundering and terrorist financing summarizes the main provisions of the applicable anti-moneylaundering and anti-terrorist financing legislation in India and provides guidance on the practicalimplications of the Act. The Guidelines also sets out the steps that Branches / Business Associatesand any of its representatives, should implement to discourage and identify any money launderingor terrorist financing activities. The relevance and usefulness of these Guidelines will be kept underreview and it may be necessary to carryout amendments from time to time.1.2. These Guidelines are intended for use primarily by our company and its Branches / BusinessAssociates. While it is recognized that a “one-size- fits-all” approach may not be appropriate for thesecurities industry in India, each Branch / Business Associates should consider the specific natureof its business, organizational structure, type of customers and transactions, etc. when implementingthe suggested measures and procedures to ensure that they are effectively applied. The overridingprinciple is that they should be able to satisfy themselves that the measures taken by them areadequate, appropriate and follow the spirit of these measures and the requirements as enshrined inthe Prevention of Money Laundering Act, 2002. (PMLA)107

B. Back Ground:2.1. The Prevention of Money Laundering Act, 2002 has come into effect from 1 st July 2005. NecessaryNotifications / Rules under the said Act have been published in the Gazette of India on 1st July2005 by the Department of Revenue, Ministry of Finance, and Government of India.2.2. As per the provisions of the Act, every banking company, financial institution (which includes chitfund company, a co-operative bank, a housing finance institution and a non-banking financialcompany) and intermediary (which includes a stock-broker, sub-broker, share transfer agent, bankerto an issue, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, portfoliomanager, investment adviser and any other intermediary associated with securities market andregistered under section 12 of the Securities and Exchange Board of India Act, 1992) shall have tomaintain a record of all the transactions; the nature and value of which has been prescribed in theRules under the PMLA. Such transactions include:All cash transactions of the value of more than Rs 10 lacs or its equivalent in foreigncurrency.All series of cash transactions integrally connected to each other which have been valuedbelow Rs 10 lakhs or its equivalent in foreign currency where such series of transactions takeplace within one calendar month.All suspicious transactions whether or not made in cash and including, inter-alia, credits ordebits into from any non monetary account such as d-mat account, security accountmaintained by the registered intermediary.It may, however, be clarified that for the purpose of suspicious transactions reporting, apart from„transactions integrally connected‟, „transactions remotely connected or related‟ should also beconsidered.108

C. Guiding Principles3.1.1. These Guidelines have taken into account the requirements of the Prevention of the MoneyLaundering Act, 2002 as applicable to the intermediaries registered under Section 12 of the SEBIAct. The detailed guidelines in Part II have outlined relevant measures and procedures to guide theBranches / Business Associates in preventing money laundering and terrorist financing. Some ofthese suggested measures and procedures may not be applicable in every circumstance. EachBranch / Business Associates should consider carefully the specific nature of its business,organizational structure, type of customer and transaction, etc. to satisfy itself that the measurestaken by them are adequate and appropriate to follow the spirit of the suggested measures in Part IIand the requirements as laid down in the Prevention of Money Laundering Act, 2002.3.2 Obligation to establish policies and procedures3.2.1. International initiatives taken to combat drug trafficking, terrorism and other organized and seriouscrimes have concluded that financial institutions including securities market intermediaries mustestablish procedures of internal control aimed at preventing and impeding money laundering andterrorist financing. The said obligation on intermediaries has also been obligated under thePrevention of Money Laundering Act, 2002. In order to fulfill these requirements, there is also aneed for registered intermediaries to have a system in place for identifying, monitoring andreporting suspected money laundering or terrorist financing transactions to the law enforcementauthorities.3.2.2. In light of the above, senior management of a Branch / Business Associates should be fullycommitted to establishing appropriate policies and procedures for the prevention of moneylaundering and terrorist financing and ensuring their effectiveness and compliance with all relevantlegal and regulatory requirements. The Registered Intermediaries should:(a) issue a statement of policies and procedures, on a group basis where applicable, for dealingwith money laundering and terrorist financing reflecting the current statutory and regulatoryrequirements;(b)(c)(d)(e)(f)ensure that the content of these Guidelines are understood by all staff members;Regularly review the policies and procedures on prevention of money laundering andterrorist financing to ensure their effectiveness. Further in order to ensure effectiveness ofpolicies and procedures, the person doing such a review should be different from the onewho has framed such policies and procedures;adopt customer acceptance policies and procedures which are sensitive to the risk of moneylaundering and terrorist financing;undertake customer due diligence (“CDD”) measures to an extent that is sensitive to the riskof money laundering and terrorist financing depending on the type of customer, businessrelationship or transaction; anddevelop staff members‟ awareness and vigilance to guard against money laundering andterrorist financing.3.2.3. Policies and procedures to combat Money Laundering should cover:(a) Communication of group policies relating to prevention of money laundering and terroristfinancing to all management and relevant staff that handle account information, securitiestransactions, money and customer records etc. whether in branches, departments orsubsidiaries;(b) Customer acceptance policy and customer due diligence measures, including requirementsfor proper identification;109

(c)(d)(e)(f)Maintenance of records;Compliance with relevant statutory and regulatory requirements;Co-operation with the relevant law enforcement authorities, including the timely disclosureof information; andRole of internal audit or compliance function to ensure compliance with policies,procedures, and controls relating to prevention of money laundering and terrorist financing,including the testing of the system for detecting suspected money laundering transactions,evaluating and checking the adequacy of exception reports generated on large and/orirregular transactions, the quality of reporting of suspicious transactions and the level ofawareness of front line staff of their responsibilities in this regard.PART II DETAILED GUIDELINESACustomer Due DiligenceI. One Pager Information3. Branch to obtain information of client in one pager form and sent to HO through mail/fax, etc.4. Client Code will be mapped by HO to the trading/back office system for the purpose of executingtrades/generation of contracts.5. Client Registration Form (CRF) be collected from the client as per SEBI/Exchange requirement onthe same day.6. No CRF No UCC allotment18. Branch code19. Client type20. Party codeList of Mandatory Fields in Pradnya (Back office Software).21. Name (Long Name and Short Name)22. Residential Address (Permanent / correspondence) (City & State, Country, Pin Code)23. PAN Card No24. Sub broker code,25. Trader code26. Client Status27. Region code28. Area code29. Dealer code30. Details of Bank Account (Bank Name, Address, Account No., Type of Account)31. Details of Depository Participant32. Date of Birth110

33. Gender34. Introducer DetailsII. Know Your ClientCLIENT REGISTRATION FORM (CRF)1. CRF are of 2 types –a. Individual / HUFb. Non-Individual– Company/Firms/Trust2. Separate CRF must be collected from clients for ARSL/NCSL/ARCL in the format as provided toyou.3. CRF to be collected from ALL the clients i.e. both existing and new clients.4. CRF to be collected before commencement of business with new client.5. CRF to be collected with the relevant supporting documents I.e. ANY ONE out of theprescribed documents.6. Details which are required to be collected COMPULSORILY‣ INDIVIDUAL CLIENT‟S• Photo with signature across.• Name, Address, Tel. No.• Birth Date & Occupation• Bank A/c Details & Letter from Client‟s Bank• DP A/c Details – Xerox copy for proof of DP No. to be taken• IT PAN No. Xerox copy for proof of PAN No. to be taken• Copy of any one of the specified documents (PAN Card, Voters ID Card, Passport,Driving Licence, Ration Card)• Introducer‟s Name & Signature• Signature of Client(self attestation on all supportings)• Branch Manager‟s signature‣ ADDITIONAL INFORMATION FROM NON-INDIVIDUAL CLIENT‟S• Certified true copy of Board Resolution• Certified true copy of Audited Final A/cs for the latest year• Copy of IT Return, if possible• Certified true copy of MOA/AOA/ Partnership Deed/Trust Deed• Details of 2 key personsPhoto with signature across.Name, Address, Tel. No.Birth Date & DesignationCopy of any one of the specified documents (similar to those collected in respect ofindividuals)Signature of key person.111

MEMBER-CLIENT AGREEMENT1. Member-Client Agreement to be collected from ALL the clients i.e. both existing and newclients.2. Format for both individual and non-individual clients is common.3. Separate Member-Client Agreement to be collected from clients for BSE, NSE & NSE F&O4. Member-Client Agreement will be provided by the HO on requisition of Branch.Requisition must be given to HO 15 days in advance.5. Date of Agreement must be prior to date of commencement of business with new client.6. Blanks of Agreement to be duly filled.7. Agreement to be duly signed by Branch Manager & Client.8. Signature of Branch Manager & Client to be countersigned by 1 witness each.RISK DISCLOSURE DOCUMENT (RDD)1) New requirement introduced by SEBI/Exchanges w.e.f. 15-10-2003.2) RDD in the prescribed format is required to be collected from ALL the clients i.e. both existingand new clients.3) RDD must be signed by the client acknowledging that he has read and understood the risk/benefit of buying/selling in shares.Duly completed CRF‟s to be sent to HO on a weekly basis.Client Code to be written on CRF before sending the same to HO.Note: Detailed Process available in Operational Manual.112

