Apr 2, 2020

Some cautious advice to implement relaxations provided to Stock Brokers from Compliance Requirement amidst COVID-19

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Due to outbreak of COVID-19 across the Nation causing hindrance for the employees to travel to work place, SEBI and BSE and NSE provided relaxations from compliance requirements:
  1. Firstly vide their Circulars* dated 20th March 2020, BSE and NSE permitted their members to operate trading terminals from designated alternate locations subject to appropriate due diligences by Members by framing an Internal Policy duly approved by CEO/Designated Director/compliance officer etc.
  2. Further in order to reduce the compliance burden upon trading member, SEBI vide its Circular dated 23.03.2020# and Exchanges vide circular dated 26.03.2020$ and 27.03.2020@ decided to grant relaxation with following norms:
    1. The penal provision for non-collection/short collection of margins by brokers which was to be implemented from April 01, 2020 has been deferred till April 30, 2020. Although, they shall continuously report non-collection/short collection of margins in the cash and derivatives segment.
    2. NISM certifications which are expiring during the period, March 15, 2020 to June 29, 2020 have been extended till June 30, 2020.
    3. Trading members working from designated alternate locations are exempted from the penal provisions for not maintaining call recordings of orders/instructions received from clients till March 31, 2020. But Trading Members shall send a confirmation on the registered mobile number of the client immediately after execution of the order. Stock Brokers shall review and ensure that correct Email ID & mobile numbers are updated in the Exchange UCC database for the client in order to enable the Exchange to send trade confirmations.
    4. Trading members will be placed in risk reduction mode upon utilization of 90 per cent (instead of existing level of 85 per cent) of the members’ capital towards margins.
    5. No penal action will be taken in case of any late or delayed submission of any regulatory reporting till April 30, 2020. However, the Exchange system for making the submissions will be open as per the schedule.
    6. Implementation of the weekly reporting of client-wise cash/cash equivalent balances and bank account balances w.e.f April 2020 stands postponed till further notice.
In light of aforesaid amendments, Brokers are bound to be extra cautious and keep following in mind while enjoying relaxations provided by SEBI & Exchanges:
  1. Framing of Internal Policy to prevent unauthorized trading duly approved by concerned person.
  2. Post-Trade confirmations could be preserved as e-mails and chats.
  3. Monitoring of Terminals and ensuring that he terminals are being operated from such designated alternate locations only and by the approved users.
  4. Ensure confidentiality of traders.
  5. Proper transfer of securities upon execution of trade.
  6. Settlement of trades in a timely manner.
  7. Stock brokers to identify and assess the potential risk and maximize returns.

AUTHORED BY

Ms. Deepika Vijay Sawhney

Partner & Head - Securities Laws and Transaction Advisory

ACS, LLB

deepika@indiacp.com

+91 11 40622229

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