 OTC EXCHANGE OF INDIA Ref:: 1184/OTC/2004/60 Date: April 8, 2004 Dear Members/Dealers, Sub. : Margin Trading and Securities Lending and Borrowing SEBI
has issued circular nos. SEBI/MRD/SE/SU/Cir-15/04 dated
March 19, 2004 and SEBI/MRD/SE/SU/Cir-16/04 dated March 31,
2004 relating to margin trading and securities lending and
borrowing. The relevant provisions of the aforesaid SEBI
circulars which have come into effect from April 01, 2004
are given below: 1. Margin Trading 1.1 SEBI had, vide Circular No.SMD/Policy/Cir-6 dated 7/5/97, clarified, inter alia, that borrowing and lending of funds by a trading member in connection with or incidental to or consequential upon the securities business would not be disqualified under rule/s 8(1)(f) & 8(3)(f) of Securities Contract (Regulations) Rules, 1957. In continuation of the said circular, it has now been decided to allow the member-brokers to provide margin trading facility to their clients, in the cash segment, subject to the conditions mentioned in this Circular. 1.2
Securities
eligible for
margin trading 1.2.1 SEBI vide circular dated March 11, 2003 has categorized the securities under 3 groups, namely, Group 1, Group 2 and Group 3. The securities having mean impact cost of less than or equal to 1 and having traded on atleast 80% (+/-5%) of the days for the previous eighteen months, have been categorized as Group 1. The securities in Group 1 would be eligible for margin trading facility. 1.3
Eligibility
requirements for brokers to provide margin trading facility
to clients 1.3.1
Only corporate brokers with a “net worth” of at
least Rs.3.00 crore would be eligible to offer margin
trading facility to their clients. The “net worth” for the purpose of margin trading facility would mean
“Capital” (excluding preference share capital) plus free
reserves less non allowable assets, i.e fixed assets,
pledged securities, member’s card, non-allowable
securities, bad deliveries, doubtful debts and advances
(including debts and advances overdue for more than 3 months
or given to associates), pre paid expenses, intangible
assets and 30% of the marketable securities.”
1.3.2 The broker shall submit to the stock exchange a half-yearly certificate, as on 31st March and 30th September of each year, from an auditor confirming the net worth as specified in clause 1.3.1. Such a certificate shall be submitted not later than 30th April and 31st October of the year. 1.4 Agreement 1.4.1 The broker shall enter into an agreement with his client for providing the margin trading facility, on the lines of the model agreement, enclosed as Annexure 1. The broker/exchange may modify the agreement only for stipulating any additional or more stringent conditions, provided that no such modification shall have the effect of diluting any of the conditions laid down in the circular or in the model agreement. 1.5
Source of Funds for the
broker for providing margin trading facility to his clients
and maximum permissible borrowing by any broker 1.5.1 For the purpose of providing the margin trading facility, a broker may use his own funds or borrow from scheduled commercial banks and/or NBFCs regulated by RBI. A broker shall not be permitted to borrow funds from any other source. 1.5.2 The broker shall not use the funds of any client for providing the margin trading facility to another client, even if the same is authorised by the client. 1.5.3 At any point of time, the total indebtedness of a broker for the purpose of margin trading shall not exceed 5 times of his net worth, calculated as stated at para 1.3.1 above. 1.5.4 The “maximum allowable exposure” of the broker towards the margin trading facility shall be within the self imposed prudential limits and shall not, in any case, exceed the borrowed funds and 50% of his “net worth”. The term “exposure” will mean the aggregate outstanding margin trading amount in the books of the broker for all his clients. 1.5.5 While providing the margin trading facility, the broker shall be prudent and also ensure that there is no concentration on any single client. In any case, the exposure to any single client at any point of time shall not exceed 10% of the broker’s lendable resource (i.e. borrowed funds for the purpose of margin trading + 50% of net worth). 1.6 Margin
requirements 1.6.1 The initial and maintenance margin for the client shall be a minimum of 50% and 40% respectively, to be paid in cash. For this purpose; i. “initial margin” would mean the minimum amount, calculated as a percentage of the transaction value, to be placed by the client, with the broker, before the actual purchase. The broker may advance the balance amount to meet full settlement obligations ii. “Maintenance margin” would mean the minimum amount, calculated as a percentage of the market value of the securities, calculated with respect to the last trading day’s closing price, to be maintained by the client with the broker. 1.6.2 When the balance deposit in the client’s margin account falls below the required maintenance margin, the broker shall promptly make margin calls. However, no further exposure can be granted to the client on the basis of any increase in the market value of the securities. 1.6.3 The exchange/broker shall have the discretion to increase the margins mentioned at 1.6.1 above and in such a case, the margin call shall be made, as and when required. 1.7
