TaxTMI 
TaxTMI 
Committee on Model Rule and Bye-laws of Stock Exchanges
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....ted only after all exchanges are corporatised. Some of the Rules may not be applicable in the same way for all stock exchanges. Besides, on account of the nature and constitution of stock exchanges, some of the new Model Rules can not be implemented as suggested. The Model Rules have been divided into 4 Parts. Part 'A' given in the Annexure contains rules which have already been implemented under SEBI directives etc. Reference of Model Rules, Subject matter and the corresponding Circulars issued by SEBI/GOI etc. have been made. It may be seen that while there may be a variation in language in the Model Rules, for most of Rules in Part A, however the basic principle underlying the Model Rules and the relevant SEBI Circular/GOI notification etc. is the same. Such rules have been identified with asterisks in Part A. In respect of Rules No. 5.5 (Compliance Officer), 6.8.1 (Special Authorisation by the Governing Board- Buy back of Membership), 7.20 (Declaration of Defaulter automatically), 7.34 (Apportionment of Consideration Realised/Other Realisation of Receivables) and 8.3.6 (Ethics Committee), SEBI Regulations/Circulars already issued in this regard will prevail. ....
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.... Clearing House, Clearing Corporation or Clearing Bank SEBI's circular dated SMD/SED/RCG/270/96 dated January 19, 1996. 3.2.13 Information and Publications SEBI's circular no. SE/10118 dated October 12, 1992 and SMD/POLICY/CIR-32/97 dated December 03, 1997 regarding dissemination of information to investors and brokers. 3.2.16 Promotion of Other Companies SEBI's circular no. SMD- II/POLICY/CIR-37/99 dated November 26, 1999 and SMD-I/POLICY/CIR-40/99 dated December 16, 1999 regarding floating of Floating of a Subsidiary/Company by a Stock Exchange for membership of other Stock Exchange. 4. FUNCTIONARIES 4.2 Governing Board SEBI's circular no. SMD/SED/6919/93 dated April 20, 1993 regarding composition of Governing Board 4.3 Standing Committees SEBI's circular no. SMD/SED/6919/93 dated April 20, 1993* *Model Rule: There ....
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.... 5.2.4.7.1 Minimum Paid-up Capital SEBI Circular No. SMD/SED/9012/93 dated May 14, 1993 5.2.4.7.2 Maintenance of Net Worth SEBI Circular No. SMD/SED/9012/93 dated May 14, 1993 5.2.4.7.3 Additional Financial and Other Requirements SEBI Circular No. SMD/SED/9012/93 dated May 14, 1993 5.2.5 General Conditions 5.2.5.3 Past Experience As per Rule 8(2)(a) of SCRR, the person should have worked for not less than 2 years as a partner with or as an authorised assistant or authorised clerk or remisier or apprentice to, a member* *As per this clause of Model Rules, apart from above, experience as sub broker or dealer or portfolio manager or investment consultant is also included. 5.2.5.6 Bankruptcy ....
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....nbsp; 6.5 Multiple Membership / Trading Membership - Eligibility Criteria 6.5.4 Conditions Precedent for Multiple Membership As per SEBI Circular No. SMD-DBAII/Policy/CIR-47/2000 dated October 10, 2000, the condition of operating membership card for a minimum period of 5 years for multiple membership was relaxed for all members.* *As per Model Rules, this condition is subject to waiver if the member meets the net worth criteria separately for each of the stock exchanges. 6.5.5 Criteria for Applying for Multiple Membership / Trading Membership -------Same as above------- 6.5.6 Non-Applicability of Criteria When Net Worth Criteria Met -------Same as above------- 6.5.7 Exchange of Report Between Stock Exchanges GOI Circular no. F.No.1/26/SE/91 dated August 21, 1991 6.5.8 Entrance Fee, Admission Fee, Annual Subscription and Base Minimum Capital GOI Circular no....
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.... Termination of Membership / Trading Membership 6.10.1 Adjudged Bankrupt Rule 8(3) (b) of SCRR, 1957 6.10.2 Convicted of Fraud Rule 8(3) (c) of SCRR, 1957 6.10.3 Engaged in Other Business Rule 8(3) (f) of SCRR, 1957 6.16 Remisiers 6.16.10 Remisier not to Sign Contract Notes SEBI Circular No. SMD/POLICY/ CIRCULAR/3-97 dated March 31, 1997. 6.18 Sub-brokers 6.18.1 Appointment SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 provide for registration of sub brokers. 6.18.3 Non-Compliance of Requirements GOI Circular No. 14/8/SE/85 dated December 30, 1985 provides that The Stock-broker with whom a sub-broker is associ....
