Securities and Exchange Board of India
DEPUTY GENERAL MANAGER
Market Regulation Department
E-mail: sundaresanvs@sebi.gov.in
SEBI/MRD/SE/Cir- 32/2003/27/08
August 27, 2003
The Executive Directors/Managing Director/
Administrators Of All Stock Exchanges
Dear Sir/Madam,
Sub:- “Pro – account” trading terminal
1. During the course of inspections carried out by SEBI and stock exchanges of the books of accounts and other documents of members, it has been observed that certain members are putting large number of orders on pro-account from various locations rather than using “pro-account” at the terminals located at the corporate office from where the owner / directors normally function. It has further been observed that these trades executed from various locations under “pro-account” are, many a time, transferred subsequently to the respective clients in the back office of the members. This practice is in clear violation of the requirement of putting the orders of clients under the appropriate client code through trading terminals.
2. With a view to check such misuse of the above facility, if any, stock exchanges are directed to ensure the following:-
2.1. Facility of placing orders on “pro-account” through trading terminals shall be extended only at one location of the members as specified / required by the members
2.2. Trading terminals located at places other than the above location shall have a facility to place orders only for and on behalf of a client by entering client code details as required / specified by the Exchange / SEBI.
2.3. In case any member requires the facility of using “pro-account” through trading terminals from more than one location, such member shall be required to submit an undertaking to the stock exchange stating the reason for using the “pro-account” at multiple locations and the stock exchange may, on case to case basis after due diligence, consider extending the facility of allowing use of “pro-account” from more than one location.
3. Stock Exchanges are directed to implement the above requirement with immediate effect and take necessary disciplinary action wherever such facility is being misused by any member.
4. The undersigned has been authorized to direct the exchanges to
4.1. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately.
4.2. bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and also to disseminate the same on the website.
4.3. communicate to SEBI, the status of the implementation of the provisions of this circular in Section II, Item No. 13 of the Monthly Development Report for the month of August, 2003.
5. This circular is being issued in exercise of 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.
Yours faithfully,
V S SUNDARESAN
