TaxTMI 
TaxTMI 
Simplification and Rationalization of Trading Account Opening Process
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng on the existing and new stock brokers (including trading members) and clients. Accordingly, SEBI (Stock Broker and Sub-Broker) Regulations, 1992 have been amended suitably vide notification No. LADNRO/GN/2011-12/19/26273 dated August 17, 2011. 3. SEBI has devised the uniform documentation to be followed by all the stock brokers/trading members; a copy thereof to be provided by them to the clients. The details of such documents are listed below: i. Index of documents giving details of various documents for client account opening process - Annexure-1 ii. Client Account Opening Form in two parts: a. Know Your Client (KYC) form capturing the basic information about the client and instruction/check list to fill up the form - Annexure-2. b. Document capturing additional information about the client related to trading account -Annexure-3. iii. Document stating the Rights & Obligations of stock broker, sub-broker and client for trading on exchanges (including additional rights & obligations in case of internet / wireless technology based trading)- Annexure-4. iv. Uniform Risk Disclosure Documents (for all segments/exchanges) - Ann....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6/2000 dated January 3, 2000 a. No. SEBI/MRD/SE/Cir- 37/2003 dated September 30, 2003 e. No. SEBI/MIRSD/DPS-1/Cir-31/2004 dated August 26, 2004 f. No. MIRSD/SE/Cir-19/2009 dated December 3, 2009 g. No. CIR/MRD/DP/25/2010 dated August 27, 2010 h. No. CIR/MRD/DP/26/2010 dated August 27, 2010 10. The Stock Exchanges are directed to: a. bring the provisions of this circular to the notice of the Stock Brokers and also disseminate the same on their websites. b. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision in co-ordination with one another to achieve uniformity in approach. c. communicate to SEBI, the status of the implementation of the provisions of this circular Monthly Development Report of the following month; and d. monitor the compliance of this circular through half-yearly internal audit and inspections of stock brokers. 11. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... satisfied with the response, please contact the concerned exchange(s) at [email protected] and Phone no. 91-XXXXXXXXXX. Annexure - 2 KNOW YOUR CLIENT (KYC) APPLICATION FORM For Individuals PHOTOGRAPH Please affix your recent passport size photograph and sign across it Please fill this form in ENGLISH and in BLOCK LETTERS. A. IDENTITY DETAILS 1. Name of the Applicant: ___________________________ 2. Father's/Spouse Name: ___________________________ 3. a. Gender: Male/Female b. Marital status: Single/Married c. Date of birth: _____________(dd/mm/yyyy) 4. a. Nationality: ________________ b. Status: Resident Individual/Non Resident/Foreign National 5. a. PAN: ________________b. Unique Identification Number (UID)/Aadhaar, if any:__________________ 6. Specify the proof of Identity submitted: _____________________ B. ADDRESS DETAILS 1. Address for correspondence: _________________________________________________City/town/village:_________ Pin Code: __________ State: __________Country: _________ 2. Contact Details: Tel. (Off.) _____________ Tel. (Res.) ________________Mobile No.:....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4. a. PAN: __________________b. Registration No. (e.g. CIN): _____________________ 5. Status (please tick any one): Private Limited Co./ Public Ltd. Co./ Body Corporate/ Partnership/ Trust/ Charities/ NGO's/FI/ FII/ HUF/ AOP/ Bank/ Government Body/ Non-Government Organization/ Defense Establishment/ BOI/ Society/ LLP/ Others (please specify) _______________ B. ADDRESS DETAILS 1. Address for correspondence:______________________________________ City/town/village: ____________ Pin Code: ___________ State: ____________ Country: _____________ 2. Contact Details: Tel. (Off.) _______ Tel. (Res.) _______ Mobile No.: ________Fax: ___________Email id: _____________ 3. Specify the proof of address submitted for correspondence address: ____________________________________ 4. Registered Address (if different from above): ______________________________________ City/town/village: ______________ Pin Code: ____________ State: ______________Country: _____________ 5. Specify the proof of address submitted for registered address: _____________________________ C. OTHER DETAILS 1. Gross Annual Income Details (please specify): Income Ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mentary proof submitted. 