Liquidation
of securities by the broker in case of default by the client 1.7.1 The broker may liquidate the securities if the client fails to meet the margin call made by the broker or fails to deposit the cheques on the day following the day on which the margin call has been made or where the cheque deposited by the client has been dishonoured. 1.7.2 The broker may also liquidate the securities in case the client’s deposit in the margin account (after adjustment for mark to market losses) falls to 30% or less of the latest market value of the securities, in the interregnum between making of the margin call and receipt of payment from the client. 1.7.3 However, the broker shall not liquidate or use in any manner the securities of the client in any situation other than the ones mentioned at paras 1.7.1 and 1.7.2. 1.8 Maintenance
of Records 1.8.1 The broker shall maintain separate client wise accounts of the securities purchased on margin trading with depositories and shall enable the client to observe the movement of securities from his account (through internet). The broker shall also maintain a separate record of details (including the sources) of funds used for the purpose of margin trading. 1.8.2 The books of accounts, maintained by the broker, with respect to the margin trading facility offered by it, shall be got audited on a half yearly basis. The broker shall submit an auditor’s certificate to the exchange/s, within one month from the date of the half year ending 31st March and 30th September of a year certifying, inter alia, the extent of compliance with the conditions of margin trading facility. This certificate is in addition to the certificate on net-worth specified in clause 1.3.2. 1.8.3 SEBI and the stock exchange/s shall have the right to inspect the books of accounts and/or any other documents maintained by the broker with respect to the margin trading facility. 1.9
Disclosure of exposure to the Margin Trading
Facility 1.9.1 The broker shall disclose to the stock exchange/s details on gross exposure including name of the client, Unique Identification Number (UIN) under the SEBI (Central Database of Market Participants) Regulations, 2003, name of the scrip and if the broker has borrowed funds for the purpose of providing margin trading facility, name of the lender and amount borrowed, on or before 12 noon on the following day. 1.9.2 The stock exchange/s shall disclose the scrip wise gross outstanding in margin accounts with all brokers to the market. Such disclosure regarding margin trading done on any day shall be made available after the trading hours on the following day, through its website. 1.9.3 The formats for such disclosures by the broker to the exchange and the exchange to the public are enclosed at Annexure 2 and 3 respectively. 1.9.4 The stock exchanges shall also put in place a suitable mechanism to capture and maintain all relevant details including member-wise, client-wise, scrip-wise information and source of funds of the members/dealers, pertaining to margin trading on their exchange, both on daily as well as on cumulative basis. 1.10
Arbitration 1.10.1The arbitration mechanism of the exchange would not be available for settlement of disputes, if any, between the client and broker, arising out of the margin trading facility. However, all transactions done on the exchange, whether normal or through margin trading facility, shall be covered under the arbitration mechanism of the exchange. 1.11
Investor Protection Fund and Trade/Settlement
Guarantee Fund 1.11.1 The amounts lying in the aforesaid funds would not be available for settling any loss suffered in connection with the margin trading facility. However, the aforesaid funds will continue to be available for all transactions done on the exchange, whether normal or through margin trading facility. 1.12 General
