Do's And Don'ts

Special Instructions For Clients Buying Shares Of Exchanges, Clearing Corporations And Depositaries

  • “Regulation 19(1) & 20 of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (SECC Regulations) which states that no person shall, directly or indirectly, acquire or hold equity shares of a recognised Stock Exchange, recognised Clearing Corporation and recognised Depositaries unless he is a fit and proper person in terms of Regulation 19 and 20 of the SECC Regulations."

ELIGIBILITY FOR ACQUIRING OR HOLDING SHARES. REGULATION 19 OF SECC

  • No person shall, directly or indirectly, acquire or hold equity shares of a recognised Stock Exchange, recognised Clearing Corporation and recognised Depositaries unless he is a fit and proper person.
  • Any person who, directly or indirectly, either individually or together with persons acting in concert, acquire equity shares such that his shareholding exceeds two per cent of the paid up equity share capital of a a recognised Stock Exchange, recognised Clearing Corporation and recognised Depositaries shall seek approval of SEBI within fifteen days of the acquisition.
  • A person eligible to acquire or hold more than five per cent of the paid up equity share capital under sub-regulation (2) of regulation 17 and sub-regulation (2) of regulation 18 may acquire or hold more than five per cent of the paid up equity share capital of a a recognised Stock Exchange, recognised Clearing Corporation and recognised Depositaries only if he has obtained prior approval of SEBI.
  • Any person holding more than two per cent of the paid up equity share capital of the a recognised Stock Exchange, recognised Clearing Corporation and recognised Depositaries on the date of commencement of these regulations, shall ensure compliance with this regulation within a period of ninety days from the date of such commencement.
  • If approval under sub-regulation (2) or (4) is not granted by SEBI to any person, such person shall forthwith divest his excess shareholding.
  • Any person holding more than two per cent. of the paid up equity share capital in a a recognised Stock Exchange, recognised Clearing Corporation and recognised Depositaries, as the case may be, shall file a declaration within fifteen days from the end of every financial year to the a recognised Stock Exchange, recognised Clearing Corporation and recognised Depositaries, as the case may be, that he complies with the fit and proper criteria provided in these regulations.

FIT AND PROPER CRITERIA. REGULATION 20 OF SECC

For the purposes of these regulations, a person shall be deemed to be a fit and proper person if Such person has a general reputation and record of fairness and integrity, including but not limited to—

  • Financial integrity;
  • Good reputation and character; and
  • Honesty;

Such person has not incurred any of the following disqualifications

  • The person, or any of its whole time directors or managing partners, has been convicted by a court for any offence involving moral turpitude or any economic offence or any offence against the securities laws;
  • An order for winding up has been passed against the person;
  • The person, or any of its whole time directors or managing partners, has been declared insolvent and has not been discharged;
  • An order, restraining, prohibiting or debarring the person, or any of its whole time directors or managing partners, from dealing in securities or from accessing the securities market, has been passed by the Board or any other regulatory authority, and a period of three years from the date of the expiry of the period specified in the order has not elapsed;
  • Any other order against the person, or any of its whole time directors or managing partners, which has a bearing on the securities market, has been passed by SEBI or any other regulatory authority, and a period of three years from the date of the order has not elapsed;
  • The person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force; and
  • The person is financially not sound.

If any question arises as to whether a person is a fit and proper person, SEBI's decision on such question shall be final.

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Do's

  • Read the Prospectus/ Abridged Prospectus and carefully note
    • Risk factors pertaining to the issue.
    • Outstanding litigations and defaults, if any
    • Financials of the issuer.
    • Object of the issue.
    • Company history.
    • Background of promoters.
    • Instructions before making application.
  • In case of any doubt/problem, contact the compliance officer named in the offer document.
  • In case you do not receive physical certificates/credit to demat account or application money refund, lodge a complaint with compliance officer of issuer company and post issue lead manager as stated in the offer document.

Don'ts

  • Do not fall prey to market rumors.
  • Do not go by any implicit/explicit promise made by the issuer or any one else
  • Do not invest based on Bull Run of the market index/scrips of other companies in same industry/issuer company.
  • Do not bank upon the price of the shares of the issuer company to go up in the short run.

Do's

  • Go through all rules, regulations, bye-laws and disclosures made by the exchanges.
  • Trade only through - Trading Member (TM) registered with SEBI or authorized person of TM registered with the exchange.
  • While dealing with an authorised person, ensure that the contract note has been issued by the TM of the authorized person only.
  • While dealing with an authorized person, pay the brokerage/payments/margins etc. to the TM only.
  • Ensure that for every executed trade you receive duly signed contract note from your TM highlighting the details of the trade along with your unique client-id.
  • Obtain receipt for collateral deposited with Trading Member (TM) towards margin.
  • Go through details of Client-Trading Member Agreement.
  • Know your rights and duties vis-à-vis those of TM/ Clearing Member.
  • Be aware of the risk associated with your positions in the market and margin calls on them.
  • Collect / pay mark to market margins on your futures position on a daily basis from / to your Trading member.