5. If correspondence & permanent address are different, then proofs for both have to be submitted. 6. Sole proprietor must make the application in his individual name & capacity. 7. For non-residents and foreign nationals, (allowed to trade subject to RBI and FEMA guidelines), copy of passport/PIO Card/OCI Card and overseas address proof is mandatory. 8. For foreign entities, CIN is optional; and in the absence of DIN no. for the directors, their passport copy should be given. 9. In case of Merchant Navy NRI's, Mariner's declaration or certified copy of CDC (Continuous Discharge Certificate) is to be submitted. 10. For opening an account with Depository participant or Mutual Fund, for a minor, photocopy of the School Leaving Certificate/Mark sheet issued by Higher Secondary Board/Passport of Minor/Birth Certificate must be provided. 11. Politically Exposed Persons (PEP) are defined as individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., Heads of States or of Governments, senior politicians, senior Government/judicial/military officers, senior exe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evidence in support of such claims to be collected.) 1. In case of transactions undertaken on behalf of Central Government and/or State Government and by officials appointed by Courts e.g. Official liquidator, Court receiver etc. 2. Investors residing in the state of Sikkim. 3. UN entities/multilateral agencies exempt from paying taxes/filing tax returns in India. 4. SIP of Mutual Funds upto Rs 50,000/- p.a. 5. In case of institutional clients, namely, FIIs, MFs, VCFs, FVCIs, Scheduled Commercial Banks, Multilateral and Bilateral Development Financial Institutions, State Industrial Development Corporations, Insurance Companies registered with IRDA and Public Financial Institution as defined under section 4A of the Companies Act, 1956, Custodians shall verify the PAN card details with the original PAN card and provide duly certified copies of such verified PAN details to the intermediary. E. List of people authorized to attest the documents: 1. Notary Public, Gazetted Officer, Manager of a Scheduled Commercial/ Co-operative Bank or Multinational Foreign Banks (Name, Designation & Seal should be affixed on the copy). 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anted to transact business on its behalf. • Authorized signatories list with specimen signatures. Banks/Institutional Investors • Copy of the constitution/registration or annual report/balance sheet for the last 2 financial years. • Authorized signatories list with specimen signatures. Foreign Institutional Investors (FII) • Copy of SEBI registration certificate. • Authorized signatories list with specimen signatures. Army/Government Bodies • Self-certification on letterhead. • Authorized signatories list with specimen signatures. Registered Society • Copy of Registration Certificate under Societies Registration Act. • List of Managing Committee members. • Committee resolution for persons authorised to act as authorised signatories with specimen signatures. • True copy of Society Rules and Bye Laws certified by the Chairman/Secretary. Annexure - 3 TRADING ACCOUNT RELATED DETAILS For Individuals & Non-individuals A. BANK ACCOUNT(S) DETAILS Bank Name Branch address Bank account no. Account Type: Saving/Curre....
X X X X Extracts X X X X
X X X X Extracts X X X X
................................ • Whether you wish to avail of the facility of internet trading/ wireless technology (please specify): ........................... • Number of years of Investment/Trading Experience: ........................................ • In case of non-individuals, name, designation, PAN, UID, signature, residential address and photographs of persons authorized to deal in securities on behalf of company/ firm/ others: ..................... • Any other information: .............................................. G. INTRODUCER DETAILS (optional) Name of the Introducer: ........................(Surname Name) ..............................................................................(Middle Name) Status of the Introducer: Sub-broker/ Remisier/ Authorized Person/ Existing Client/ Others, please specify........................ Address and phone no. of the Introducer: .................................. Signature of the Introducer: ................................. H. NOMINATION DETAILS (for individuals only) I/We wish to nominate I/We do not wish to nominate Name of the Nominee: ..................