provisions 1.12.1The brokers wishing to extend the facility of margin trading to their clients would be required to obtain prior permission from the exchange/s where the margin trading facility is proposed to be provided. The exchange shall have the right to withdraw this permission at a later date, after giving reasons for the same. 1.12.2 A broker should take adequate care and exercise due diligence before providing margin trading facility to any client. Any broker providing margin trading facility to a client shall ensure that the client has obtained a Unique Identification Number (UIN) under the SEBI (Central Database of Market Participants) Regulations, 2003. (SEBI vide its subsequent circular SEBI/MRD/SE/SU/Cir-16/04 dated March 31, 2004 has clarified that since the notified date for obtaining the new Unique Identification Number (UIN) by the intermediaries registered with SEBI has been postponed to June 30, 2004 and some intermediaries have informed SEBI that as at present, they are not in a position to obtain UIN for all their clients availing of margin trading facility in a short period of time on account of logistic difficulties, it has been decided to allow a further period of 3 months, i.e., up to June 30, 2004, to the clients who want to avail margin trading facility to obtain an UIN. Till such time the clients obtain the UIN, the broker shall obtain suitable undertaking from the clients and do due diligence to ensure that the client is not availing the margin trading facility from more than one broker at any point of time) 1.12.3 A client will be allowed to obtain margin trading facility from one broker per exchange for buying securities in that exchange. To ensure this, it shall be obligatory on the part of every broker to, a) obtain a declaration from his client whether he has availed of any margin trading facility from any broker in any exchange, or whether his request for margin trading with any broker was rejected and if so, in both the cases, obtain the name of the broker and his registration number; and b) also verify the details from the concerned broker/s 1.12.4 Before providing margin trading facility to a client who has already availed of margin trading facility from another broker in the same exchange, the broker shall ensure that the client has liquidated his outstanding in the margin trading account with the other broker, and obtain a certificate to this effect in writing from that broker. 2
Securities Lending and Borrowing 2.1 SEBI had, in 1997, formulated a scheme for securities lending and borrowing (copy enclosed as Annexure 4) under which certain intermediaries approved by SEBI could provide the securities lending and borrowing facility. 2.2 The entities desirous of offering the facility of securities lending and borrowing may seek registration with SEBI for the same under the scheme. 2.3
Borrowing
by Clearing Corporation/Clearing House 2.3.1
The clearing corporation/clearing house would require
to be registered as an approved intermediary with SEBI,
under the SEBI scheme for securities lending and borrowing,
for handling settlement shortages. 2.3.2
The
clearing corporation/house may borrow, on behalf of the
members/dealers, securities for the purpose of meeting
shortfalls, if any, in the settlement, subject to the
following: (i) The Clearing Corporation/House shall borrow the required securities to meet the shortfall on the day of settlement, for a maximum period of 7 trading days, excluding the day of borrowing. (ii)
The defaulter selling broker may make the
delivery within 3 trading days from the due date, i.e. the
settlement date, subject to charges for late delivery as may
be prescribed by the stock exchanges. (iii)
In the event of the defaulted selling broker
failing to make the delivery within the aforesaid 3 trading
days, the Clearing Corporation/House shall buy the
securities from the open market and return the same to the
lender within 7 trading days.
iv)
The cost, if any, incurred by the clearing
corporation/house in this regard shall be recovered from the
defaulted selling broker.
This would be in addition to other penal charges
referred to at point (ii) above.
v)
The return of the borrowed securities by the
Clearing Corporation / House should be independent of the
normal settlement. 2.3.3 In case of the inability of the clearing corporation/house to borrow the securities fully or partly for the purpose of meeting the shortfall in the settlement, the outstanding transaction shall be closed out, as described below:
i.
The
Clearing Corporation/House shall effect close out of such
remaining quantity and/or securities by paying monetary
compensation to the receiving/buying clearing member/s
worked out as under and debiting such amount to the account
of the defaulting selling / delivering clearing member/s :
10%
on the highest of the closing prices on the days from the
trading day till the settlement day. 2.3.4
The exchanges and the clearing house/clearing
corporation shall closely monitor the shortages in
securities in every exchange at the time of delivery in the
settlement and shall take appropriate punitive action
against any member who is found to be defaulting frequently
in the delivery of securities. 2.3.5
The following circulars issued by SEBI with respect
to auction and/or closing out regarding the cash market
stand modified accordingly.
i.
