20031112-5 Date : 12/11/2003
BSE
Subject : Norms for imposition of late fees, fines and penalties - Cash Segment
Dept Name : Inspection Segment Name : General
The Exchange has reviewed and rationalised the existing norms for imposing late
fees, fines and penalties. The revised norms have been approved by the Disciplinary
Action Committee (DAC) of the Exchange in its meeting held on October 22, 2003.
Statement indicating the nature of irregularity/violation and the consequential late
fees, fines and penalties that would be levied is enclosed for the information of the
members. The members may please note that these norms shall be applied for the
violations observed during the course of inspection conducted on or after the date of
this notice.
It may be noted that the actions including fines for violations are only indicative. In
case of a large number of instances of a violation involving large amount of funds /
large quantity of securities or of repetitive nature, DAC may take such strict action as
it may deem fit including levy of higher fines / suspension / expulsion.
The members are once again advised to ensure compliance with the various Rules,
Byelaws & Regulations of the Exchange.
In case the members require any clarification, they may please contact any of the
following officials :
Sr. No. Name Intercom No.
1. Mr. Ranjan Prabhu 8214
2. Ms. Srividhya Subramanian 8404
Kevin Desouza Mayank Mehta
Chief General Manager Asst. General Manager
(Inspection & Membership) Inspection
Page 1 of 9
List of violations alongwith indicative fines.
Sr. No Violation Rule/Byelaw/ Upto 3 instances Multiple
Regulation/Notice instances
no.
Contract Notes
1. Non-issue of contract notes. Bye law 219 & Rs. 5,000 Rs. 10,000
Exchange Notice
No. 5116/93 dated
November 11,
1993.
2. Contract Note not as per the Regulation Advice Rs. 5,000
format prescribed by the 14.2/Exchange
Exchange notice No.
20021109-9 dated
November 9, 2003.
3. Board Resolution / Power of Exchange notice Advice Advice
Attorney for signing of Contract no.1024/98 dated
Notes not submitted to the March 20, 1998.
Exchange
4. Contract notes not issued within Bye law 247 Advice Rs. 10,000
24 hours of trade execution or A/Exchange
duplicates of the contract notes Notice No.
issued not acknowledged by 4914/96 dated
clients / no proof of delivery in August 13, 1996
case of despatch through courier
or post.
5. Duplicates of the contract notes Exchange notice Advice Warning
issued not maintained. Counter no. 4850/97 dated
foils maintained having no December 10,
adequate details. 1997.
6. Details of the trade have not been Notice no.4646/97 Advice Warning
attached as an Annexure to the dated November
contract note (original / 29, 1997
duplicate) issued in case of
consolidated trade shown in
contract note.
Page 2 of 9
Sr. No Violation Rule/Byelaw/ Upto 3 instances Multiple
Regulation/Notice instances
no.
7. Instances of brokerage charged at Regulation 14.1 The Member to be advised to
a rate higher than the permissible refund the excess brokerage
maximum. charged to the constituents and a
fine of an equivalent amount or Rs
5000/-, whichever is higher, be
levied on the Member.
8. Execution of Negotiated Deals Notice no. Rs. 1,00,000 Rs. 2,00,000
(including Cross Deals) not 245012/99 dated
through price and order Sept 2, 1999.
matching mechanism of the
Exchange.
9. Execution of transactions in Byelaw 45, 49 & Refer the matter to DAC
securities not listed/not 50.
permitted on the Exchange.
10. Difference in rate mentioned in Notice No. Excess amount to be returned to
the contract note and the 5116/93 dated the client and fine equal to twice
executed rate. November 11, the excess amount charged or Rs
1993. 25,000/-, whichever is higher, to
be levied on the member
Client Codes
11. Transfer of trades executed for Notice no. Advice Rs. 5,000
one client to another client. 101502/2001 dated
October 12, 2001.
12. Transfer of trades from Own Notice no. Rs. 5,000 Rs. 10,000
account to client account or vice- 101502/2001 dated
versa October 12, 2001.
13. Evasion of margin by entering Notice no. Rs. 5,000 Rs. 10,000
wrong client code in the system. 101502/2001 dated
October 12, 2001.
14. Use of fictitious client codes Notice no. Rs. 10,000 Rs. 20,000
during order placement. 101502/2001 dated
October 12, 2001.
Spot Transaction
15. Not taken written consent from Byelaw 199/ Rs. 5,000 Rs. 10,000
the client for principal to Exchange Notice
principal transactions. No. 4914/96 dated
August 13, 1996.