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Signature I/We undertake that we have made the client aware of 'Policy and Procedures', tariff sheet and all the non-mandatory documents. I/We have also made the client aware of 'Rights and Obligations' document (s), RDD and Guidance Note. I/We have given/sent him a copy of all the KYC documents. I/We undertake that any change in the 'Policy and Procedures', tariff sheet and all the non-mandatory documents would be duly intimated to the clients. I/We also undertake that any change in the 'Rights and Obligations' and RDD would be made available on my/our website, if any, for the information of the clients. ............................................... Signature of the Authorised Signatory Date ...................... Seal/Stamp of the stock broker INSTRUCTIONS/CHECK LIST 1. Additional documents in case of trading in derivatives segments - illustrative list: Copy of ITR Acknowledgement Copy of Annual Accounts In case of salary income - Salary Slip, Copy of Form 16 Net worth certificate Copy of demat account holding statement. Bank account statement for last 6 months Any other relevant documents substa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er before executing orders through the stock broker. 4. The stock broker shall continuously satisfy itself about the genuineness and financial soundness of the client and investment objectives relevant to the services to be provided. 5. The stock broker shall take steps to make the client aware of the precise nature of the Stock broker's liability for business to be conducted, including any limitations, the liability and the capacity in which the stock broker acts. 6. The sub-broker shall provide necessary assistance and co-operate with the stock broker in all its dealings with the client(s). CLIENT INFORMATION 7. The client shall furnish all such details in full as are required by the stock broker in "Account Opening Form" with supporting details, made mandatory by stock exchanges/SEBI from time to time. 8. The client shall familiarize himself with all the mandatory provisions in the Account Opening documents. Any additional clauses or documents specified by the stock broker shall be non-mandatory, as per terms & conditions accepted by the client. 9. The client shall immediately notify the stock broker in writing if there is any change in the information in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ure that the money/securities deposited by the client shall be kept in a separate account, distinct from his/its own account or account of any other client and shall not be used by the stock broker for himself/itself or for any other client or for any purpose other than the purposes mentioned in Rules, Regulations, circulars, notices, guidelines of SEBI and/or Rules, Regulations, Bye-laws, circulars and notices of Exchange. 16. Where the Exchange(s) cancels trade(s) suo moto all such trades including the trade/s done on behalf of the client shall ipso facto stand cancelled, stock broker shall be entitled to cancel the respective contract(s) with client(s). 17. The transactions executed on the Exchange are subject to Rules, Byelaws and Regulations and circulars/notices issued thereunder of the Exchanges where the trade is executed and all parties to such trade shall have submitted to the jurisdiction of such court as may be specified by the Byelaws and Regulations of the Exchanges where the trade is executed for the purpose of giving effect to the provisions of the Rules, Byelaws and Regulations of the Exchanges and the circulars/notices issued thereunder. BROKERAGE 18. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ication of bad delivery, etc. 24. The client and the stock broker shall refer any claims and/or disputes with respect to deposits, margin money, etc., to arbitration as per the Rules, Byelaws and Regulations of the Exchanges where the trade is executed and circulars/notices issued thereunder as may be in force from time to time. 25. The stock broker shall ensure faster settlement of any arbitration proceedings arising out of the transactions entered into between him vis-à-vis the client and he shall be liable to implement the arbitration awards made in such proceedings. 26. The client/stock-broker understands that the instructions issued by an authorized representative for dispute resolution, if any, of the client/stock-broker shall be binding on the client/stock-broker in accordance with the letter authorizing the said representative to deal on behalf of the said client/stock-broker. TERMINATION OF RELATIONSHIP 27. This relationship between the stock broker and the client shall be terminated; if the stock broker for any reason ceases to be a member of the stock exchange including cessation of membership by reason of the stock broker's default, death, resi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d with all other relevant details as required therein to be filled in and issued in such manner and within such time as prescribed by the Exchange. The stock broker shall send contract notes to the investors within one working day of the execution of the trades in hard copy and/or in electronic form using digital signature. 