Circular
No. SEBI/SMD/SE/Cir- 26/2003/25/06
dated June 25, 2003. ii. Circular No. SMD/POLICY/Cir-21/02 dated September 04, 2002. iii. Circular No. SMD/Policy/Cir-08/2002 dated April 16, 2002. iv. Circular No. SMD/Policy/Cir-03/2002 dated January 30, 2002
v. Circular No.TSMD/POLICY/IECG/5548/96
dated December 09, 1996
(SEBI vide its subsequent circular no. SEBI/MRD/SE/SU/Cir-16/04 dated March 31, 2004 has clarified that the exchanges have submitted that they are in the process of getting their clearing corporation/house registered as an intermediary under the SEBI Securities lending and borrowing scheme (SLS), for handling settlement shortages. Therefore, pending registration under SLS, the stock exchanges are advised to continue with the existing system for handling settlement shortages. The exact date of implementation of the close-out procedure as per the circular no.15/2004 dated 19th March 2004 would be decided by NSE in consultation with BSE) Members/Dealers are requested to take note of the above. For OTC Exchange of India R.Anand Asst. Vice President Annexure
1 MODEL MARGIN TRADING AGREEMENT This Agreement (hereinafter
referred to as “Agreement”)
is entered into on this _________ day of ______________
20_____, by and between _________(broker name)_____________,
a Company incorporated under the Companies Act, 1956, having
its registered office at
_________________________________(Head office) and having
one of its Branch Office at
____________________________________________________________________________________________________________________________________________________________________________(Branch
office address) (hereinafter referred to as “the broker”, which expression shall, unless repugnant to the
meaning or context thereof, be deemed to mean and include
its successors and assigns) of the One Part; And
M/s/Mr/Mrs/Ms
_____________________________________________ , unique
client code being________________, whose details are as
below ____________________________________, ____________________________________________________________________________________
(hereinafter referred to as the “Client” which expression shall, unless repugnant to the context or
meaning thereof be deemed to include his/her/its heirs
and/or legal representatives and/or successors and/or
executors and/or permitted assignees and/or administrators
and/or successors in business) of the Other Part WHEREAS: (a)
(a)
________(BROKER)_____
is engaged, inter alia, in the business of stock broking and
is a Trading Member of _______________________ (Names of
stock exchange(s)), with SEBI registration Number (s)
____________________________________.
(b)
(b)
________(BROKER)_____
is engaged in providing margin Trading Facility (hereinafter
referred to as MTF), as described hereinafter, to those
clients who are registered with it as client for availing
Stock Broking Services and have also entered into an
agreement for availing of the Margin Trading Facility. (c)
(c)
The
Client is registered with ________(BROKER)_____
as a client for stock broking services and is
desirous of availing Margin Trading Facility, and has
approached ________(BROKER)_____ with that
request (d)
(d)
Upon
the request of the Client, ________(BROKER)_____
has agreed to provide the said facility to the client
subject to the terms and conditions contained in this
Agreement NOW THIS AGREEMENT WITNESSETH AND IT
IS HEREBY AGREED BY AND BETWEEN ________(BROKER)_____
AND CLIENT AS UNDER: I. DEFINITIONS & INTERPRETATIONS
1.
“Initial margin”
means the minimum amount, calculated as a percentage of the
transaction value, to be placed by the client, with the
broker, before the actual purchase. The broker will advance
the balance amount to meet full settlement obligations. 2.
“Maintenance
margin” means the minimum amount, calculated as a
percentage of the market value of the securities, calculated
with respect to the last trading day’s closing price, to
be maintained by the client with the broker. 3.
“Margin
Trading Facility” or MTF means and refers to the
facility pursuant to which part of the transaction value due
to the Stock Exchange, at the time of purchase of Shares,
shall be paid by ______________(BROKER) on behalf of the
Client on Client’s request, on such terms and conditions
as contained in this Agreement. 4.
“Mark to Market
Loss” or “MTM Loss” means
the difference between the purchase value of the shares and
the marked to market value of these shares. 5.
“Mark to Market Value
of shares” or “MTM Value of Shares” means the value of shares calculated with reference to
the previous day’s closing price on the Stock Exchange. 6.
“Share/s” means
and refer to the shares / stock / securities eligible for
margin trading facility, as specified by the SEBI from time
to time and approved by ______________(BROKER) for the
purpose of granting MTF. 7.
“Stock Exchange” means
the stock exchange on which the shares has been purchased Unless the
Context otherwise requires: 1.
The expression month and year shall be to the
calendar month or calendar year 2.
Reference to date or dates which do not fall on a
working day, shall be construed as reference to the day or
date falling on the immediately subsequent Working day II. CLIENT REPRESENTATION:
The Client hereby undertakes to: 1.
Place the initial and maintenance margin amounts as
the Broker
may specify to the Client from time to time, subject to
requirements specified by SEBI. 2.
Authorize retention of the shares with the broker
upon the receipt of the same in the pay out from the Stock
exchange till the amount due in respect of the said
transaction including the dues to the broker is paid in full
by the client. 3.