IF NOT SATISFIEDProcess FlowSTARTCRF to AOT fromBranchesWith Excel format of KYCmailed to AOT Dept.And Pending CRF statusFully checked withthe mandatory fieldsand proofs.IF SATISFIEDEntered in the system,CRF to be filed,Alloted a file no.For permanent recordAOT Dept. updated ondaily basis about the fileno and the CRF in thatfile.Follow upwithBranchesFor proofs,completeddocumentsand pendingCRF statusEND113

III. Dealing With Clients1. Branch to receive only account payee crossed cheque/demand draft from clients and the samemust be deposited on same/next day.2. No payments/receipts be made/accepted in CASH from clients.3. Securities due to one client will not be transferred to other clients A/c and vice-versa.4. Securities due to clients will not be used for meeting own/other clients pay-in obligations.114

B. Code Of Conduct For Prevention Of Insider Trading For ARG Employees (As Per SEBI Guidelines)Departments and persons for whom further restrictions for buying and selling of securities is applicable:DirectorsAll Head of the Departments (VP & Above)ComplianceDealing DepartmentResearch DepartmentRisk DepartmentFor Applicable PersonsNot to communicate any Price Sensitive Information to any non-applicable person. In exceptionalcircumstances confidential information can be given to non-applicable person on the basis of "needto know" criteria, under intimation to the compliance officer.Not to use Price Sensitive Information to buy or sell securities of any sort, whether for their ownaccount, their relative‟s account, Company's account or a client's account. (Relative to include self,spouse, dependant children and their spouses, dependant parents, dependant grand parents,dependant brothers, sisters and their spouses)Not pass on such information directly or indirectly by way of making a recommendation for thepurchase or sale of securities.For Research TeamFor Dealers:To intimate compliance officer of all existing companies on which the research activity is carriedout on the date of introduction of this codeTo intimate compliance officer any addition to the above list on initiation of research.To disclose their share holdings/ interest in companies on which they are conducting research to thecompliance officer.Analysts who prepare research report of a listed company shall not trade in securities of thatcompany for 30 days from preparation of such report.To intimate the compliance officer immediately upon the execution of the order where the tradedquantity either buy or sell on account of any trade (client / proprietor) is more than 0.5% (BulkDeal) of the number of equity shares of the company listed on the stock exchange.115

C. Employee TradingIPolicy For Trading In Shares & Commodities By Employees Of Anand Rathi GroupEmployees of Anand Rathi Group their spouses, dependent parents and dependent children wishing to dealin securities are required to abide by the following code of conduct:13. Dealing in securities must be only through Anand Rathi Group. However, exceptions shall beallowed in case of the spouse of a staff member who is working in some other broking house wheresimilar policy is in place. Such exceptions shall be granted only after prior approval is obtainedfrom Compliance Officer at Anand Rathi Group.14. All the trades should be executed through the Dealing Desk at the respective Branch. Dealers at theDealing Desk would send confirmation of all the transactions executed through email on same day.15. Buying and selling shares of the same company within the same settlement shall normally not beallowed.16. Trading in F & O, would be permitted only for the limited purpose of hedging / arbitrage. Tradingin commodities would be allowed through investment in arbitrage – structured products.17. Concerned Business Head / Head of Department should be vigilant about policy implementation byhis/her team members and should inform relevant authorities in case the policy is violated.However, the compliance officer shall have the right to call for relevant information from any staffmember. All the employees would submit a self certification of following this policy to HRdepartment; this would be coordinated by HR department.18. If any employee is found to be breaking this policy, management may take strict disciplinary action,which may include reflecting in the appraisal and even termination of services from the company.19. To transact in securities only after pre clearance from compliance officer in case of transactionvalue is Rs. 25 Lakh or more or the number of securities is 25000 or more. This will include even toIPO‟s. Approval from Compliance shall be valid for a period of one week.20. Hold their investments for a minimum period of 30 days this will include even to IPOs. (From thedate of allotment for IPOs)21. In case the sale of securities is necessitated by personal emergency before the minimum period,obtain confirmation from the compliance officer22. Declare all holdings in securities at the time of joining the organization or for existing persons onintroduction of this code to the Compliance Department.23. Compliance Department would take record of all transactions and holdings of employees in softcopy through DP AC on Quarterly and Annual Basis.24. All employees shall submit the Undertaking for the trading account held by him / her and theirdependents before initiating any trades.116

II. Dealing With Employee Clients1. Employees of the Branch Offices (including Branch Manager) can buy / sell securitiesthrough the Dealing Desk at their respective Branch.2. Client Codes allotted to employees will start with prefix „E……‟3. Validity of Compliance Approval to be ensured for the transaction exceeding the threshold limitspecified above for employee trading.4. Trading Account Undertaking to be submitted to the Compliance Department.117

PART II TRANSACTION MONITORING & REPORTINGA. Proposed Internal Alert GenerationFollowing Alerts to be generated as a PMLA Measure :1. Cash Transaction above 1Rs.2. Trades carried out by a client exceeding 25% or more of Gross Exchange Turnover (For AllSegments).3. Continuous buying / selling in a particular scrip by a particular client or Group of clients for morethan 7 trading days.4. Transaction in Dormant/passive accounts amounting to a value Rs. 10 Lakhs or more.5. Transaction of particular client or group of clients, having value more than the total transaction ofprevious 10 days transaction value.6. Transactions in Derivative/options segment executed at price having difference of 25% or morefrom the previous day closing price of underlying value in Cash Segment.7. Off Market Transactions above Rs. 5 Lakhs.8. Third Party pay in / pay out of Funds / Securities.9. Multiple clients having same address.10. Clients having more than 3 DP accounts.11. Same PAN No. entered for more than one trading account.12. Same DP ID mapped to more than one account.Following Alert to be generated for the Employee trades:1. Square off transaction is within 30 days. (Applicable for IPO also)2. Transaction value is Rs. 25 Lakh or more or the number of securities is 25000 or more.Note: Alerts will be generated periodically, randomly & sample basis, as and when deemed to beappropriate across branches.118

B. Monitoring & ReportingI. Cash TransactionResponsibilityAll the Branches / business associates shall report all Cash Transaction to Compliance Departmentimmediately on observation.On basis of the report generated as above / on basis of continuous monitoring, Compliance department hasto furnish the information of the cash transactions of a month to the Principal Officer by the 7 workingdays of the succeeding month.Compliance Department shall accumulate the information received from Branches / business associates andshall furnish the same to Principal Officer in accordance with the requirement of SEBI circular, and shallprepare the required file and complete the procedures as prescribe in PMLA Act / PMLA Rule / thecirculars in that regards.Due DateThe Principal Officer has to furnish the information of the cash transactions of a month to Director, FIU-IND by the15 th day of the succeeding month.FormatCash Transaction Reports in manual format consists of following forms:FormCash Transaction Report for an Business AssociatesAnnexure A- Individual Detail Sheet for an Business AssociatesAnnexure B- Legal Person/ Entity Detail Sheet for an BusinessAssociates (Non Individual)InformationDetails of account and cashtransactionsIdentification details of individualIdentification details of legalperson /entityThe above forms are given in the Appendix119

II. Suspicious TransactionResponsibilityAll the Branches/business associates shall report all Suspicious Transaction to Compliance Departmentimmediately on observation.On basis of the alerts generated as above / on basis of continuous monitoring, Compliance department hasto furnish the information of the suspicious transactions to the Principal Officer immediately.Compliance Department shall accumulate the information received from business associates and shallfurnish the same to Principal Officer in accordance with the requirement of SEBI circular, and shall preparethe required file and complete the procedures as prescribe in PMLA Act / PMLA Rule / the circulars in thatregards.Due DateThe Principal Officer has to furnish the information of the suspicious transactions to Director, FIU-INDwithin 7 working days of establishment of suspicion at the level of Principal OfficerFormatSuspicious Transaction Report in manual format has to be filed in following forms:Description of FormInformationSuspicious Transaction Report for an Business AssociatesDetails of suspicious transactionsAnnexure A- Individual Detail Sheet for an Business Associates Identification details of individualAnnexure B- Legal Person/ Entity Detail Sheet for an Business Identification details of legalAssociates (Non Individual)person /entityAnnexure C- Account Detail Sheet for an Business Associates Details of account andtransactionsThe above forms are given in the Appendix.120

