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Annexure – 4
RIGHTS AND OBLIGATIONS OF STOCK BROKERS, SUB-BROKERS AND CLIENTS
as prescribed by SEBI and Stock Exchanges
1. The client shall invest/trade in those securities/contracts/other instruments admitted to dealings on the Exchanges
as defined in the Rules, Byelaws and Regulations of Exchanges/ Securities and Exchange Board of India (SEBI)
and circulars/notices issued there under from time to time.
2. The stock broker, sub-broker and the client shall be bound by all the Rules, Byelaws and Regulations of the
Exchange and circulars/notices issued there under and Rules and Regulations of SEBI and relevant notifications of
Government authorities as may be in force from time to time.
3. The client shall satisfy itself of the capacity of the stock broker to deal in securities and/or deal in derivatives
contracts and wishes to execute its orders through the stock broker and the client shall from time to time continue
to satisfy itself of such capability of the stock broker before executing orders through the stock broker.
4. The stock broker shall continuously satisfy itself about the genuineness and financial soundness of the client and
investment objectives relevant to the services to be provided.
5. The stock broker shall take steps to make the client aware of the precise nature of the Stock broker’s liability for
business to be conducted, including any limitations, the liability and the capacity in which the stock broker acts.
6. The sub-broker shall provide necessary assistance and co-operate with the stock broker in all its dealings with the
client(s).
CLIENT INFORMATION
7. The client shall furnish all such details in full as are required by the stock broker in "Account Opening Form” with
supporting details, made mandatory by stock exchanges/SEBI from time to time.
8. The client shall familiarize himself with all the mandatory provisions in the Account Opening documents. Any
additional clauses or documents specified by the stock broker shall be non-mandatory, as per terms & conditions
accepted by the client.
9. The client shall immediately notify the stock broker in writing if there is any change in the information in the ‘account
opening form’ as provided at the time of account opening and thereafter; including the information on winding up
petition/insolvency petition or any litigation which may have material bearing on his capacity. The client shall
provide/update the financial information to the stock broker on a periodic basis.
10. The stock broker and sub-broker shall maintain all the details of the client as mentioned in the account opening
form or any other information pertaining to the client, confidentially and that they shall not disclose the same to any
person/authority except as required under any law/regulatory requirements. Provided however that the stock broker
may so disclose information about his client to any person or authority with the express permission of the client.
MARGINS
11. The client shall pay applicable initial margins, withholding margins, special margins or such other margins as are
considered necessary by the stock broker or the Exchange or as may be directed by SEBI from time to time as
applicable to the segment(s) in which the client trades. The stock broker is permitted in its sole and absolute
discretion to collect additional margins (even though not required by the Exchange, Clearing House/Clearing
Corporation or SEBI) and the client shall be obliged to pay such margins within the stipulated time.
12. The client understands that payment of margins by the client does not necessarily imply complete satisfaction of all
dues. In spite of consistently having paid margins, the client may, on the settlement of its trade, be obliged to pay
(or entitled to receive) such further sums as the contract may dictate/require.
TRANSACTIONS AND SETTLEMENTS
13. The client shall give any order for buy or sell of a security/derivatives contract in writing or in such form or manner,
as may be mutually agreed between the client and the stock broker. The stock broker shall ensure to place orders
and execute the trades of the client, only in the Unique Client Code assigned to that client.
14. The stock broker shall inform the client and keep him apprised about trading/settlement cycles, delivery/payment
schedules, any changes therein from time to time, and it shall be the responsibility in turn of the client to comply
with such schedules/procedures of the relevant stock exchange where the trade is executed.
15. The stock broker shall ensure that the money/securities deposited by the client shall be kept in a separate account,
distinct from his/its own account or account of any other client and shall not be used by the stock broker for
himself/itself or for any other client or for any purpose other than the purposes mentioned in Rules, Regulations,
circulars, notices, guidelines of SEBI and/or Rules, Regulations, Bye-laws, circulars and notices of Exchange.
16. Where the Exchange(s) cancels trade(s) suo moto all such trades including the trade/s done on behalf of the client
shall ipso facto stand cancelled, stock broker shall be entitled to cancel the respective contract(s) with client(s).