To pay to the broker - brokerage, commission, fees,
transaction costs, service tax, stamp duty and other taxes /
expenses as are prevailing from time to time and as they
apply to the Client’s account, transactions and to the
Services that the broker renders to the Client. 4.
Abide by any revision in any of the terms of this
agreement as may be agreed between the parties III. CLIENT’S
WARRANTIES
The Client warrants, represents and assures
______________(BROKER) that: 1.
He has the necessary authority to enter into this
Agreement and observe and perform the obligations herein
contained. 2.
He shall duly observe and perform the conditions and
obligations stated herein. IV.
BROKER’SREPRESENTATION The _______________(Broker) represents
that: 1.
On entering into this agreement and deposit of intial
margin by the client, the _______________(Broker) undertakes
to settle the obligation towards the Stock Exchange for and
on behalf of the Client . The Client hereby agrees and
authorizes the _______________(Broker)
to make such payment on his behalf. V.
MARGIN TRADING FACILITY 1.
The margin facility shall carry interest at _% per
annum payable ________. 2.
The Client shall be free to take the delivery of the
Share at any time by repaying the amounts that was paid by
______________(BROKER) to the Stock Exchange towards Shares,
and further paying all such sums of money as may be due
towards brokerage, transaction costs and charges, service
tax and other costs towards his transactions. Alternatively,
Client may at any time, but not before the delivery of the
Shares has been actually received by ______________(BROKER),
choose to sell the Shares on the Stock Exchange by issuing
appropriate instructions to _______________(Broker) 3.
Provided however that, the Client may at his risk as
to cost and consequences, choose to sell the Shares prior to
receipt of confirmation from the Stock Exchange of delivery
of Securities against his Purchase, and in such situation,
the Client shall be fully responsible to bear the losses /
costs arising due to auctions / closeout by the Stock
Exchange, in the event the delivery against purchase fails
to materialise 4.
Where the Shares are sold as provided in sub-clause
2/3 above, ______________(BROKER) will effect the pay-in of
Shares to the Stock Exchange in accordance with the Stock
Exchange requirements. Upon receipt of sale proceeds from
the Stock Exchange towards the sale of Shares,
______________(BROKER) shall, after deducting therefrom
brokerage, fees, charges, levies, taxes, duties and other
costs, charges and expenses, and further deducting amounts
due to it from the Client on account of moneys paid by
______________(BROKER) on his behalf to the Stock Exchange
at the time of purchase of Shares, effect the net payment to
the Client 5.
______________(BROKER) may, at its sole and absolute
discretion, revise the limit of initial and/or maintenance
margin amount from time to time. The Client agrees and
undertakes to abide by such revision, and where there is an
upward revision of such margin amount, he agrees to make up
the shortfall within such time as ______________(BROKER) may
permit, failing which the Client shall be deemed to be in
breach of this Agreement. 6.
The MTF shall be provided only in respect of such
Shares as may be decided by ______________(BROKER) from time
to time. 7.
The Client may furnish further Margin Amount from
time to time for availing higher MTF Limit. VI. MONITORING
CLIENT’S POSITIONS
1.
______________(BROKER) shall monitor and review on a
continuous basis the client’s positions with regard to the
margin trading facility. 2.
The (BROKER) shall make a ‘margin call’ requiring
the client to place such Margin Amount as may be specified
by ______________(BROKER) with a view to make up for the MTM
Loss, If any, in accordance with SEBI requirements. 3.
On receipt of ‘margin call’ intimation from
______________(BROKER), the Client shall make good such
deficiency by placing the further Margin Amount, within such
time as is specified by SEBI, failing which the Client shall
be deemed to be in breach of this Agreement 4.
Notwithstanding what is stated above,
______________(BROKER) may immediately sell the Shares, in
the circumstances specified by SEBI and for this purpose,
the Client do hereby expressly authorize such sale, and
thereafter, the sale proceeds shall be treated in the manner
specified in Clause V.4 above. The ______________(BROKER) may, in its sole discretion, determine
which Shares is/are to be sold, and / or which contract(s)
is/are to be closed. 5.
