Sub: Financing of securities transactions and transfer of
securities & funds
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.
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.
view of the same, members are advised to ensure the following:
- 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.
- 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.
- 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.
- 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.
who may be indulging in the above practices are advised to desist from the same