16. Contract Notes not issued / not Reg. 14/ Exchange Rs. 5,000 Rs. 10,000
in prescribed Form ‘B’ for Notice No.
principal to principal 4914/96 dated
transactions. August 13, 1996
17. Transactions done on a spot basis SEBI Circular no. Rs. 5,000 Rs. 10,000
are not at all reported to the SMD/RCG/CIR/(
Exchange. BKG)/293/95
dated March 14,
1995.
Page 3 of 9
Sr. No Violation Rule/Byelaw/ Upto 3 instances Multiple
Regulation/Notice instances
no.
18. Transactions done on a spot basis SEBI Circular no. Advice Rs. 5,000
are not reported to the Exchange SMD/RCG/CIR/(
within the prescribed time limit. BKG)/293/95
dated March 14,
1995.
19. Transactions done on a spot basis Section 2(i) of the 1% of the 2% of the
are not settled within the SCRA, 1956. transaction value transaction
prescribed time limit. or Rs. 5,000/- value or Rs.
whichever is 10,000/-
lower. whichever is
higher.
Books of accounts & other documents
20. Not maintained Reg. 17(1) of the 10,000/- N.A
SEBI (Stock
Brokers & Sub
Not maintained properly Brokers) Rules, 5,000/- N.A
1992.
Not made available for Reprimand N.A
verification when asked for.
Not maintained for branch / 10,000/- per N.A
sub-broker office
Not maintained properly for 5,000/- per office N.A
branch / sub-broker
Not made available for
branch / sub-broker when Reprimand N.A
asked for.
21. Segregation of Exchange wise / Rs. 10,000 N.A
Segment wise client ledgers not
maintained.
22. Incomplete / Non-maintenance Exchange notice Advice N.A
of registers (Register of no. 4850/97 dated
Securities / Register of 10.12.1997.
Transactions / Register of
Complaints / Dividend ledger /
Margin Deposit Book)
Dealing with clients
23. Client’s funds not routed Bye law Rs. 25,000 N.A
through designated ‘Client 247A/Exchange
Account’/Non maintainance notice nos.
of Client account. 7031/94 dated
6.12.1994 &
Page 4 of 9
Sr. No Violation Rule/Byelaw/ Upto 3 instances Multiple
Regulation/Notice instances
no.
Non-segregation of own and 4850/97 dated Reprimand 10,000
client transactions in separate 10.12.1997.
bank accounts
Use of Client account for non Reprimand 10,000
specified purposes
Use of clients’ funds for own
purposes / Misuse of clients’ Rs. 50,000 Rs. 1,00,000
funds / Unauthorised
transfer of funds from one
client’s account to another
client’s account.
Delay in payments of funds Advice Rs. 5,000
to the clients. (In case of
inordinate
delays of more
than 1 week,
double the fine
amount to be
collected.)
Non-payment or delay in
payment of dividend Advice Rs. 5,000
amounts to constituents /
non-reconciliation of
dividend account
24. Securities due to the clients Bye law Reprimand Rs. 5,000
transferred to the members’ 247A/Exchange
beneficiary account. notice nos.
7031/94 dated
6.12.1994 &
4850/97 dated
Securities due to one client 10.12.1997. Rs. 50,000 Rs. 1,00,000
transferred to another client
OR Securities due to the
clients used for meeting the
pay-in obligation of the
member/other client. Rs. 5,000
Advice (In case of
Delay in delivery of securities inordinate
to clients. delays of more
than 1 week,
double the fine
amount be
levied.)
Page 5 of 9
Sr. No Violation Rule/Byelaw/ Upto 3 instances Multiple
Regulation/Notice instances
no.
25. Transaction with clients in cash. Notice no. 5 dated Advice Rs. 5,000
03/09/2003
26. Deliver / Receive securities other Notice no. 5 dated Advice Rs. 5,000
than from respective Clients September 3, 2003.
Beneficiary Account. or under
approved scheme.
27. Half yearly statement of Notice no. 9 dated Rs. 5,000 Rs. 10,000
accounts for funds /securities January 14, 2003.
not sent to the clients.
Client Registration
28. Non execution of Client Notice no. 1798/97 Advice Rs. 10,000
Registration Form or dated April 24,
maintaining incomplete client 1997
database.
Non execution of member-
client agreement or Advice Rs. 10,000
agreement not in prescribed
format.