The Client agrees and understands that
______________(BROKER) shall have full freedom and authority
to vary, modify, revise the initial and maintenance margin
amount, minimum transaction amount from time to time,
subject to the SEBI requirements in this respect, and Client
agrees to abide by such variation, modification or revision VII. PLEDGE
OF SECURITIES
Notwithstanding
anything contained in this Agreement, the Client hereby
pledges and shall have deemed to have pledged forthwith the
Shares, at the time when received by ______________(BROKER),
as security for repayment and settlement of amounts due to
______________(BROKER) from the Client under Margin Trading
Facility along with interest and other amounts payable
thereunder. The Client hereby records that the share
certificates account statements or any other documents
evidencing the right, title and interest of the Client as
the holder of the Securities shall remain deposited and
shall be deemed to have been deposited by the Client as
having been deposited being marketable securities, for
repayment of the amounts due under the Margin Trading
Facility and this instrument accordingly shall be deemed to
be connected with the mortgage of the marketable securities
/ Shares as contemplated by Section 24 of the Bombay Stamp
Act, 1958/Section 23A of the Indian Stamp Act, 1899 or the
corresponding/relevant provisions of the Stamp Act as in
force in the relevant state. VIII. BREACH
OF THIS AGREEMENT
In the event of Client committing any breach of any terms
or condition of this Agreement, ______________(BROKER) shall
be entitled to terminate this Agreement forthwith. However,
______________(BROKER) at its option may elect to give
notice to the Client of such duration, and extended from
time to time, if so decided by ______________(BROKER),
requiring the Client to cure the breach. IX. TERMINATION
& EXPIRY
1.
This Agreement shall stand terminated forthwith, as
provided in Clause VIII
above, or on the Client failing to cure the breach within
the time period as provided in the Notice given thereunder. 2.
This Agreement shall automatically stand terminated,
without any further act on the part of any party hereto, on
and from the date of termination/determination of the Client
Member Agreement executed between the parties hereto in
respect of stock broking services provided / being provided
by ______________(BROKER) to the Client. 3.
In the event of termination / determination of this
Agreement, the Client shall forthwith settle the dues of
______________(BROKER). ______________(BROKER) shall be
entitled to immediately adjust the Margin Amount against the
dues of the Client, and the Client hereby authorizes
______________(BROKER) to make such adjustment. 4.
After such adjustment, if any further amount is due
from the Client to ______________(BROKER), the Client shall
settle the same forthwith. Upon full settlement of all the
dues of the Client to ______________(BROKER),
______________(BROKER) shall release the balance amount to
the Client. 5.
In the event of failure of the Client to settle the
dues of ______________(BROKER) within ____ days,
______________(BROKER) shall be entitled to enforce its
rights and shall be entitled to sell off Shares, and
adjust/apply the net sale proceeds thereof in recovery of
its dues. X. NOTICES
& COMMUNICATIONS
1.
Any notice or other communication to be given by one
party to the other under or in connection with this
Agreement shall be in writing and shall be deemed duly
served if delivered personally or sent by confirmed
facsimile transmission or by prepaid registered post or
email to the addressee at the address / number (if any), of
that party set opposite its name below: (a)
Notices /
Communications to be sent to ______________(BROKER): Address
: ________________________________________________________
________________________________________________________ Fax
: ______________________ E-mail:
(b)
Notices / Communications to be sent to the Client: Address:
_________________________________________________________
_________________________________________________________ Fax:
___________________________________ Email: ___________________________________ XI. WAIVER
Subject to SEBI requirements, any of the terms and
conditions of this Agreement may be waived at any time by
______________(BROKER), but no such waiver shall affect or
impair the right of ______________(BROKER) to require
observance and performance of any other term or condition
hereof and no waiver hereunder shall be considered valid
unless made in writing and signed by ______________(BROKER)
and no such waiver, or any failure or delay on the part of
______________(BROKER) to exercise any right, power or
privilege hereunder shall be deemed a waiver of any
subsequent breach of default nor shall any single or partial
exercise of any such right, power or privilege preclude any
further exercise thereof or the exercise of any other right,
power or privilege. XII. CLIENT
CONFIDENTIALITY
The
member hereby undertakes to maintain, the details of the
client as mentioned in the client registration form or any
other information pertaining to the client, in confidence
and that he shall not disclose the same to any person /
entity except as required under the law Provided
however, that the member may share the details of the client
as mentioned in the client registration form or any other
information pertaining to the client with parties/entities
other than required under law with the express permission of
the client IN WITNESS WHEREOF the
parties hereto have set their respective hands on the date
above-mentioned Signed
and delivered by _______________
) ___________________________________
) for
and on behalf of
)
_______________(Broker)
) in
the presence of:
) ___________________________________
) Signed
and delivered by the within named
) Client,
_____________________________
) __________________________________
)
X in
the presence of:
) __________________________________
)
Annexure
2
Format
of the Daily Reporting by the members/dealers to the
Exchange on the amount financed by them under the Margin
Trading Facility
Name of
the member
Clearing No.