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.... Dues of the Exchange /Clearing House / Clearing Corporation /SEBI SEBI Circular no SMD (B) /Cir/ misc-04/1624/94 dated March 22, 1994 had advised the exchanges that claims of investors against defaulter members should be ranked on par and ratably distributed. Further vide SEBI Circular No.SMD/AA/SU/1939/96 dated May 21, 1996, the claims of SEBI are to be treated on par with the claims of exchange and clearing house. * *Model Rules have, however, put the claims of investors at second level of priority of distribution. 7.34.2 Liabilities Relating to Contracts -----Same----- 7.34.3 Balance -----Same----- 7.34.4 Apportionment in case in Defaulter/Deemed Defaulter in Relation to Multiple Membership/ Trading Membership GOI Circular no. 1/26/SE/ 91 dated August 21, 1991 has provided that apportionment of the assets of the defaulter members against the claims must be done strictly Stock exchange wise. If there is, however, a surplus of the assets at any particular Stock Exchange, the same may be distribut....
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....and Functionaries of Exchanges 8.3.6.2.3 Securities -------Same------- 8.3.6.3 General Principles SEBI Circular as above has prescribed general standards for directors and functionaries of the exchange * *Model Rules have applied the same on elected members and functionaries of the exchange. 8.3.6.4 Prohibition of Dealings in Securities in Proprietary Account by Elected Members of the Governing Board SEBI Circular dated May 17, 2001 regarding Code of Ethics for Directors and Functionaries of Exchanges 8.3.6.5 Disclosure of Dealings in Securities by Functionaries of the Exchange SEBI Circular as above has not fixed any minimum monetary limit of dealing in securities for disclosure.* *Model Rules have prescribed the limit as may be fixed by the Governing Board. 8.3.6.6 Disclosure of Dealings in Se....
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....f the Executive Dirtector. 9 ELECTION, NOMINATION AND APPOINTMENT OF MEMBERS OF THE GOVERNING BOARD, VACANCIES IN THE GOVERNING BOARD AND ADMINISTRATIVE SET-UP 9.1 Governing Board 9.1.1 Election of Members - Conditions of Eligibility 9.1.1.1 Nationality SEBI circular SMD/POLICY/ IECG/5694/96 December 20, 1996. 9.1.1.2 Standing SEBI circular SMD/POLICY/ IECG / 2-97 February 25, 1997 9.1.1.3 Default SEBI circular SMD/POLICY/ IECG/5694/96 December 20, 1996. 9.1.1.4 Suspended SEBI circular SMDRP/Policy/ Cir-33/98 November 12, 1998 9.1.1.5 Cancellation of Registration SEBI circular SMD/POLICY/IECG/5694/96 December 20, 1996 ....
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.... 9.10.3 Appointment and Tenure SEBI circular SMD-II/11615/92 dated November 20, 1992 & SEBI circular SMD /SED/6919/93 dated April 20, 1993* *Model Rules have provided for superannuation age of ED as 60 years and tenure of 5 years, subject to renewal. 9.11 Election Procedure for Elected Members 9.11.8 Election of Chairman SEBI circular SMD /SED/6919/93 dated April 20, 1993 11 DISCIPLINARY PROCEEDINGS 11.5 Causes Requiring Disciplinary Action SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 11.5.1 Misconduct 11.5.2 Unbusinesslike Conduct 11.5.2.1 Fictitious Names SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. &nbs....
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....p; SUB CLAUSE SUBJECT 3 CONSTITUTION, OBJECTS AND CAPITAL / CORPUS 3.1 Constitution 3.2 Objects 3.2.1 The Interest of Investors, Issuers, Brokers, Sub-Brokers, Dealers and Any Other Intermediaries 3.2.2 Buildings 3.2.3 Acquisition of Property 3.2.5 Management and Disposal of Property 3.2.6 Borrowings of Monies 3.2.7 Investments 3.2.8 Payments and Disbursements 3.2.9 Subscriptions 3.2.10 Funds and Trusts ....