29. Not assigned unique client codes Notice no. Rs 5000 Rs. 10,000
and / or not mapping the client 20030115-5 dated
code with PAN/Passport etc. in January 15, 2003
the back office, and/or not
registering the client details on
BOLT
Dealing with Intermediaries
30. Dealing with un-registered sub- Notice Rs. 25,000 per Rs. 25,000 per
brokers no.623111/2000 un-registered un-registered
dated September Sub broker. Sub broker.
18, 1999.
31. Members of other Exchanges Notice no. Advice the member to comply
routing orders of their clients 54809/2000 dated with registration requirement
through BOLT, without being July 1, 2000 within one month. If not
registered as Sub-brokers with complied, fine of Rs. 25,000/- per
SEBI. unregistered sub-broker to be
imposed.
32. Sharing Commission/brokerage Bye law 218/ Rs. 5,000 Rs. 10,000
without registering such persons Exchange notice
as Remisiers with the Exchange. no. 2628/97 dated
9.6.1997.
33. Sharing of brokerage with Byelaw 218 5 ,000/- 10,000/-
Page 6 of 9
Sr. No Violation Rule/Byelaw/ Upto 3 instances Multiple
Regulation/Notice instances
no.
-another member
-an employee of another member 10,000/- 20,000/-
or a person for or with whom
trading members are forbidden to
do business.
34. Allotting BOLT TWSs to another Notice no. Rs. 15,000 per Rs. 15,000 per
member of the Exchange. 104616/2001 dated instance and de- instance and
November 12, activation of the de-activation
2001. said BOLT TWS of the said
BOLT TWS
35. Executing trades for another Rs. 10,000 Rs. 25,000
member of the Exchange.
36. Done business on behalf of Bye- Law 358 (vi) Rs. 10,000 Rs. 25,000
suspended / defaulter /
expelled members without
obtaining prior permission of the
Exchange.
Margins
37. Non submission/late submission Notice no. 5 dated Fine of Rs. 100 N.A
of Compliance Certificate September 18, per day till the
regarding collection of up-front 2003 date of
margin from non-institutional submission.
clients.
38. Non collection / short collection Notice no. Rs. 5,000 Refer the
of a margin from non- 123621/2002 May matter to
institutional clients on their 21, 2002. DAC.
respective net open positions by
the member / sub-broker.
39. Non collection of compliance Notice no. Rs. 5,000 Refer the
certificate from sub-broker(s) 84618/2001 dated matter to
regarding collection of margin April 26, 2001. DAC.
from non-institutional clients on
their respective net open
positions.
40. Submission of wrong compliance Notice no. Rs.5,000 Refer the
certificate regarding collection of 123621/2002 May matter to
up-front margin from non- 21, 2002. DAC.
institutional clients.
Page 7 of 9
Sr. No Violation Rule/Byelaw/ Upto 3 instances Multiple
Regulation/Notice instances
no.
Others
41. Non receipt of reply seeking Advice Rs. 5,000/-
clarification on inspection.
42. Submitting late/wrong i) The Compliance of the
Compliance Certificate regarding Inspection Report observations
implementation of suggestions should be submitted within 30
made at the time of inspection days / prescribed time of the
date of receipt of the letter
communicating the
observations failing which, a
fine of Rs.5,000/- may be
imposed.
ii) If it is observed that the
member has submitted a wrong
compliance certificate, a fine
upto Rs. 25,000/- may be
imposed.
43. Delay / Non submission of Notice No. 7 dated Non-submission of documents by
Audit Report, Audited Accounts July 10, 2003. due date:
and Networth Certificate. Fine of Rs. 100/- per day till
the date of submission of the
Note : Submission of incorrect, documents.
unaudited or not in a prescribed
format will be treated as non- Non-submission of documents
submission of the same. after two months of due date:
Fine of Rs. 500/- per day after
two months of due date until
submission of the documents.
44. Non-attendance of DAC To be referred N.A.
meetings without prior to DAC
intimation.
45. Involved in Fund Based SMD/POLICY/CI Advice Rs. 20,000
activities R-6/97 dated May
7, 1997.
Notes:-
(1) In respect of repeated violations, action may be restructured to cases where
multiple instances of a violation have been observed in both the last annual
inspection of a member and the current inspection and 50% of the fine applicable
for multiple instances of the violation be levied additionally. In all other
circumstances of repeat violation, the fine structure in respect of initial violations
to be followed.
Page 8 of 9
(2) The above actions including fines are only indicative. In case of a large number of
instances of a violation involving large amount of funds / large quantity of
securities or of repetitive nature, the Exchange may take such strict action as it may
deem fit including levy of higher fines / suspension / expulsion.
Page 9 of 9