SOURCES
OF FUNDS (Refer to item No. 4 above)
Note: Disclosure is required to be made on or before 12 noon on the following day.
Annexure
3
Format
for the dissemination of information by the stock exchange
to the market
Note: Disclosure is required to be made immediately after the trading hours on the following day (in respect of previous day’s margin trading facility). Annexure
4 SECURITIES LENDING SCHEME
1.
PRELIMINARY
(1) This scheme shall be called the Securities Lending Scheme, 1997
2. APPLICABILITY (1) It shall come into force on
6th February 1997. 3. DEFINITIONS (1) In this scheme, unless the context otherwise requires :- (a.) “approved intermediary” means a person duly registered by the Board under the guidelines/scheme through whom the lender will deposit the securities for lending and the borrower will borrow the securities;
(b.) “Board” means the Securities and Exchange Board of India (SEBI) established under Section 3 of the Securities and Exchange Board of India Act, 1992;
(c.) “borrower” means a person who borrows the securities under the scheme through an approved intermediary; (d.) “corporate benefits” shall include dividends(gross), rights, bonus, redemption benefits, interest, or any other right or benefit accruing on the securities lent; (e.) “lender” means a person who deposits the securities registered in his name or in the name of any other person duly authorised on his behalf with an approved intermediary for the purpose of lending under the scheme; (f.) “securities” has the meaning assigned to it in Section 2 of the Securities Contracts (Regulation) Act, 1956; (g.) “scheme” means Securities Lending Scheme, 1997 for lending of securities through an approved intermediary to a borrower under an agreement for a specified period with the condition that the borrower will return equivalent securities of the same type or class at the end of the specified period along with the corporate benefits accruing on the securities borrowed.
(2) Words and expression used and not defined for the purpose of this Scheme
but defined in the Securities Contracts (regulation) Act,
1956 or SEBI Act shall have the meanings respectively
assigned to them in that Act or rule and regulations made
thereunder. 4.
SCHEME (1) The lender shall enter into an agreement with the approved intermediary for depositing the securities for the purpose of lending through approved intermediary as per the scheme and the borrower shall enter into an agreement with the approved intermediary for the purpose of borrowing of securities and as such there shall be no direct agreement between the lender and the borrower for the lending or borrowing of securities.
(2) The agreement between the lender and the approved intermediary shall provide that when the lender has deposited the securities with the approved intermediary under the scheme, the beneficial interest shall continue to remain with the lender and all the corporate benefits shall accrue to the lender.
(3) The lender shall be entitled to deposit only those securities registered in his name or in the name of any other person duly authorised on his behalf with the ‘approved intermediary’ for the purpose of lending.
(4) The lending of securities under the scheme through an approved intermediary and the return of the equivalent securities of the same type and class by the borrower shall not be treated as disposal of the securities.
(5) The approved intermediary shall issue a receipt to the lender acknowledging the deposit of the securities by the lender.
(6) The approved intermediary shall unless otherwise provided in the agreement with the lender, guarantee the return of the equivalent securities of the same type and class to the lender along with the corporate benefits accrued on them during the tenure of the borrowing. Even in case of failure of the borrower to return the securities or corporate benefits the approved intermediary shall be liable for making good the loss caused to the lender.
(7) The approved intermediary may retain the securities deposited by the lender in its custody as a trustee on behalf of the lender.
(8) The approved intermediary shall in accordance with the terms of the agreement entered into with the lender, be entitled to lend the securities deposited by the lender to the borrower from time to time.
(9) Under the scheme, the title of the securities lent to the borrower shall vest with the borrower and the borrower shall be entitled to deal with or dispose of the securities borrowed in any manner whatsoever.
(10) The agreement between the borrower and the approved intermediary shall inter- alia provide that the borrower shall have an obligation to return, the equivalent number of securities of the same type and class borrowed, to the approved intermediary within the time specified in the agreement along with all the corporate benefits which have accrued thereon during the period of borrowing.
