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SEBI imposes Penalty for short­collection/non-collection of margins from clients in Equity and Currency Derivatives segments

Circular No. CIR/DNPD/7/2011    August 10, 2011
Sub: Short-collection/Non-collection of client margins (Derivatives Segments)

1. In consultation with BSE, MCX-SX, NSE and USE, it has been decided that Stock Exchanges shall levy penalty specified hereunder on trading members for short­collection/non-collection of margins from clients in Equity and Currency Derivatives segments:

For each member

‘a’

Per day Penalty as %age of
‘a’

(< Rs 1 lakh) And (< 10% of applicable margin)

0.5

(≥ Rs 1 lakh)     Or (≥ 10% of applicable margin)

1.0

Where a = Short-collection/non-collection of margins per client per segment per day

2. If short/non-collection of margins for a client continues for more than 3 consecutive days, then penalty of 5% of the shortfall amount shall be levied for each day of continued shortfall beyond the 3rd day of shortfall.
3. If short/non-collection of margins for a client takes place for more than 5 days in a month, then penalty of 5% of the shortfall amount shall be levied for each day, during the month, beyond the 5th day of shortfall.
4. Notwithstanding the above, if short collection of margin from clients is caused due to movement of 3% or more in the index (close to close value of Nifty/Sensex for all equity derivatives) and in the underlying currency pair (close to close settlement price of currency futures, in case of all currency derivatives) on a given day, (day T), then, the penalty for short collection shall be imposed only if the shortfall continues to T+2 day.
5. All instances of non-reporting shall amount to 100% short collection and the penalty as applicable shall be charged on these instances in respect of short collection.

6. If during inspection it is found that a member has reported falsely the margin collected from clients, the member shall be penalized 100% of the falsely reported amount along with suspension of trading for 1 day in that segment.

7. The penalty shall be collected by the Stock Exchange within five days of the last working day of the trading month and credited to its Investor Protection Fund.

8. SEBI shall examine implementation of this circular during inspection of the Stock Exchange.

9. This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

10. The circular shall come into force from September 1, 2011.

11. This circular is available on SEBI website at www.sebi.gov.in under the category “Derivatives- Circulars”.

Yours faithfully,

Sujit Prasad
General Manager
Derivatives and New Products Department
022-2644-9460
sujitp@sebi.gov.in

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