33. The stock broker shall make pay out of funds or delivery of securities, as the case may be, to the Client within one working day of receipt of the payout from the relevant Exchange where the trade is executed unless otherwise specified by the client and subject to such terms and conditions as may be prescribed by the relevant Exchange from time to time where the trade is executed. 34. The stock broker shall send a complete `Statement of Accounts' for both funds and securities in respect of each of its clients in such periodicity and format within such time, as may be prescribed by the relevant Exchange, from time to time, where the trade is executed. The Statement shall also state that the client shall report errors, if any, in the Statement within such time as may be prescribed by the relevant Exchange from time to time where the trade was executed, f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bounced back. The stock broker shall take all possible steps to ensure receipt of notification of bounced mails by him at all times within the stipulated time period under the extant regulations of SEBI/stock exchanges. 41. The stock broker shall continue to send contract notes in the physical mode to such clients who do not opt to receive the contract notes in the electronic form. Wherever the ECNs have not been delivered to the client or has been rejected (bouncing of mails) by the e-mail ID of the client, the stock broker shall send a physical contract note to the client within the stipulated time under the extant regulations of SEBI/stock exchanges and maintain the proof of delivery of such physical contract notes. 42. In addition to the e-mail communication of the ECNs to the client, the stock broker shall simultaneously publish the ECN on his designated web-site, if any, in a secured way and enable relevant access to the clients and for this purpose, shall allot a unique user name and password to the client, with an option to the client to save the contract note electronically and/or take a print out of the same. LAW AND JURISDICTION 43. In addition to the specif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch as mobile phone, laptop with data card, etc. which use Internet Protocol (IP). The stock broker shall comply with all requirements applicable to internet based trading/securities trading using wireless technology as may be specified by SEBI & the Exchanges from time to time. 2. The client is desirous of investing/trading in securities and for this purpose, the client is desirous of using either the internet based trading facility or the facility for securities trading through use of wireless technology. The Stock broker shall provide the Stock broker's IBT Service to the Client, and the Client shall avail of the Stock broker's IBT Service, on and subject to SEBI/Exchanges Provisions and the terms and conditions specified on the Stock broker's IBT Web Site provided that they are in line with the norms prescribed by Exchanges/SEBI. 3. The stock broker shall bring to the notice of client the features, risks, responsibilities, obligations and liabilities associated with securities trading through wireless technology/internet/smart order routing or any other technology should be brought to the notice of the client by the stock broker. 4. The stock broker shall make the clie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....broker on account of any suspension, interruption, non-availability or malfunctioning of the Stock broker's IBT System or Service or the Exchange's service or systems or non-execution of his orders due to any link/system failure at the Client/Stock brokers/Exchange end for any reason beyond the control of the stock broker/Exchanges. Annexure - 5 RISK DISCLOSURE DOCUMENT FOR CAPITAL MARKET AND DERIVATIVES SEGMENTS This document contains important information on trading in Equities/Derivatives Segments of the stock exchanges. All prospective constituents should read this document before trading in Equities/Derivatives Segments of the Exchanges. Stock exchanges/SEBI does neither singly or jointly and expressly nor impliedly guarantee nor make any representation concerning the completeness, the adequacy or accuracy of this disclosure document nor have Stock exchanges/SEBI endorsed or passed any merits of participating in the trading segments. This brief statement does not disclose all the risks and other significant aspects of trading. In the light of the risks involved, you should undertake transactions only if you understand the nature of the relationship into which yo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsidering whether to trade or authorize someone to trade for you, you should be aware of or must get acquainted with the following:- 1. BASIC RISKS: 1.1 Risk of Higher Volatility: Volatility refers to the dynamic changes in price that a security/derivatives contract undergoes when trading activity continues on the Stock Exchanges. Generally, higher the volatility of a security/derivatives contract, greater is its price swings. There may be normally greater volatility in thinly traded securities/derivatives contracts than in active securities /derivatives contracts. As a result of volatility, your order may only be partially executed or not executed at all, or the price at which your order got executed may be substantially different from the last traded price or change substantially thereafter, resulting in notional or real losses. 