Dated: 22nd December 2005



Sub: Financing of securities transactions and transfer of securities & funds


Attention of members of the Exchange is drawn to SEBI Circular No. SEBI/MRD/SE/SU/Cir-15/04, dated 19th March 2004 regarding margin trading and securities lending and borrowing.


In this connection, members are hereby informed that certain instances have come to the notice of the Exchange by which, the securities and funds of a client are received/transferred by members routinely from/to the accounts of different entities or the joint accounts of the client with the financier or its agents, or the  member operates the client’s bank account and/or depository account, under a financing arrangement with a general authorisation by the clients.  Such arrangements are in violation of the above referred SEBI Circular.


In view of the same, members are advised to ensure the following:


  1. Members shall not be a party to any agreement or arrangement, directly or indirectly, entered into between their clients and any person including their subsidiary/holding company or group company, to fund the transactions executed by the members on behalf of their clients, or recognise or act in accordance with any such agreement or arrangement entered into by the clients with any person.


  1. Members shall not entertain, any instructions to trade in securities or transfer funds or securities, from any entity other than the clients, by prior arrangement or otherwise to facilitate financing clients’ transactions.


  1. Members shall not obtain any authorisation or power of attorney, for operating the depository and/or bank accounts of clients who avail financing facility for securities trading, conferring rights for operation of such accounts exclusively by the member.


  1. Members shall not also otherwise finance or act as a conduit or front for financing any secondary market transactions entered into by their clients, directly or indirectly except in accordance with the provisions of Margin Trading Facility and Securities Lending and Borrowing as stipulated by SEBI.


Members who may be indulging in the above practices are advised to desist from the same immediately.