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....Nominees 5.2.4.6 Other Business 5.2.4.8 Promoters', Identity and Undertaking 5.2.4.9 Approval from the Exchange for Change in Shareholding Pattern 5.2.5 General Conditions 5.2.5.1 Educational Qualification 5.2.5.2 Professional Qualification 5.2.5.4 Common Applicability of Conditions 5.2.5.5 Financial Soundness 5.2.5.9 Unsound mind 5.2.5.10 Insolvent ....
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.... Withdrawal of Permission 6.1.17 Names to be Printed 6.1.18 Liability of Member / Trading Member Partners 6.1.19 Liability of Partners 6.1.20 Joint and Several Liability 6.1.21 Member / Trading Member Working in Firm Name 6.1.22 Partnership Dissolved on Declaration of a Defaulter 6.1.23 Register of Partnership Firms 6.1.24 Representative Member / Trading Member 6.1.24.1 Who may Authorize 6.1.24.2 Number of Representative Members / Trading Members 6.1.24.3 Approval or Rejection of Application 6.1.24.4 Termination ....
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....sp; 6.5.2 Requirements to be Fulfilled 6.5.3 Books of Accounts 6.7 Continuous Requirements for Membership / Trading Membership 6.7.1 Refresher Course 6.7.5 Right Vesting in Governing Board When Business/ Nomination not Activated/Exercised 6.7.6 Right of Nomination for Deceased Members 6.7.7 Payment of Dues 6.8 Buy-Back / Surrender of Membership / Trading Membership 6.8.2 Prohibition to Re-issue Buy-back / Surrender Right 6.8.3 Notice of Surrender 6.8.4 Acceptance or Refusal of Surrender 6.9 Notice of Resignation 6.9.1 Written Notice Required ....
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.... Absence of Discharge Certificate 6.16.6 Permission Necessary 6.16.7 Approval or Rejection of Application 6.16.8 Commission Terms 6.16.9 Annual Fee 6.16.11 Remisier not to Advertise 6.16.12 Remisier's Personal Business 6.16.13 Sub-agent 6.16.14 Remisier not to Share Brokerage with Clients 6.16.15 Refusal to Registration 6.16.16 Suspension 6.16.17 Cancellation 6.16.18 Termination 6.16.19 Register of Remisiers 6.16.20 Inspection of Register 6.17 Approved U....
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....Member Nominating During His Life Time 7.3.2 Form of Nomination in Favour of a Family Member 7.3.3 Form for Legal Heirs / Legal Representatives 7.3.4 Nomination Irrevocable 7.4 Notice of Nomination 7.5 Candidates to be Recommended 7.6 Objections 7.7 Member's / Trading member's Duty to Report 7.8 Dues and Claims 7.8.1 Dues of the Exchange 7.8.2 Liabilities Relating to Contracts 7.9 Consideration of Application 7.10 Inquiry 7.11 Admission of New Members / Trading Members 7.12 Admission Under Misrepresentation 7.13 Fresh Nomination 7.14 Payment of Entrance and ....
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.... 8.1 General Meeting 8.1.1 Number of Members/Trading Members 8.1.2 Adoption of Statement of Accounts 8.1.3 Appointment and / or Removal of Statutory Auditor 8.1.4 Election of Members to the Governing Board 8.1.5 Dealing with Immovable Property 8.1.6 Dealing with Funds 8.1.7 Distribution of Dividend, Bonus, etc 8.1.8 Extra-Ordinary General Meeting May Make Bye-laws 8.2 Powers of the Governing Board 8.2.1 Jurisdiction 8.2.2 General Powers 8.2.3 Governmental Powers 8.2.3.1 Chairman, Managing Director, Standing Committees I....
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.... 8.2.6.2 Review 8.2.6.3 Delegation of Powers in Emergency 8.2.7 Decision of Governing Board Final 8.2.8 Governing Board as Trustees 8.2.9 Indemnity to the Governing Board 8.3 Standing Committees 8.3.3 Audit Committee 8.3.5 Investors' Services Committee 8.3.7 Limitation of Constituting other Committees 8.3.8 Removal of Member 8.3.9 Casual Vacancy 8.3.10 Vacation of Office 8.3.11 Retiring Members 8.5 Managing Director 8.5.2 Delegation of Powers 8.5.3 ....