(11) The agreement between the lender and the approved intermediary and the borrower and the approved intermediary, shall also provide for the following terms and conditions :- (a) the period of depositing/lending of securities, (b) charges or fees for depositing/lending and borrowing, (c) collateral securities for borrowing, (d) provisions for the return including premature return of the securities deposited or lent; and (e) mechanism for resolution of the disputes through arbitration.
(12) The borrower shall not be entitled to discharge his liabilities of returning the equivalent securities through payment in cash or kind.
(13) The approved intermediary shall be entitled to receive from the borrower collateral security and fees for lending the securities.
(14) The borrower shall deposit the collateral securities with the approved intermediary in the form of cash, bank guarantee, Government securities or certificate of deposits or other securities as may be agreed upon with the approved intermediary for the purpose of ensuring the return of the securities.
(15) When the approved intermediary returns securities to the lender, the approved intermediary shall issue a receipt to the lender.
(16) The approved intermediary shall maintain a complete record of the securities deposited by the lender, securities lent to the borrower, the securities received from the borrower and the securities returned to the lender by the approved intermediary.
(17) In the event of the failure of the borrower to return the securities in terms of the agreement, the borrower shall become a defaulter and the approved intermediary shall have the right to liquidate the collateral deposited with it, in order to purchase from the market the equivalent securities of the same class and type for purpose of returning the equivalent securities to the lender. The approved intermediary shall be entitled to take any action as deemed appropriate against the defaulting borrower to make good its loss, if any. (18) The approved intermediary shall notify defaults by any borrower to the Board, the concerned stock exchange and the concerned authorities for initiation of appropriate action against the defaulter.
5. ELIGIBILITY CRITERIA FOR APPROVED INTERMEDIARY No person shall act as an approved intermediary unless a certificate of registration has been obtained from the Board.
For the grant of a certificate of registration the Board shall take into account the following:
(a) whether the applicant is a person with minimum networth of Rs.50 crores; (b) if the applicant is a clearing house or a clearing corporation and it has the networth specified by the Board after consulting the stock exchange; (c) whether the applicant has adequate infrastructure facilities like office space, equipment and manpower experienced in dealing in securities to effectively discharge its activities.
6. OBLIGATIONS AND RESPONSIBILITIES OF APPROVED INTERMEDIARY An approved intermediary shall comply with the following obligations and responsibilities:-
(1) The approved intermediary shall abide by the scheme and the guidelines issued by the Board from time to time with respect to its activity of securities lending. (2) The approved intermediary shall comply with the requirement of eligibility criteria for the lender and the borrower with the eligibility criteria, if, specified by the Board. (3) The approved intermediary shall specify in the respective agreement the fees payable to the lender and the fee to be charged from the borrower. (4) The approved intermediary shall specify the amount and type of collateral acceptable for the purpose of securities lending as well as the norms for the valuation of securities. It may also specify the mechanism of sharing the income on collateral with the borrower. (5) The approved intermediary at the request of lender shall issue a receipt acknowledging the deposit of the securities by the lender. The receipt shall include the complete details of securities deposited such as name of security, quantity, face value, certificate number and folio number of the lender along with the date from when the lender has become the registered holder of the security. Similarly, when securities are returned to the lender by approved intermediary, it shall issue a receipt containing the above details to enable the lender to use the same as a proof of continuity of his holdings. (6) The approved intermediary shall maintain a complete record of the securities deposited by the lender, securities lent to the borrower, the securities received from the borrower and the securities returned to the lender by the approved intermediary. The records of the approved intermediary shall be open for inspection by the Board or any other person duly authorised by the Board for this purpose. (7) The approved intermediary shall maintain and make available to the Board such information, documents, returns and reports as may be specified from time to time. (8) The approved intermediary shall abide by the code of conduct as may be specified by the Board. (9) Nothing in this scheme shall exempt the approved intermediary from discharging any obligations placed on it by any law, regulations and guidelines.
7.
GUIDELINES FOR APPROVED INTERMEDIARIES Terms of Registration : (a) The registration shall be for an initial period of three years. (b) The approved intermediary as a condition of registration shall be required to pay fees as specified by the Board. (c) The Board shall have the right to suspend/cancel the registration of the approved intermediary in case of violation of the terms of the scheme. (d) Notwithstanding anything contained above, no action shall be initiated by the Board without following the principles of natural justice.
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