Don'ts

  • Do not start trading before reading and understanding the Risk Disclosure Documents
  • Do not trade on any product without knowing the risk and rewards associated with it

Do's

  • Before investing ensure that the entity is registered with SEBI.
  • Read the offer document of the scheme especially the risk factors carefully.
  • Check the viability of the project.
  • Check and verify the background/expertise of the promoters
  • Ensure clear and marketable title of the property/assets of the entity
  • Ensure that the Collective Investment Management Company has the necessary infrastructure to carry out the scheme
  • Check the credit rating of the scheme and tenure of the rating
  • Check for the appraisal of the scheme and read the brief appraisal report.
  • Read carefully the objects of the scheme.
  • Check for the promise vis-a-vis performance of the earlier schemes in the offer document.

Don'ts

  • Do not invest in any CIS entity not having SEBI registration.
  • Do not get carried away by indicative returns.
  • Do not invest based on market rumors.

Do's

  • Deal only with SEBI registered intermediaries.
  • Ensure that the intermediary has a valid registration certificate
  • Ensure that the intermediary is permitted to transact in the market.
  • State clearly who will be placing orders on your behalf
  • Insist on client registration form to be signed by the intermediary before commencing operations
  • Enter into an agreement with your broker or sub-broker setting out terms and conditions clearly
  • Insist on contract note/ confirmation memo for trades done each day
  • Insist on bill for every settlement.
  • Ensure that broker’s name, trade time and number, transaction price and brokerage are shown distinctly on the contract note.
  • Insist on periodical statement of accounts.
  • Issue cheques/drafts in trade name of the intermediary only.
  • Ensure receipt of payment/ deliveries within 48 hours of payout.
  • In case of disputes, file written complaint to intermediary/ Stock Exchange/SEBI within a reasonable time
  • In case of sub-broker disputes, inform the main broker about the dispute within 6 months
  • Familiarise yourself with the rules, regulations and circulars issued by stock exchanges/SEBI before carrying out any transaction

Don'ts

  • Do not deal with unregistered intermediaries
  • Do not pay more than the approved brokerage to the intermediary.
  • Do not undertake deals for others.
  • Do not neglect to set out in writing, orders for higher value given over phone.
  • Do not sign blank Delivery instruction slip(s) while meeting security payin obligation
  • Don’t accept unsigned/duplicate contract note/confirmation memo
  • Don’t accept contract note/confirmation memo signed by any unauthorised person.
  • Don’t delay payment/deliveries of securities to broker/ sub-broker.
  • Don’t get carried away by luring advertisements, if any.
  • Don’t be led by market rumors or get into shady transactions

Do's

  • Read the offer document carefully before investing.
  • Note that investments in Mutual Funds may be risky
  • Mention your bank account number in the application form
  • Invest in a scheme depending upon your investment objective and risk appetite
  • Note that Net Asset Value of a scheme is subject to change depending upon market conditions
  • Insist for a copy of the offer document/key information memorandum before investing
  • Note that past performance of a scheme is not indicative of future performance
  • Past performance of a scheme may or may not be sustained in future
  • Keep track of the Net Asset Value of a scheme, where you have invested, on a regular basis
  • Ensure that you receive an account statement for the money that you have invested.
  • Update yourself on the performance of the scheme on a regular basis.

Don'ts

  • Do not invest in a scheme just because somebody is offering you a commission or other incentive, gifts etc.
  • Do not get carried away by the name of the scheme/Mutual Fund
  • Do not fall prey to promises of unrealistic returns
  • Do not forget to take note of risks involved in the investment
  • Do not hesitate to approach concerned persons and then the appropriate authorities for any problem.
  • Do not deal with any agent/broker dealer who is not registered with Association of Mutual Funds in India (AMFI).
Under Section 54 EC of Income Tax, 1961 an investor need not pay any tax on any long-term capital gains arising on sale of any asset, if the amounts of capital gains are invested in certain specified bonds. Rural Electrification Corporation Limited (REC) & National Highways Authority of India (NHAI) are permitted to issue capital gains bonds under Section 54 EC.

Some key features of Section 54 EC bonds are:

  •   AAA rated
  • Interest is taxable although no TDS is deducted
  •  Lock-in of 3 years and non- transferable
  •  Minimum investment-1 Bond amounting to ` 10,000/- and maximum investment-500 Bonds amounting to ` 50 lakhs in a financial year
  • Rate of Interest 5.25% p.a. payable annually
  •  Bonds can be held in Demat /Physical Form
  • Facility of Payment of Interest and Redemption through NECS
  • The Bonds will automatically redeem after expiry of three years
Prevent unauthorized transactions in your account --> Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile/email at the end of the day.......... Issued in the interest of Investors is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account