III. Branch / Associates InspectionAll Operational Managers will visit their Branches / BusinessAssociates periodically on surprise basis andwill verify the business activity and ensure the adherence of the checklist.All Operational Managers will than forward the report for the discrepancies found if any to the complianceDepartment.Branch / Business Associate Audit Check listActiveSegmentsSr No Particular Remarks Complied(Y/N)1 Registered2 Certificates3 Notice Board4 Terminals5 AgreementIncase of registered Subbrokers6 KYC7 CRF8 Missing CRF9 PAN10 Authorised SignatoryCheque111213141516171819CashSecuritiesPaymentF & O TradingComplaint RegisterPay-in of FundPay-Out of FundF & OBranch registered under the Shops &Establishment Act/ Local AuthorityRelevant SEBI & FMC registrationcertificates displayed at branchRelevant Notice Board displayed at Branch(BSE/NSE/MCX/NCDEX)All terminals alloted are used by relevantemployee dealers registered in their namewith their NCFM having validity for next 3monthsClient agreements executed;maintained &intimated to HO for all clients andconfirmed by HOTripartite agreements executedTrack of all clients details maintained insoftcopyTotal Clients = Total CRF; NO CRF noUCC;One client one codeNew CRF collected from existing client asper HO listPAN copy of clients maintained afterverification with original card & income taxsite and screenprint attached with CRFAS appointed in Branch and intimated toHO in relevant format for ExchangeSubmissionPayment must be received / paid incheque in the name of BrokerCompany/Client not in the name of anyother company/partyNo broker shall receive / pay cash to theclientsNot to accept / issue third party securitiesNot to issue / recd payment from thirdpartyTrading in Ban period – Rs 5000 Penaltycharges by NSE (Increase in open positionover 95%)RMS alertsBranch/Sub-Broker must maintain - Clientcomplaint Register.To send it bimonthly toCompliance Dept– HOClient should issue us a cheque same dayof Purchases of Shares ( Trading Day)Branch should issue cheque on T+2 to theClientsUpfront Margin must be collected by thebranch before executing the sauda in caseof F & O Segment121Reason forNonCompliance

202122232425262728F & OContract NotePay in of SharesPay Out of sharesFamilyM To M Margin should be collected on adaily basisContract Note must be issued to the clientwithin 24 hours of trading.Acknowledgement register maintained forthe same.Client should deliver the shares to thebroker same day of sales or maximum T+1dayClient should receive shares from thebroker within 24 hours from the payoutrecd from the ExchangeNo family Adjustment allowedStatement of accounts Securities ledger and Account / FundStatement to be sent to the Client onQuarterly basisReporting of bulk deal To report bulk deal to us on or before 3.30pm on a daily basis (BSE)MinorUCC registrationNot to open minor trading account/ trustaccountTrade carried out in Code only afterExchange successful registration of UCC122

AppendixCash Transaction ReportSuspicious Transaction ReportAnnexure A- Individual Detail SheetAnnexure B- Legal Person/ Entity Detail Sheet (Non Individual)Annexure C- Account Detail Sheet123

Compliance Training – Capital MarketCompliance means ensuring conformity andadherence to regulatory acts, rules, procedures, laws,regulations, directives and circulars.1124

Why Comply ?Stand alone benefits:• Prevents internal frauds & losses• Structuring an effective risk management system• Boosts Client confidence• Reduces the risk of disciplinary action• Ensures continuity of business• Increases efficiency in operations• Above all, guarantees peace of mind2125

Why Comply? (Contd…)Larger benefits:• Ensures risk containment and safer market place• Increases confidence of investor community• Increases credibility of Stock Market operations• Protect the interest of Investors• Improved Awareness and putting a check on themalpractices• Uniform practices - No compliance arbitrage3126

SCOPE OF COMPLIANCECompliance requirement broadly flow from the relevantprovisions of :-• Securities Contracts (Regulation) Act, 1956• Securities Contracts (Regulation) Rules, 1957• SEBI Act, Rules, Regulation and Circulars4127

SCOPE OF COMPLIANCE (Contd…)NSEIL / NSCCL• Rules and Byelaws of NSEIL• Rules and Byelaws of NSCCL• Capital Market - Regulations of NSEIL & NSCCL• F&O Segment - Regulations of NSEIL & NSCCL• F&O Segment - Rules and Byelaws of NSCCL• WDM Segment - Regulations of NSEIL• NSEIL/ NSCCL Circulars and Directives5128

Broad Areas CoveredMajor compliances relating to• Dealing with Clients• Trading requirements• Dealing with Intermediaries• Membership requirements• Maintenance of Books of Accounts & Records• Code of Conduct6129

Compliances relating toDealing with Clients7130

REGISTRATION OF CLIENTS• Know Your Client Form (KYC)• Member Constituent Agreement (MCA)• Risk Disclosure Document (RDD)• Maintenance/Upload of Unique Client Code8131

REGISTRATION OF CLIENTS (Contd…)Salient features of Know Your Client Forms– Client information / Status– Bank and Depository Account details– Financial details of the constituent– Investment/ Trading experience– References– Financial documents (for Non Individual Constituents)9132

REGISTRATION OF CLIENTS (Contd…)Attachments to KYC form− Photograph− Proof of identity and address− Board Resolution from corporate clients permitting trading inderivative products−KYC to be obtained duly signed by all the clients10133

REGISTRATION OF CLIENTS (Coned…)Salient features of Member Constituent Agreement– Printed on a non-judicial stamp paper of appropriatevalue– To be signed by both the TM and the client & dated– To be witnessed– Must contain clauses prescribed by SEBI / NSE fromtime to time11134

REGISTRATION OF CLIENTS (Coned…)Salient features of Member Constituent Agreement (Coned…)– Additional clauses may be included, but shall not contradict withRules, Byelaws, Regulations– Requirements of MODEL TRIPARTITE AGREEMENT madeeffective from 01-04-2005– Trading Member and FI / FII clients may at their discretion decideabout the requirement of entering into Member ConstituentAgreement12135

REGISTRATION OF CLIENTS (Coned…)Salient features of Risk Disclosure Document− Client to acknowledge the risk disclosure documentand be aware that certain basic risks are involved intrading in equity and derivative products− Client to be solely responsible for the losses− Client to be aware that NSE/NSCCL/SEBI are notresponsible for losses− Client to fulfill certain formalities as a requirement fortrading13136

REGISTRATION OF CLIENTS (Coned…)Salient features of Risk Disclosure Document− Client to be aware that contracts cannot be rescindedon the ground of lack of awareness or any otherground− Trading Member to obtain acknowledgement inprescribed format of RDD− Additional clauses may be introduced by the tradingmember but shall not contradict with the basic formator the Rules, Byelaws, Regulations, etc.14137

REGISTRATION OF CLIENTS (Coned…)Salient features of Unique Client Code− Every client to be assigned one Trading code only− Mandatory collection and upload of PAN for all− PAN to be treated as Unique Client Code− Fool proof mapping of unique client code with tradingcode allotted to the respective client to be maintained inback office− Both trading code and unique client code to be printedon contract notes15138

REGISTRATION OF CLIENTS (Contd…)Unique Client Code (Exchange’s Requirement)− TM to upload on a daily basis all the trading codes allottedand corresponding unique client codes prior tocommencement of trading− Rectification of errors in client codes during order entry tobe done & uploaded within prescribed time and notbeyond− Request for Unique Client Code for NRI Clients -allotment by the Exchange (in F & O segment)− Own trades to be done with PRO code only16139

DEALING WITH CLIENTSCompliance related to Contract Notes− To be issued as per format prescribed by NSE− Trading Code & Unique Client Code of the Constituent tobe printed− Running serial number (reset to one at the beginning ofthe Financial Year)− To be issued within 24 hours of the trade− To be issued only for transactions executed in the tradingsystem− Acknowledgement of client / Proof of delivery17140

DEALING WITH CLIENTS (contd..)Compliance related to Contract Notes− To be issued on a pre-printed stationary or in electronicform− To be signed by an Authorised Signatory mentioningname/ certified digital signatory− Revision in the format from time to time to be up-dated(including revised legal jurisdiction & arbitration clause)− Can be issued in continuation sheet as per prescribedformat18141

