Rights and Obligations of Stock Brokers, Sub Brokers and Clients
1. The client shall invest or trade only in those securities, contracts, or other instruments admitted to dealings on the Exchanges as defined in the Rules, Bye-laws, and Regulations of the Exchanges and the Securities and Exchange Board of India (SEBI), and circulars or notices issued thereunder from time to time.
2. The stock broker, sub-broker, and the client shall be bound by all the Rules, Bye-laws, and Regulations of the Exchanges and circulars or notices issued thereunder, and the Rules and Regulations of SEBI and relevant notifications of Government authorities as may be in force from time to time.
3. The client shall satisfy itself about the capacity of the stock broker to deal in securities and/or derivatives contracts and wishes to execute orders through the stock broker. The client shall continue to satisfy itself of such capability before placing orders from time to time.
4. The stock broker shall continuously satisfy itself about the genuineness, financial soundness, and investment objectives of the client 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 the 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 cooperate with the stock broker in all its dealings with the client.
Client Information
7. The client shall furnish all required details in full in the Account Opening Form along with supporting documents as mandated by stock exchanges and SEBI from time to time.
8. The client shall familiarize himself with all mandatory provisions in the Account Opening documents. Any additional clauses or documents specified by the stock broker shall be non-mandatory and subject to acceptance by the client.
9. The client shall immediately notify the stock broker in writing of any change in information provided in the Account Opening Form, including details of winding-up petitions, insolvency petitions, or litigation which may materially affect the client’s capacity. The client shall periodically update financial information.
10. The stock broker and sub-broker shall maintain client details confidentially and shall not disclose such information except as required by law or regulatory requirements. However, the stock broker may disclose such information with the express permission of the client.
Margins
11. The client shall pay applicable initial margins, withholding margins, special margins, or any other margins as required by the stock broker, Exchange, or SEBI. The stock broker may, at its discretion, collect additional margins even if not required by the Exchange or SEBI, and the client shall pay such margins within the stipulated time.
12. Payment of margins does not necessarily imply complete satisfaction of all dues. On settlement of trades, the client may be required to pay or may be entitled to receive additional amounts as per contract terms.
Transactions and Settlements
13. The client shall place buy or sell orders in writing or in any mutually agreed manner. The stock broker shall execute trades only under the Unique Client Code assigned to the client.
14. The stock broker shall keep the client informed about trading and settlement cycles, delivery and payment schedules, and any changes therein. The client shall comply with such schedules.
15. Client funds and securities shall be kept in a separate account and shall not be used by the stock broker for any purpose other than those permitted under SEBI and Exchange regulations.
16. Where trades are cancelled by the Exchange suo moto, all such trades executed on behalf of the client shall stand cancelled automatically, and the stock broker may cancel corresponding contracts.
17. All transactions are subject to the Rules, Bye-laws, and Regulations of the Exchanges and parties submit to the jurisdiction of the courts specified by such Exchanges.
Brokerage
18. The client shall pay brokerage and statutory levies as applicable. The stock broker shall not charge brokerage exceeding the maximum permissible limits prescribed by the Exchanges or SEBI.
Liquidation and Close-Out of Positions
19. The stock broker shall be entitled to liquidate or close out client positions for non-payment of margins, outstanding debts, or other obligations. Losses and financial charges shall be borne by the client.
20. In the event of death or insolvency of the client, the stock broker may close out transactions and recover losses from the client’s estate. Any surplus shall be payable to nominees or legal heirs.
21. The stock broker shall report defaults in payment or delivery to the relevant Exchange, including details of directors, promoters, partners, or proprietors where applicable.
Dispute Resolution
22. The stock broker shall provide contact details of the relevant Exchanges and SEBI.
23. The stock broker shall cooperate in resolving client grievances.
24. Disputes shall be referred to arbitration as per Exchange rules.
25. Arbitration awards shall be implemented by the stock broker.
26. Instructions issued by authorized representatives for dispute resolution shall be binding.
Termination of Relationship
27. The relationship shall terminate if the stock broker ceases to be a member of the Exchange or loses SEBI registration.
28. Either party may terminate the relationship with one month’s written notice. Rights and obligations for past transactions shall continue.
29. In case of termination of sub-broker relationship, the client shall become a direct client of the stock broker unless the client opts to terminate.
Additional Rights and Obligations
30. The stock broker shall protect client rights relating to dividends, bonus shares, and other benefits.
31. Accounts shall be reconciled periodically.
32. Contract notes shall be issued within one working day of trade execution.
33. Payout of funds or securities shall be made within one working day of receipt from the Exchange.
34. Periodic statements of accounts shall be provided to the client.
35. Daily margin statements shall be issued, including collateral details.
36. The client shall ensure legal capacity to enter into transactions.
37. The stock broker shall not compel the client to execute Power of Attorney (PoA) or Demat Debit and Pledge Instruction (DDPI).
Electronic Contract Notes (ECN)
38. Clients opting for electronic contract notes shall provide a valid email ID and notify changes in writing.
39. ECNs shall be digitally signed, encrypted, and compliant with the IT Act, 2000.
40. Non-receipt of bounced email notification shall be treated as successful delivery of the contract note.
The stock broker shall retain ECN and acknow- ledgement of the e-mail in a soft and non-tamperable form in the manner prescribed by the exchange in compliance with the provisions of the IT Act, 2000 and as per the extant rules/regulations/ circulars/ guidelines issued by SEBI/Stock Exchanges from time to time. The proof of delivery i.e., log report generated by the system at the time of sending the contract notes shall be maintained by the stock broker for the specified period under the extant regulations of SEBI/stock exchanges. The log report shall provide the details of the contract notes that are not delivered to the client/e- mails rejected or 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.
- 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 email 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.
- 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
1. In addition to the specific rights set out in this document, the stock broker, sub-broker and the client shall be entitled to exercise any other rights which the stock broker or the client may have under the Rules, Bye-laws and Regulations of the Exchanges in which the client chooses to trade and circulars/notices issued thereunder or Rules and Regulations of SEBI.
2. The provisions of this document shall always be subject to Government notifications, any rules, regulations, guidelines and circulars/notices issued by SEBI and Rules, Regulations and Bye laws of the relevant stock exchanges, where the trade is executed, that may be in force from time to time.
3. The stock broker and the client shall abide by any award passed by the Arbitrator(s) under the Arbitration and Conciliation Act, 1996. However, there is also a provision of appeal within the stock exchanges, if either party is not satisfied with the arbitration award.
4. Words and expressions which are used in this document but which are not defined herein shall, unless the context otherwise requires, have the same meaning as assigned thereto in the Rules, Byelaws and Regulations and circulars/notices issued thereunder of the Exchanges/SEBI.
5. All additional voluntary clauses/document added by the stock broker should not be in contravention with rules/regulations/notices/ circulars of Exchanges/SEBI. Any changes in such voluntary clauses/document(s) need to be preceded by a notice of 15 days. Any changes in the rights and obligations which are specified by Exchanges/SEBI shall also be brought to the notice of the clients.
6. If the rights and obligations of the parties hereto are altered by virtue of change in Rules and regulations of SEBI or Bye-laws, Rules and Regulations of the relevant stock Exchanges where the trade is executed, such changes shall be deemed to have been incorporated herein in modification of the rights and obligations of the parties mentioned in this document.