SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, A Wing, Gr. Floor,
224, Nariman Point, Mumbai 400 021
SMDRP/Policy/Cir-33/98
November 12, 1998
To
The Executive Directors/ Managing Directors
of all the Stock Exchanges.
Sir,
Sub: Decisions taken in the Meeting of the Executive Committee of the IECG held on October 15, 1998
The meeting of the Executive Committee of the Inter Exchange Co-Ordination Group was held on October 15, 1998 at Mumbai to discuss various issues relating to the capital market. The Stock Exchanges are advised to initiate immediate actions so as to implement the following decisions taken at the meeting:-
* Transfer of membership cards
It had been represented that the exchanges are facing problems in redressal of complaints of investors against brokers where the cards have already been transferred and the new member(transferee) has not been attending to the complaints. In such cases the investor/ client has been the sufferer since, the exchange has no recourse as the transferor has already sold the card. In this regard, it has been decided that in all future transfer cases an undertaking would have to be executed by the transferee to the effect that all the liabilities of the transferor would be taken over by the transferee. In all such a cases, where the undertaking has been obtained, the Exchange may release the base minimum capital of the outgoing member, if the exchange is satisfied that there would not be any difficulty in the future with respect to the honouring of the commitments of the transferor.
In the cases where the exchanges have presently retained the base minimum capital of the outgoing members, in the absence of an undertaking from the new member, the Exchanges may decide to retain the same in the form of fixed deposits, if so required.
* Eligibility criterion for the elected members on the Governing Boards/Council of Management etc.
It was decided to amend the last para of the circular number SMD/POLICY/IECG/5694/96 dated December 20, 1996, to be read as-
Further, in the event of suspension of trading, suspension of the registration as stock broker because of any disciplinary action taken against the member by
Exchange/SEBI, the member shall not be eligible to continue on the Governing Board and shall also not be eligible to be elected to the Governing Board for two years from the date of expiry of such suspension of trading or suspension of registration.
A member whose registration has been cancelled would not be allowed to continue on the Governing Board or be eligible to be elected to the Governing Board
AND
A new proviso to be added to the last para of the circular to be read as -.
The persons falling in the category of Notified Persons as per the Special Courts(Trial of Offences Relating to Transactions in Securities) Act, 1992, would not continue on the Governing Board and would not be eligible to be elected to the Governing Board for two years from the date the person is de-notified under the said Act.
Broker Database
The process of the compilation of the Broker Database has to be completed by April 30, 1998. Since the compilation was proposed to be done in a phased manner, the following deadlines have been earmarked for each of the sections.
Section I December 31, 1998
Section II March 31, 1998
Section III April 30, 1998
It has been decided that the above dates would be the final dates for the submission of the information for the respective sections and that if any of the member of the exchanges do not comply with the due dates by submitting the requisite information complete in all aspects then, the exchange would suspend the member from trading until the submission of the requisite information.
Appointment of public representatives on the Statutory Committees
It has been decided that the Exchanges would have to amend their Articles, rules, regulations, & bye-laws to incorporate an enabling clause in the Articles, rules, regulations, & bye-laws of the exchanges so as to enable the SEBI to appoint any person/persons as public representatives, other than the persons suggested by the exchanges, on the Statutory Committees of the exchanges.
Composition of Base Minimum Capital
In view of the monitoring difficulties expressed by the exchanges associated with the acceptance of securities as part of the Base Minimum Capital, it has been decided that the exchanges may substitute the portion of the securities by irrevocable bank guarantees from the members, if so desired subject to the following:-.
1. he bank guarantee should be from a specified scheduled commercial bank and should be non-conditional.
2. Members ” No Objection” should not be the pre-condition for the encashment of the bank guarantee by the Exchange.
3. The bank guarantee should be for a minimum period of three years and it should contain a clause which would enable any claim arising during the period of guarantee could be preferred within a period of six months from the expiry of the guarantee.
4.The bank guarantee should be made realisable within 24 hours of it’s presentation with the bank.
5. There should be a mechanism in place at the Stock Exchange to monitor the status of bank guarantees on a continuous basis.
Thanking you
Yours faithfully
P K Bindlish
Division Chief
Secondary Market, Depository
Research & Publications Department
E-mail : pkb@sebi.gov.in