Electronic issue of Contract notes• Issuing ECNs when specifically consented• ECNs to be digitally signed, encrypted and non tamper able incompliance with provisions of IT Act, 2000• Delivery of ECNs to e-mail of client, Preserve Log reports formails sent and bounced back .• In case of non delivery sent it by physical mode• Simultaneously publish ECNs on the web-site.• Enable access to clients in a secured way by allotting uniqueuser name and password.19142

DEALING WITH CLIENTS (contd..)Funds and Securities of constituents– Separate Bank and Demat Account to be maintained forclient funds and securities– Segregation of own and clients funds/ securities– Funds / securities to be received by TM only fromrespective clients accounts directly– Pay-out of funds / securities directly to respective clientsby TM within one working day of pay-out by Exchange– Funds / securities of a client should not be transferredto the account of the trading member / another client20143

DEALING WITH CLIENTS (contd..)Funds and Securities of constituents– Funds / securities of a client should not be used forpay-in obligation of another constituent / pro-trades– Client funds to be used only for the purposes specified– Clients funds / securities not to be misused– TM not to receive/ pay cash to clients for margin/Settlement– Dividends received on clients’ securities to bedisbursed within 30 days21144

DEALING WITH CLIENTS (contd..)Statement of funds and securities− Sending statement of funds and securities to clients on aquarterly basis within one month from the end of the relevantperiod− Statement of funds and securities/ margin and settlements shouldcontain an error reporting clause of 30 days− Proof of dispatch/ delivery to be maintained22145

DEALING WITH CLIENTS (contd..)Margins from Constituents (CM Segment)−TM to have prudent Risk Management System−Margins to be an important element of RMS−RMS to be documented and made accessible to clients and the Exchange.−Quantum of Margins, form and mode of collection are left to the discretion ofmembers.Margins from Constituents (F&O Segment)TM to madatorily collect initial margin (MG 13 file) upfront on a daily basis fromthe clients.• Daily reporting of Initial Margin collected• Non-reporting considered as 100% shortfall• Penalty for shortfall in collection• Wrong reporting (Considered as serious violation with stringentdisciplinary actions)23146

DEALING WITH CLIENTS (contd..)Margins CollectionMode of collection• Funds• Securities• FDR and Bank Guarantee favoring TMOther requirements• Maintenance of adequate records for identifying clientwisemargin collection• If securities collected as margins, statement ofsecurities to be issued to the clients24147

DEALING WITH CLIENTS (contd..)Brokerage− Brokerage not to exceed 2.5% of value of contract.− Brokerage not to exceed 1.5 % in case of sub- brokers− Maximum brokerage of 25 paise per share if trade priceof a share is Rs. 10/- or less− Incase of option contract, brokerage to be charged onoption premium amount which shall not exceed 2.5% ofpremium amount or Rs. 100/- per lot whichever ishigher25148

DEALING WITH CLIENTS (contd..)Straight Through Processing (STP)− All institutional trades to be mandatorily processedthrough STP systemTransfer of Trades− No Transfer of trades from PRO to client and vice versa− No transfer of trades from one client to another26149

DEALING WITH CLIENTS (contd..)Others− Exclusive e-mail ID for registering Investor Complaints, to bedisplayed on website/ other material− Not charging excess rates for the trades− Declaration of PRO trading to clients− Confidentiality of client information− No false inducement to trade by giving misleading advice orinformation to clients− Client trades to be done with CLI code only− Not resorting to unfair means to induce clients from other stockbrokers27150

Compliances relating toTrading requirements28151

MARGIN TRADING• Prior permission to be obtained for providing MarginTrading Facility to the clients• Agreements to be entered into with all the clients• Margin Trading Facility to be provided only for thespecified securities.• Trading members to upload the details of margintrading in the prescribed file formats• Separate records to be maintained detailing fundsused for the purpose of margin trading29152

MARGIN TRADING• Maintenance of separate demat account for everyclient for holding client-wise securities purchasedunder margin trading facility• Funds if borrowed should be either from scheduledcommercial banks and/ or NBFC• Total indebtness not to exceed 5 times of networth• Funds of any client not to be used for providing margintrading facility to another client30153

MARGIN TRADING• Maximum allowable exposure not to exceed theborrowed funds plus 50% of net worth• Exposure to any single client not to exceed 10% of thetotal lendable resources• Collection of initial and maintenance margin in form ofCash / FDR / Bank Guarantee• Enabling client to observe movement of securities fromhis/ her demat account through internet31154

Financing of securities transactions andtransfer of securities and funds• TM not to be a party to any agreement or arrangement, directly orindirectly, entered into between their clients and any other personfinancing such clients• TM not to entertain any instructions to trade or transfer funds orsecurities from any other entity other than the clients to facilitatefinancing• TM not to obtain any authorisation or POA to exclusively operate bankor demat account of client to facilitate financing• TM not to act as a conduit or front for financing any secondary markettransactions except in accordance with the provisions of margin tradingfacility.• TM not to transfer funds or securities to joint bank or demat account ofclients with financer32155

INTERNET TRADING• Prior permission to be obtained for providing InternetTrading Facility to the clients• Agreements to be entered into with all the clients in theprescribed format• Prior approval to be obtained incase of use of internettrading software other than that of empanelled vendors• Trading member to ensure reliability, security andconfidentiality of internet trading system33156

INTERNET TRADING• Client specific user id and password to be used forexecution of trades• Password policy to be adhered for security, reliabilityand confidentially• Trading Member to ensure clients do not deal onbehalf of others• Submission of SSL Certificate (Yearly) & Internet TradeStatistics (Weekly)• Trading Member to submit system audit certificate on ayearly basis34157

OFFICE MANAGEMENTNotice Board• Display of permanent nature Notice Board (viz. paintedboard) containing required details, at all places wheretrading terminals are located including registered officesand branch offices of trading member /sub-broker• Display of copy of SEBI Registration Certificate35158

OFFICE MANAGEMENT (contd..)Compliance related to trading terminals• Trading Terminal to be located at registered office and/or branch offices of trading member /sub-broker• No extension of NEAT terminal without prior approval ofthe Exchange• Trading terminal to be operated by approved personsonly36159

OFFICE MANAGEMENT (contd..)Compliance related to trading terminals• Upload of CTCL terminal to the Exchange before activation• All information to be correctly uploaded in the prescribed formatparticularly user name, location of the terminal and CTCL id• Any change in the uploaded details to be immediately uploadedto the Exchange• Due diligence to be exercised while allotting trading terminaland prevent misuse• PRO trading to be done only from trading terminals enabled forPRO trading37160

OFFICE MANAGEMENT (contd..)Compliance related to NCFM certification• Trading terminals in the F&O segment to be operated by usershaving valid NCFM certification only• Capital market Segment• NEAT Terminal – only Corporate Manager ID and BranchManager ID requires NCFM certificate.4 users can be attached to one branch manager ID.• CTCL Terminal – for every 5 CTCL users or part thereof in aBRACH 1 user should be NCFM certified• Each CTCL location is identified as a separate branch.38161

OFFICE MANAGEMENT (contd..)Compliance Officer• Trading member to appoint compliance officer• Compliance officer to monitor the compliance withregulatory requirements and redress investor’sgrievances.Inspection• Trading member to inspect on a yearly basis- 10% of active sub-brokers ;- 10% of active branches ;- each active sub-broker/ branch to be inspectedatleast once in every 5 years39162

Prevention of Money Laundering Act,2002 (PMLA)Obligations of intermediaries under Prevention of MoneyLaundering Act, 2002 (PLMA)• Appoint a Principal Officer who would be responsible forensuring compliance of provisions of PMLA• Name, designation, address and e-mail address of suchPrincipal officer be intimated to Office of Director – FIU(Financial Intelligence Unit), Delhi• Adopt written procedures to implement the anti-moneylaundering provisions40163

PMLA ( continue)Stcock Broker/Sub-Brokers to maintain record and report• All cash transactions of the value of more than Rs.10 Lacs orits equivalent in foreign currency• All series of cash transactions integrally connected which havebeen valued below Rs. 10 Lacs where such series oftransactions take place within 1 month• All suspicious transactions whether or not made in cashincluding credits or debits into from account such as dmataccount.41164

Compliances relating toDealing with Intermediaries42165

DEALING WITH INTERMEDIARIESThe trading member should not deal with any unregisteredentities and should have dealings• directly with clients; or• through Registered sub-brokers (CM Segment); or• through Authorised Persons (F&O segment only)43166

DEALING WITH INTERMEDIARIES(Contd..)Trading member to exercise due diligence and care that none of its clients,authorized persons or any other entity with which it is dealing act as anunregistered intermediary and ensure that :• Contract notes are issued to clients for the client code entered whileexecuting the order• Funds / Securities for margin and pay-in/ pay-out are received /delivered directly from/ to respective clients bank and de-mat accountsonly• Remarks column is not misused for doing unregistered intermediaryactivities44167