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.... 9.11.3 Notice of Candidates 9.11.4 Ballot When Not Necessary 9.11.5 Scrutineers 9.11.6 Voting 9.11.7 Elected Candidates 9.12 Vacancies in the Governing Board 9.12.1 Vacancy in the Office of Chairman 9.12.2 Leave 9.12.3 Vacancy 9.12.3.1 Suspension of Payment 9.12.3.2 Unsound Mind 9.12.3.3 Absence 9.12.3.4 Death, Suspension or Expulsion 9.12.3.5 Criminal Prosecution 9.12.3.6 Not Complying With....
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.... 10.1.4.4 Who May Be Present at Meetings 10.1.4.5 Who May Not Be Entitled to be Present at Meetings 10.1.4.6 Clarifications at Meetings 10.1.4.7 Suspended Member Not to be Present and Vote 10.1.4.8 Chairman of Meeting 10.1.4.9 Decision of Majority 10.1.4.10 Voting by Proxy 10.1.4.11 Voting 10.1.4.12 Poll 10.1.4.13 Validity of Votes 10.1.4.14 Casting of Votes 10.1.4.15 Minutes 10.2 Meetings o....
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.... Members/Trading Members And Others to Appear Before Meetings 10.2.3.20 Minutes 10.3 Meetings Of Standing Committees 10.3.1 Who May Convene And When 10.3.2 Quorum 10.3.3 Voting 10.3.4 Proceedings 10.3.5 Leave 10.3.6 Custody of Minutes 11 DISCIPLINARY PROCEEDINGS At present, the provisions relating to disciplinary proceedings are incorporated partly in the Rules and Partly in the Byelaws of stock exchanges. Clear cut provisions relating to the disciplinary action to be taken by the Governing Board, the Disciplinary Action Committee and the managing Director 11.1 Jurisdiction for Taking Disciplinary Action 11.2 The Governing Board May Expel Any Member/Trading Member ....
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.... 11.3.5 Imposition of Penalties 11.3.6 Commutation 11.3.7 Failure to Pay Fines and Penalties 11.3.8 Re-consideration/Review 11.3.9 The Managing Director 11.3.9.1 Disablement / De-activation Until Compliance of Requirements 11.3.9.2 Action No Subject to Appeal 11.4 11.4.1 Exclusive Powers in Disciplinary Matters 11.4.2 Appeal of the Governing Board 11.4.3 Authority to Call for Information 11.4.4 Withdrawal/suspension of Admission and Re-admission to Dealings on the Exchange 11.4.5 Reconsiderati....
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....tted 11.5.3.3 Business for Defaulting Client 11.5.3.4 Dealings with Clients 11.5.3.6 Business for Insolvent 11.5.3.7 Business Without Permission When Under Suspension 11.5.3.8 Business For or With Suspended or Expelled Member/ Trading Member or Defaulter 11.5.2.9 Business for Employees of Other Members/Trading Members 11.5.2.10 Business for Exchange Employees 11.5.2.11 Advertisement 11.5.2.12 Evasion of Margin Requirements 11.5.2.13 Brokerage Charge 11.6 RESPONSIBILITY/LIABILITY OF MEMBER/TRADING MEMB....
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.... of Holding of Base Minimum Capital 12.3.1.4 Manner of Holding Base Minimum Capital of Representative Member/Trading Member 12.3.1.5 Value of Base Minimum Capital to be Maintained 12.3.1.6 First Charge/Paramount Lien on Base Minimum Capital 12.3.1.7 Change of Securities 12.3.1.8 Conditions of Other Approved Securities 12.3.1.9 Return of Base Minimum Capital to Members/Trading Members or Designated Partners or Representative Members/Trading Members 12.3.1.11 Letter of Declaration 12.3.1.12 Nomination Form for Return of Base Minimum Capital and other Credit Amounts/Securities Lying with the Exchange/Clearing Corporation 12.4 ....
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....ecommended by the Committee may be implemented after demutualisation/ corporatisation. 8.4.1 Chairman to Preside -------Same------- 8.4.2 Chairman to Deal at Meetings Only -------Same------- 8.4.3 Representative of the Exchange -------Same------- 8.4.4 Ex-Officio Member of Committees -------Same------- 8.4.5 Calling of Meetings -------Same------- 8.5 Managing Director The redesignation of Executive Director as Managing Director may be implemented by Exchanges after demutualisation/ corporatisation. 9.11 Election Procedure for Elected Members 9.11.8 Election of Chairman SEBI circular SMD /SED/6919/93 dated April 20, 1993 has provided for election of chairman from members of the Governing Board. However the provision pertaining to non executive Chairman may be implemen....