1.2 Risk of Lower Liquidity: Liquidity refers to the ability of market participants to buy and/or sell securities/derivatives contracts expeditiously at a competitive price and with minimal price difference. Generally, it is assumed that more the numbers of orders available in a market, greater is the liquidity. Liquidity is important beca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... generally placed "away" from the current price of a stock/derivatives contract, and such order gets activated if and when the security/derivatives contract reaches, or trades through, the stop price. Sell stop orders are entered ordinarily below the current price, and buy stop orders are entered ordinarily above the current price. When the security/derivatives contract reaches the pre-determined price, or trades through such price, the stop loss order converts to a market/limit order and is executed at the limit or better. There is no assurance therefore that the limit order will be executable since a security/derivatives contract might penetrate the pre-determined price, in which case, the risk of such order not getting executed arises, just as with a regular limit order. 1.5 Risk of News Announcements: News announcements that may impact the price of stock/derivatives contract may occur during trading, and when combined with lower liquidity and higher volatility, may suddenly cause an unexpected positive or negative movement in the price of the security/contract. 1.6 Risk of Rumors: Rumors about companies/currencies at times float in the market through word of mouth, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re completely understand the following statements before actually trading in derivatives and also trade with caution while taking into account one's circumstances, financial resources, etc. If the prices move against you, you may lose a part of or whole margin amount in a relatively short period of time. Moreover, the loss may exceed the original margin amount. A. Futures trading involve daily settlement of all positions. Every day the open positions are marked to market based on the closing level of the index/derivatives contract. If the contract has moved against you, you will be required to deposit the amount of loss (notional) resulting from such movement. This amount will have to be paid within a stipulated time frame, generally before commencement of trading on next day. B. If you fail to deposit the additional amount by the deadline or if an outstanding debt occurs in your account, the stock broker may liquidate a part of or the whole position or substitute securities. In this case, you will be liable for any losses incurred due to such close-outs. C. Under certain market conditions, an investor may find it difficult or impossible to execute transactions. For ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ficient to cover the cost of the option, the investor may lose all or a significant part of his investment in the option. 2. The Exchanges may impose exercise restrictions and have absolute authority to restrict the exercise of options at certain times in specified circumstances. 2.4 Risks of Option Writers: 1. If the price movement of the underlying is not in the anticipated direction, the option writer runs the risks of losing substantial amount. 2. The risk of being an option writer may be reduced by the purchase of other options on the same underlying interest and thereby assuming a spread position or by acquiring other types of hedging positions in the options markets or other markets. However, even where the writer has assumed a spread or other hedging position, the risks may still be significant. A spread position is not necessarily less risky than a simple 'long' or 'short' position. 3. Transactions that involve buying and writing multiple options in combination, or buying or writing options in combination with buying or selling short the underlying interests, present additional risks to investors. Combination transactions, such as option spre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of all the documents executed by you from the stock broker free of charge. 7. In case you wish to execute Power of Attorney (POA) in favour of the Stock broker, authorizing it to operate your bank and demat account, please refer to the guidelines issued by SEBI/Exchanges in this regard. TRANSACTIONS AND SETTLEMENTS 8. The stock broker may issue electronic contract notes (ECN) if specifically authorized by you in writing. You should provide your email id to the stock broker for the same. Don't opt for ECN if you are not familiar with computers. 9. Don't share your internet trading account's password with anyone. 10. Don't make any payment in cash to the stock broker. 11. Make the payments by account payee cheque in favour of the stock broker. Don't issue cheques in the name of sub-broker. Ensure that you have a documentary proof of your payment/deposit of securities with the stock broker, stating date, scrip, quantity, towards which bank/demat account such money or securities deposited and from which bank/demat account. 12. Note that facility of Trade Verification is available on stock exchanges' websites, where details of trade as mentioned in the contract no....