DEALING WITH INTERMEDIARIES(Contd..)• Dealing with sub-broker/ authorized person to commenceonly after receipt of approval from Exchange/Sebi• For client introduced by sub-broker, tripartite agreement tobe entered• Inspect Sub-brokers on a periodic basis45168

Compliances relating toMembership Requirements46169

MEMBERSHIP REQUIREMENT• Trading member should not undertake fund basedactivities• Approval of the Exchange/ SEBI to be obtained for anychange in status and constitution/transfer ofmembership• Prior approval of the Exchange must be taken for anychange in the shareholding pattern / profit sharing ratio /change in other directors• Written prior approval of the Exchange to be obtainedbefore releasing any advertisement and advertisementcode to be adhered47170

MEMBERSHIP REQUIREMENT• Trading member to obtain prior approval for actingthrough or on behalf of another trading member / subbrokerfor trading on the Exchange• Trading member to deal with one broker / sub-broker ofanother Exchange for proprietary trading only withintimation to the Exchange• Trading member to deal with broker of anotherExchange for clientele trading only after registration asa sub-broker48171

Compliances relating tomaintenance ofBooks of Accounts & Records49172

MAINTENANCE OF BOOKSAND RECORDS Securities Contracts (Regulation) Rules, 1957 (SCRR)and the Securities and Exchange Board of India (StockBrokers and Sub-Brokers) Regulations, 1992 specifiesmaintenance of proper books of accounts. Members to maintain Exchange-wise separate books ofaccounts, other records and documents, in accordancewith the Rules, Regulations, Bye-laws and relevantcirculars of Stock Exchanges.50173

MAINTENANCE OF BOOKSAND RECORDS (Contd…)What is Required ?− Maintenance of books of accounts, records anddocuments− Maintenance in prescribed format− Preservation of books, records and documents51174

MAINTENANCE OF BOOKSAND RECORDS (Contd…)Regulation 17 (1) of SEBI Regulations provides formaintenance of following books, records and documents bythe Brokers.– Register of transactions (Sauda Book)– Clients ledger– General ledger– Journals– Cash book52175

MAINTENANCE OF BOOKSAND RECORDS (Contd…)– Bank pass book– Register of Securities– Members’ contract books– Counterfoils or duplicates of contract notes issued toclients;– Written consent of clients in respect of contracts enteredinto as principals ;– Margin deposit book;53176

MAINTENANCE OF BOOKSAND RECORDS (Contd…)– Register of accounts of sub-brokers;– Tripartite Agreement between broker, sub-broker and clientsspecifying scope of authority and responsibilities of the Broker andsuch sub-broker.All these books of accounts and other records are to be preserved by thebroker for a minimum period of five years as per Regulation 18 of SEBI(Stock Brokers and Sub Brokers) Regulations,199254177

MAINTENANCE OF BOOKSAND RECORDS (Contd…)Other Books and Records− Register of Complaints− Records of Particulars of Approved Users− Record of Brokerage Collected− Dividend Ledger− Statement of funds and securities obligations received from theClearing Corporation55178

MAINTENANCE OF BOOKSAND RECORDS (Contd…)Register of Transactions should contain :− Name of the Constituent− Rates both gross and net of brokerage− Name of the Security (CM) /Contract Specification(F&O)− Value of the security (CM) / derivatives contract (F&O)−Date of expiry of Contract (F&O)56179

MAINTENANCE OF BOOKSAND RECORDS (Contd…)Register of securities to be maintained client-wise scrip-wiseand should provide for following details−−−−−Date of receipt / deliveryQuantity received / deliveredEntity from / to whom received / deliveredBalance QuantityPurpose of receipt / delivery57180

Compliances relating toCode of Conduct58181

CODE OF CONDUCTTrading Member shall• Maintain integrity and fairness in the conduct of allhis business• Act with due diligence, care and skill• Ensure compliance with statutory requirements• Abide with its duties towards the investors• Render fair, prompt and competent services to itsclients• Co-operate to protect the interest of the clients59182

CODE OF CONDUCT (Contd…)Misconduct :• Fraudulent conduct• Violation of governing statutes• Improper conduct• Breach of Rules, Bye laws & Regulations• Failure to comply with Circulars, Arbitration award,testify or give information, submit Special Returns /Audited Accounts, pay dues and fines, etc.• Filing malicious complaints60183

CODE OF CONDUCT (Contd…)Unbusiness-like conduct :• Transacting in fictitious names• Conducting fictitious dealings• Circulating rumours• Prejudicial business for upsetting market equilibrium• Market manipulation / rigging• Unwarranted or reckless or excessive business• Dishonouring cheques• Refusing to undertake committed business for theclient without proper reason61184

CODE OF CONDUCT (Contd…)Unprofessional conduct :• Business in securities in which dealings not permitted• Business for insolvents, employees of other tradingmembers (without other TM consent)• Business when under suspension• Dealings for / with suspended, expelled or defaultertrading members62185

OBLIGATIONS OF A TRADINGMEMBER─ To produce such books, accounts and otherdocuments and furnish such statements andinformation within such time as the inspectingofficials may require.─ To allow the inspecting team to have reasonableaccess to the premises occupied by the TradingMember63186

OBLIGATIONS OF A TRADINGMEMBER (contd…)──To extend reasonable facilities for examining anybooks, records, documents and computerized data,and also provide copies of documents or othermaterials which in the opinion of the inspectingofficials are relevant.To provide all assistance in connection with theinspection which the Trading Member may bereasonably expected to give.64187

RIGHTS OF THE INSPECTINGOFFICIALS──To examine the records relating to the TradingMember’s financial affairs held with its bankers orany other agency which the inspecting officials mayfind it relevant.Access to accounts and other records relating to theTrading Member or such access as authorized by theExchange to accounts and other records relating toany associate of the Trading Member as are withinthe power of the Trading Member to provide.65188

RIGHTS OF THE INSPECTINGOFFICIALS (contd..)───To examine and seek clarifications/ explanationsin relation to our observation during inspection fromany member, director, officer or employee of theTrading Member or of any associate of such TradingMember.To collect such evidence/ proof of violation observedTo take signature of the trading member (director/compliance officer) on the observation list66189

PERIODIC SUBMISSIONSAnnual Submissions– Annual Compliance Report– Proof of Insurance Cover– Certified Annual Financial Statements and forms– SSL Certificate (internet trading)– System Audit Report (CTCL /Internet trading)Half yearly Submissions– Net worth Certificate– Auditors Compliance certificate (margin trading)67190

PERIODIC SUBMISSIONSMonthly Submissions– Client Funding DisclosureWeekly Submissions– Internet trading statisticsDaily submissions– Trade details of bulk/ block deals of trade date– Disclosure of exposure to margin trading facility– Client margin reports on trade date– Unique Client Code68191

PERIODIC SUBMISSIONSOther submissions– CTCL 12-digit file and information regarding CTCLterminals before activation of terminal– Change in share holding pattern/profit sharingratio / directors– Change in Authorised Persons / Complianceofficers– Compliance Calendar – Please refer CircularNSE/MEM/8536 dated February 19, 200769192

Trading members to comply with the provisions of theRules, Byelaws, Regulations and Circulars of theExchange / NSCCL / SEBI, as may be applicable from timeto time, in addition to the requirements illustrated in thepresentation70193

THANKS71194

CommoditiesContents1 Maintenance Of Books Of Accounts/Documents/Records 11.1 Order Book 11.2 Trade Files 11.3 Register of Transactions 21.4 Margin Deposit Book 21.5 Client Ledger 21.6 Commodity Ledger 21.7 Bank Book and Cash Book 22 Registration Of Clients 42.1 Know Your Client (KYC) Forms / Client Registration Forms 42.2 Member-Client Agreement 52.3 Risk Disclosure Document (RDD) 63 Unique Client Code (UGC) 73.1 Creation and allotment of Unique Client Code (UCC) 73.2 Modification of Client Code 74 Collection Of Margin From Clients 84.1 Margin Collection 84.2 Forms of Margin Deposit 84.3 Accounting of Margin Deposit 84.4 Utilization of Margin Amount And Margin Call 85 Contract Notes 105.1 Requirements on Issue of Contract Notes to Clients 106 Trading Terminals 126.1 Terminal Location 126.2 User Id And Approved Users 127 Computer To Computer Line (CTCL) 147.1 Development of CTCL Software 147.2Some of the guidelines/requirements for use of CTCLterminals 148 Pro-Account Trading Terminals 168.1 No. of Terminals 168.2 Approval from Exchange 169 Internet Based Trading (IBT) 1710 Sub Broker Of Member 1810.1 Execution of Member-Sub broker Agreement 18i195

11 Handling Of Commodities Of Clients For Deliveries 2011.1 Type of Demat Account 2012 Client's Fund Management 2112.1 Review of Client /Own bank 2112.2 Bank Book 2212.3 Issue of Statement of accounts/funds to Clients 2213 Miscellaneous 2313.1 Appointment Compliance Officer 2313.2 Investor Grievances 2313.3 Advertisement 2313.4 Membership Requirement 2313.5 Submission of Annual Returns 2513.6 Submission of Annual Compliance Report(ACR) 2613.7 Display of Notice Board 261. MAINTENANCE OF BOOKS OF ACCOUNTS/DOCUMENTS/ RECORDSFollowing Books of Account / Records / Registers / details, are required to be maintainedby the Member as per Bye-law 11.5, Circular No. MCX/12/2006 dated January 10, 2006:a) Order Bookb) Trade Filec) Register of Transactiond) Margin Deposit Booke) Exchange wise separate client ledgerf) Clients Bills along with bill summaryg) Commodity register/ledgerh) Records in respect of premium/discounti) Records in respect of brokeragej) Journals (JVs)k) Cash Bookl) Bank Book and bank pass Book/bank statementsm) Daily Margin Statement and Client wise Margin reportsn) Trade Confirmation Slipo) Records of transaction of all purchases and sales of commodities / contractsp) Record of all statement received from the appropriate agencies and record of allcorrespondence with them.q) Reports like Trade log/Order logr) Copies of all instructions obtained in writing from client s including participantsfor order placement, order modification, order cancellation, trade cancellation.s) Record of contract wise Deliveries received / Tendered.t) Any other books of accounts/documents/records as prescribed by the FMC, MCXand / or any relevant authority from time to time.1.1. Order BookMember should maintain the details of order placed by its clients, records of timewhen a client has placed the order. This information is required to be maintainedby the Member in his Order Book.196

1.2. Trade FilesTrade file is downloaded by the Member from the Exchange on daily basis. Thisfile shows the details of all the transactions executed by a Member across all hisCompliance Guide terminals for a particular trading day. It shows trade date, trade no., order no.,time of execution of a trade, quantity, rate, commodity code, Client ID etc.1.3. Register of TransactionsAll Members are required to maintain a register of transaction, which containsdetails of all trades transacted by them. This is a basic record, which eachMember is required to maintain regularly on day-to-day basis. It contains thedetails regarding the name of commodity, name of the client on whose behalf thedeals have been done, rate and quantity of commodity brought or sold. Thesedetails are maintained date-wise.1.4. Margin Deposit BookThe Members are required to maintain a margin deposit book wherein details ofall the margins collected from the clients are recorded.1.5. Client LedgerAs per Circular No. MCX/357/2006 dated September 02, 2006, every Member ofthe exchange is required to segregate and maintain exchange wise client ledger.This ledger should contain details of all the bills raised by the Member on theclients and the payment received from or made to them for trade executed and /orany other charges debited by Member to clients are recorded in client ledgers.1.6. Commodity LedgerA Member is also required to maintain a Register of Commodities where deliverytaken/received Commodity wise client wise.1.7. Bank Book and Cash BookAll Members are required to open following three types of bank accounts.a) Settlement bank accountAs per Business Rule 19 (c), Every Member of the Exchange shall havedesignated bank accounts with any of such branches of the designatedClearing Bank, which has electronic funds transfer facility. Members shalloperate the Settlement account only for the purpose of settlement of dealsCompliance Guide entered through the Exchange, for the payment of margin money and forany other purpose as may be specified by the Exchange, where themember will not have cheque book facility for issuing cheque to anyoutsiders. He can only issue cheque from this account for transfer ofmoney from this account to his Client Account. Apart from such transfer,only the Exchange will have power to withdraw money from this accountby way of direct debit instruction.b) Client bank accountAs per Business Rule 19 (C), he member can deposit all cheques receivedfrom the client and from this account he should issue cheque/DD to hisclients towards their receivable amount in client bank account. Themember will have cheque book facility in this account and he will also beentitled to issue transfer instructions to the bank for transferring money197

from this account to the Settlement account to meet his pay in or margin obligations.c) Business/Own/Expense account(i) As per Circular no. MCX/012/2006 dated January 10, 2006; allMembers are required to ensure that he has maintained separatebank account for their own account and clients account.(ii) As per Business Rule 37 (q), Exchange Member shall at all timeskeep the money of the Client in the Member Clients accountmaintained with the Clearing bank. He shall not use this money forhis own transactions or for transactions of such other client or forany purpose other than margin and pay in relating to transactionsentered into by such client paying the margin.2. REGISTRATION OF CLIENTS2.1 Know Your Client (KYC) Forms / Client Registration FormsThe Members of the Commodity Exchanges have to complete all the detailspertaining to the clients in Know Your Client Forms and obtain all necessarydocuments in support to information provided by the clients.2.1.1 Format of KYC Forma) When establishing a relationship with a new Client, Members ofthe Exchange must take reasonable steps to assess the background,genuineness, beneficial identity, financial soundness of suchperson, and his trading objectives by registering the client withthem in the format prescribed as CLIENT REGISTRATIONFORM as per Business Rule 27(b), Annexure XII. The same hasbeen subsequently modified by the Exchange and a revised formatis given vide Circulars no. MCX/088/2006 dated March 01, 2006& MCX/555/2006 dated December 15, 2006.b) The KYC form should include all the details as prescribed by theExchange from time to time.c) Member are advised to evolve and put in place an appropriatemechanism to assess financial strength, performance tracking,trading pattern vis-à-vis their clients position and dealings inrespect of all clients2.1.2 Documents RequiredFollowing documents required from Clients along with KYC forms as perCirculars no. MCX/088/2006 dated March 01, 2006 & MCX/555/2006dated December 15, 2006.a) For individuals:Address proof, identity proof, proof of bank account number, copyof latest Income Tax Return, PAN proofb) For Corporate clients:Address proof, PAN proof, proof of bank account number, copy oflatest Annual Report, proof of date of incorporation, copy ofMemorandum of Association & Articles of Association.198

(Applicable to Corporate Entity), Copy of Partnership Deed(Applicable to Partnership Firm), Board Resolution authorizing thecompany officials to execute all the deeds/ operations with theExchange on behalf of the company, Letter of Partnership firm(letterhead) authorizing partners to execute all the deeds /operations with the Exchange on behalf of firm.The client, who does not possess PAN, would have to furnishnecessary declaration to that effect in form prescribed by theIncome Tax Department. He will, however, have to furnish otheridentification documents as already provided.2.2 Member-Client Agreement2.2.1 Execution of AgreementAs per Business Rule 27(a), Every Member of the Exchange shall enterinto an agreement with all his clients before accepting / placing orders onbehalf of clients.This agreement has to be on a valid non-judicial stamp paper withadequate value, duly signed by the parties to the agreement, complete inall respect with date of execution of agreement.2.2.2 Format of AgreementMember-Client agreement shall include provisions specified by theExchange as per of Business Rule 27(a), Annexure-XI. Further, it shouldinclude all the provisions as decided and informed by the Exchange fromtime to time.As per Business rule 27(a), Members are free to add more clauses in thespecified agreement; however, no additional clause should in any waydilute the content or purpose of the clause stated in the specifiedagreement by the Exchange. The responsibility of the Member shall not inany way be reduced due to non-execution of agreement with the Clients.2.3 Risk Disclosure Document (RDD)2.3.1 Format of RDDExchange has specified the format of RDD in Business Rule 27 (c),Annexure-XIII, through which Member of the Exchange shall make theClient aware of particulars of Member‟s registration number allocated bythe Exchange, employee primarily responsible for the Clients affairs, theprecise nature of business to be conducted, the risk associated withbusiness in trading in contracts listed in the exchange including anylimitations on that liability and the capacity in the Member of theExchange acts and the Client‟s liability thereon and etc.199

2.3.2 The Member of the Exchange shall furnish a copy of the Risk DisclosureDocument to all his clients and to get and maintain their acknowledgementon second copy of the same document.3. UNIQUE CLIENT CODE (UCC)3.1 Creation and allotment of UCCMembers shall submit their client details through UCC software on or before 7thof the subsequent month for a new client is registered, during the month as perCircular no. MCX/T&S/109/2007 dated March 24, 2007.3.2 Modification of Client Code3.2.1 A special facility is provided to Members for client code modification bythe Exchange. The same is presented as below:a) Member can change client ID of executed trades only in the postclosing session of that commodity as per Circular no.MCX/T&S/166/2007 dated April 30, 2007.b) The system driven restriction has been implemented by MCXwhich do not allow client code modification during intra-day. Thesame is implemented by MCX with effect from May 19, 2007 asper Circular No. MCX/T&S/198/2007 dated May 25, 2007.4. COLLECTION OF MARGIN FROM CLIENTS4.1 Margin CollectionAs per Business Rule 27(r), the Member shall collect adequate margin from hisclient before entertaining any order from him and as per Bye-Law 8.2.2, everymember of the Exchange executing transactions on behalf of clients, shall collectfrom the clients the margins specified from time to time, against their openpositions within such time as may be prescribed by the Relevant Authority fromtime to time.4.2 Forms of Margin DepositAs per Bye-Law 8.6.8, Members of the Exchange shall accept margin depositsfrom clients only in such form as may be permitted by the Re levant Authority.4.3 Accounting of Margin Deposita) Margin deposits received by Members from their client in any form shallbe accounted for and maintained separately in segregated accounts andshall be used solely for the benefit of the respective clients‟ positions.b) As per bye-Law 8.6.10, Margin accounts of clients of the Members shallbe marked to market daily by Clearing Members and further marginshould be collected when necessary to maintain the appropriate margin.4.4 Utilization of Margin Amount And Margin CallThe margin account of client Members shall be utilized by clearing Members onlyfor settling the dues to the clearing Member upon marking-to-market or forfulfilling the obligations resulting from their open positions.200

a) As per Bye-law 8.6.5, the member may close out an open position of aclient when the call for further margin or any other payment due is notcomplied with by the client;b) As per Bye-law 8.6.10 Members shall furnish their clients in writing suchreports and at such intervals for margin collection and its utilization asmay be specified by the Relevant Authority.5. CONTRACT NOTESThe Contract notes is a document through which a contractual obligation is establishedbetween a Member of the Exchange and its client. This is the prime document on thebasis of which all the dispute between the Member and his clients are settled.Every Member has to issue contract notes to their clients for the commodities traded byhim on behalf of them in compliance of, Rules, Bye-laws, Business Rule 27(p), andCirculars nos. MCX/012/2006 dated January 10, 2006 &. MCX/409/2005 datedDecember 06, 2005 of the Exchange.5.1 Requirements on Issue of Contract Notes to ClientsFollowing are the some of the requirements from Member of the Exchange tofollow on issue of Contract notes to their clients:a) Member shall issue contract note for trades executed in prescribed formatwith all the relevant details duly filled in within 48 hours from the close oftrading hours when the trade is executed.b) Member may also issue digitally signed contract note / confirmation slip atthe request of his clients subject to the compliance of all the provision ofIT Act. 2000.c) The Member should obtain a written consent from their clients for issue ofdigital contract notes to their clients.d) The Member shall maintain and preserve proper record for dispatch ofcontract notes to the clients if the same are dispatched through post,courier etce) Every Member shall maintain duplicate of the contract notes issued to theclients for a period of three years.f) The Members are required to issue contract notes to clients, which areserially numbered. The cont ract notes issued to the clients shall beCompliance Guidenumbered with unique running serial number commencing from onewhich shall be reset only at the beginning of every financial year.Financial year for the purpose of resetting the serial number of contractnote is April to March.g) Members are required to charge brokerage separately and the same isindicated separately from the price in the contract note.h) The Contract notes are required to sign either by the Member himself orhis authorized signatory.201

i) The power of attorney / board resolution(s) together with specimensignature of authorized signatories of contract notes are required to befiled with the Membership Department of the Exchange.j) The Member should print UMC (Unique Membership Code) on Contractnote along with its Membership no. obtained from MCX.k) The Members are also required to print the Unique Client Code (UCC)allotted to the client along with name and address of clients on the contractnote.6. TRADING TERMINALS6.1 Terminal LocationAs per Business Rule 29(b), Trading on the Exchange shall be allowed onlythrough approved Workstation(s) located at approved locations for the office(s) ofa Member.If an approved workstation of a Trading Member is connected by LAN or anyother way to other workstations at any place it shall require an approval of theExchange. For every TWS, a member shall be required to specific permissionfrom the Exchange and obtain user id in advance.6.2 User Id And Approved Users6.2.1 Approved usersAs per Circular no. MCX/010/2005 dated January 11, 2004,a) For every TWS to be used by a Member shall be required to obtainregistration of the Approved User in the specified format who willbe responsible for such TWS.b) Such Approved Users can be his own employees responsible forsuch TWS or branch, sub-Members, franchisees.c) Before termination of such Approved Users, the Member shall berequired to obtain prior permission of the Exchange.6.2.2 User IDAs per Circular MCX/006/2005 dated January 03, 2005,a) No user ID should be given by Members to any persons who havenot been registered by the exchange as approved user so that therisk in the market is reduced.b) Members are required to ensure that all the trading IDs are beingused by only such approved users who have been approved by theexchange.7. COMPUTER TO COMPUTER LINK (CTCL)7.1 Development of CTCL SoftwareMembers of Exchange are allowed to develop their own trading front end (CTCL)software in-house using the API of the Exchange or procure CTCL software fromNon-empanelled vendors. Exchange shall provide the technical specifications(message formats/protocols etc.) i.e. API for the interface with the Exchange202

trading system after submission of application form, undertaking and thedocuments as mentioned in Annexure 1 of Circular no. MCX/CTCL/043/2007dated February 02, 2007 and relevant circular/directive s from time to time.Exchange permits only single CTCL ID per VSAT and Leased Line on whichCTCL facility can be used. Members shall not be permitted to use any other userid for the purpose of CTCL.7.2 Some of the guidelines/requirements for use of CTCL terminalsFollowing are some of the requirements for the use of CTCL terminals as perCircular no. MCX/CTCL/043/2007 dated February 02, 2007:a) Members developing CTCL software in-house/procuring CTCL softwarefrom Non-empanelled vendors shall pay prescribed charges to theExchange from time to time.b) Members are required to provide list of Approved Persons who wouldhandle each CTCL terminal of the Member. Approved person may be anemployee or any Authorised Person of the Member who has beenapproved by the Exchange. Members shall not entrust the CTCL terminalsto their clients or to any unregistered intermediary other than ApprovedPersons. Necessary written approval of the Exchange is required to beobtained before CTCL terminal is entrusted to an Authorised Person,failing which it shall be treated as violation.c) A Member shall also ensure to undertake periodic audit of their CTCLsystems.8.PRO-ACCOUNT TRADING TERMINALS8.1 No. of Terminalsa) As per Circular no. MCX/241/06 dated June 15, 2006, The Members shallplace orders in „Pro-Account‟ / OWN Account from not more than 2terminals from one location and details of the terminals shall be informedto the Exchange in the format enclosed as Annexure 1 of the said circular.b) Further, Member desires to have facility of placing „Pro-Account‟ / OWNAccount orders from more than one location, the Member has to submit anundertaking in the format enclosed as Annexure 2 of circular no.MCX/241/06 dated June 15, 2006, to the Exchange stating the reason foruse of such facility from more than one location. In such case, the numberof total terminals used for „Pro-Account‟ / OWN account after Exchangeapproval shall not exceed 5 terminals across all locations.8.2 Approval from Exchangea) The Members having CTCL terminals are required to obtain approvalfrom the Exchange for Pro-Account trade facility in the required as perCircular no. MCX/241/06 dated June 15, 2006.203

) The Exchange by default shall not permit Pro-Account facility if the approval is not obtainedwithin the stipulated time.9. INTERNET BASED TRADING (IBT)As per Circulars no.: MCX/28/2004 dated May 7, 2004 the Members are advisedto comply with guidelines such as Network Security, Risk Management, Ordermatching etc.Further, the Exchange has come up with the Circular no. MCX/26/2004 dated April29, 2004 and MCX/CTCL/042/2007 dated January 31, 2007 for use to Internet basedtrading for expanding Members‟ Trading terminal.10. SUB-BROKER OF MEMBER10.1 Execution of Member-Sub broker AgreementMembers of the Exchange desirous of appointing sub-brokers for expanding theirbusiness must execute an agreement with such sub-brokers/ franchises (formatprescribed in Circular No. MCX/MCX/056/2004 dated July 09, 2004 and a copyof such agreement shall be made available to the Exchange, as and when requiredby the Exchange.a) Member has to ensure compliance by its sub-broker in accordance withthe Rules, Bye-Laws, Business Rules, and Circulars etc. of the Exchangeand the requirements of FMC from time to time.b) Member has to maintain separate records including accounts in respect ofthe dealing with futures contract entered into on behalf of the sub-brokersand preserved for the prescribed period in respect of the Head Office andbranches.c) Member has to ensure the settlement of all deals which is entered into byhim even through the orders in respect of the deals may have originatedfrom its sub-Member.d) Member has to ensure that its sub-broker may represent himself only as asub-broker of the respective Member.e) Member has to ensure that the total brokerage (including the share ofbrokerage of the Member and the sub-broker) payable by the client of itssub-broker does not exceed the maximum brokerage (currently) 1% incase of non-delivery transactions and 2% plus expenses in case oftransactions relating into delivery) exclusive of statutory levies.f) The registered sub-Members have not extended /eligible to any of therights and / or privilege that are extended to the Members by theExchange.g) A sub-Member should affiliate with only one Member of the MCX.However, he may affiliate with the registered Member of anotherrecognized Commodity Exchange.Compliance Guide204

11. HANDLING THE COMMODITIES OF CLIENTS FOR DELIVERIES11.1 Type of Demat Account:As per Circular No. MCX/238/2005 dated June 29, 2005 and MCX/267/2005dated July 22, 2005, all Members are required to open two accounts with theirDepository Participants for handling the receipt and deliveries of commodities indemat form. They are:a) Beneficiary Owner (BO) Account:It is opened by an investor or a Member of the Exchange who wants tohold and transact commodities through dematerialised warehouse receipts.The beneficial owner account can be opened in the name of Individual,Corporate, and Registered Trusts etc.b) Pool account:It is popularly known as CM Pool Account. In CM Pool account clearingMembers are authorised to make pay-in and receive pay-out from aClearing Corporation / Clearing House against trades done by them ortheir clients. This account is meant only to transfer commodities to andreceive delivery of commodities from the clearing corporation/clearinghouse and hence, the Member does not have any ownership (beneficiary)rights over the commodities held in such an account.A Clearing Member (CM) is required to open both Clearing Member(Pool) Account as well as a BO Account with each of the depositories (i.eNSDL and CDSL).Members are required to maintain a proper record of all commoditiesreceived and delivered from their Pool Account and transferred to BO, ifany. Further Member should preserve acknowledged copies of theDelivery Instruction Slip (DIS) given/to their DP for transferring thecommodities from the Pool Account to the clients‟ account after Pay-outfrom the Exchange.12 . CLIENTS‟ FUNDS MANAGEMENTIt is responsibility of the Members to use clients‟ funds only to meet exchange obligationon their behalf for trading in commodity market.12.1 Review of Client /Own bankWhile reviewing the bank accounts, the Inspecting officials should consider thefollowing:a) As per Business Rule 27(q), every Member of MCX keeps the money ofthe Constituent/client in the Member Clients‟ account maintained with theClearing bank. He is not using this money for his own transactions or fortransactions of such other client or for any purpose other than margin andpay in relating to transactions entered into by such client paying the margin.205

) All monies received from the clients and all the payment made to theclients should be routed through the clients‟ bank accounts. A Membermay open a single client account or multiple client accounts. WheneverMember trades as a principal (Pro trade), he cannot use the client‟saccount for payment.c) Every Member who holds or receives money on account of a client isrequired to forthwith deposit such money in the designated clientsaccount.d) No money should be withdrawn from clients account other then moneyrequired for payment towards payments of a debt which is due to theMember from clients or money drawn on clients‟ authority or money inrespect of which there is a liability of clients to the Member, provided thatthe money so drawn should not exceed the total of the money so held forthe time being for each such client.e) Member has not used clients‟ money for making payment for officeexpenses such as salary, telephone bills, TDS payments, purchase of officeequipment etc. It should be noted that amounts withdrawn from clientbank to own bank on account of brokerage, should be an amount due tothe Member towards brokerage receivable from clients on transactionsentered into with clients.12.2 Bank BookMember should have segregation of clients funds & own funds and should notuse clients‟ fund for the purpose other than specified. Member should not misutilizedclients‟ funds12.3 Issue of Statement of accounts/funds to ClientsDisputes can arise between the Member and their clients pertaining to paymentsdue to /from the clients. This may be due to non-submission of statement ofaccounts / funds by the Member to the clients on a regular basis.As per Circular no. MCX/357/2006 dated September 02, 2006; all Members arerequired to send a quarterly statement of accounts/funds to all the clients.13. MISCELLANEOUS13.1 Appointment of Compliance Officera) Every Member shall appoint a Compliance Officer and keep the Exchangeinformed of the appointment of a Compliance Officer as per Circular no.MCX/207/2006 dated May 19, 2006.b) It is necessary that the Exchange be also informed for any change in thecompliance officer.13.2 Investor GrievancesMember should be prompt in redressing investor grievances. Member is requiredto ensure that Complaint of any client is not pending for more than thirty days asper Circular no. MCX/012/2006 dated January 12, 2006.206

13.3 Advertisementa) Member of the Exchange are permitted to issue advertisement on priorapproval from Exchange to advertise their products and services offered totheir clients as per Circular no. MCX/007/2005 dated January 03, 2005and MCX/003/2006 dated January 03, 2006.b) Exchange has prescribed guidelines for advertisements as per said circular.13.4 Membership RequirementFollowing are some of the requirement to be followed by each Member:a) Each Member should ensure that they shall not undertake their tradingactivities with /on behalf of any Member of the, who has been suspended,expelled or declared defaulter by the Exchange / FMC / SEBI / NSE / BSEor any regulatory body/authority.b) Every Member of the Exchange shall promptly notify the Exchange inwriting about any change in the information provided by the Member ofthe Exchange at the time of admission or at a later stage to the Exchangeas per Rule 26(b). The Exchange shall indicate the changes in respect ofwhich the Member of the Exchange should take prior approval from theExchange. In case the Member fails to do so, then the Exchange shallcharge penalty and/or take further disciplinary action as may be required.c) In the case of Partnership firm, no partner is a partner at the same time inmore than one Partnership firm carrying on the business of thecommodities trading and/or clearing.d) As per Circular No. MCX/012/2006 dated January 10, 2006, Member isrequired to ensure that minimum amount of net-worth as prescribed by theRelevant Authority/Exchange from time to time is maintained throughoutthe year.e) As per Rule 19(d) “A Member of the Exchange shall not assign, mortgage,pledge, hypothecate, or charge his right of membership or any rights orprivileges attached thereto, and any such attempt shall not be effective asagainst the Exchange.f) As per Rule 27(a), Every Member of the Exchange shall pay thesubscription, fee, deposit or any other charges as may be fixed by theBoard, from time to time.g) Members are advised to enroll for MCX Certified CommodityProfessional (MCCP) examination and to obtain the MCCP certificate orto have atleast one person in their office who have passed this examinationand respond to Training department of the Exchange confirming thepassing of the examination.h) Members should not indulge in any Portfolio Advisory Services, PortfolioManagement Services and such other services directly or indirectly as perCircular no. MCX/551/2006 dated December 13, 2006.i) As per Bye- law 8.6.1, no clearing member shall directly or indirectly enterinto any arrangement or adopt any procedure for the purpose of evading orassisting in the evasion of the margin requirements prescribed under theBye-Laws, Rules and Regulations or any orders issued there under.13.5 Submission of Annual Returns207

Members of the Exchange are required to furnish the following documents on anannual basis to the Exchange at the end of respective financial year. Members arerequired to submit following documents in the specified format.a) Audited Annual Financial Statements duly certified (-for CorporateMembers : Balance Sheet, Profit and Loss Account, Directors report,Auditors reports – For Partnership Firm : Balance Sheet, Profit & LossAccount – For all other Members – Balance Sheet & Profit & LossAccount).b) Net worth Certificate in the format as specified.c) Shareholding/Sharing Pattern in the format as specified.d) Details of Directors/Partners/Proprietor/Society Member in the format asspecified.e) Dominant Promoter Group (DPG) details in the format as specified.(Applicable to Corporate Members / Partnership firms).13.6 Submission of Annual Compliance Report (ACR)a) CR is the gist of compliances to be followed by Members which is selfanalysed by Members and submitted to the Exchange annually.b) All Members are required to submit ACR to the Exchange with thetimeline as prescribed by the Exchange.13.7 Display of Notice BoardAs per Circular No MCX/295/2006 dated July 28, 2006 all the Members of theExchange are required to display Notice board at prominent place in theprescribed format.208