17. The transactions executed on the Exchange are subject to Rules, Byelaws and Regulations and circulars/notices
issued thereunder of the Exchanges where the trade is executed and all parties to such trade shall have submitted
to the jurisdiction of such court as may be specified by the Byelaws and Regulations of the Exchanges where the
trade is executed for the purpose of giving effect to the provisions of the Rules, Byelaws and Regulations of the
Exchanges and the circulars/notices issued thereunder.
BROKERAGE
18. The Client shall pay to the stock broker brokerage and statutory levies as are prevailing from time to time and as
they apply to the Client’s account, transactions and to the services that stock broker renders to the Client. The
stock broker shall not charge brokerage more than the maximum brokerage permissible as per the rules,
regulations and bye-laws of the relevant stock exchanges and/or rules and regulations of SEBI.
LIQUIDATION AND CLOSE OUT OF POSITION
19. Without prejudice to the stock broker's other rights (including the right to refer a matter to arbitration), the client
understands that the stock broker shall be entitled to liquidate/close out all or any of the client's positions for non-
payment of margins or other amounts, outstanding debts, etc. and adjust the proceeds of such liquidation/close out,
if any, against the client's liabilities/obligations. Any and all losses and financial charges on account of such
liquidation/closing-out shall be charged to and borne by the client.
20. In the event of death or insolvency of the client or his/its otherwise becoming incapable of receiving and paying for
or delivering or transferring securities which the client has ordered to be bought or sold, stock broker may close out
the transaction of the client and claim losses, if any, against the estate of the client. The client or his nominees,
successors, heirs and assignee shall be entitled to any surplus which may result there from. The client shall note
that transfer of funds/securities in favor of a Nominee shall be valid discharge by the stock broker against the legal
heir.
21. The stock broker shall bring to the notice of the relevant Exchange the information about default in
payment/delivery and related aspects by a client. In case where defaulting client is a corporate
entity/partnership/proprietary firm or any other artificial legal entity, then the name(s) of
Director(s)/Promoter(s)/Partner(s)/Proprietor as the case may be, shall also be communicated by the stock broker
to the relevant Exchange(s).
DISPUTE RESOLUTION
22. The stock broker shall provide the client with the relevant contact details of the concerned Exchanges and SEBI.
23. The stock broker shall co-operate in redressing grievances of the client in respect of all transactions routed through
it and in removing objections for bad delivery of shares, rectification of bad delivery, etc.
24. The client and the stock broker shall refer any claims and/or disputes with respect to deposits, margin money, etc.,
to arbitration as per the Rules, Byelaws and Regulations of the Exchanges where the trade is executed and
circulars/notices issued thereunder as may be in force from time to time.
25. The stock broker shall ensure faster settlement of any arbitration proceedings arising out of the transactions
entered into between him vis-à-vis the client and he shall be liable to implement the arbitration awards made in
such proceedings.
26. The client/stock-broker understands that the instructions issued by an authorized representative for dispute
resolution, if any, of the client/stock-broker shall be binding on the client/stock-broker in accordance with the letter
authorizing the said representative to deal on behalf of the said client/stock-broker.
TERMINATION OF RELATIONSHIP
27. This relationship between the stock broker and the client shall be terminated; if the stock broker for any reason
ceases to be a member of the stock exchange including cessation of membership by reason of the stock broker's
default, death, resignation or expulsion or if the certificate is cancelled by the Board.
28. The stock broker, sub-broker and the client shall be entitled to terminate the relationship between them without
giving any reasons to the other party, after giving notice in writing of not less than one month to the other parties.
Notwithstanding any such termination, all rights, liabilities and obligations of the parties arising out of or in respect
of transactions entered into prior to the termination of this relationship shall continue to subsist and vest in/be
binding on the respective parties or his/its respective heirs, executors, administrators, legal representatives or
successors, as the case may be.
29. In the event of demise/insolvency of the sub-broker or the cancellation of his/its registration with the Board
or/withdrawal of recognition of the sub-broker by the stock exchange and/or termination of the agreement with the
sub broker by the stock broker, for any reason whatsoever, the client shall be informed of such termination and the
client shall be deemed to be the direct client of the stock broker and all clauses in the ‘Rights and Obligations’
document(s) governing the stock broker, sub-broker and client shall continue to be in force as it is, unless the client
intimates to the stock broker his/its intention to terminate their relationship by giving a notice in writing of not less
than one month.
ADDITIONAL RIGHTS AND OBLIGATIONS
30. The stock broker shall ensure due protection to the client regarding client’s rights to dividends, rights or bonus
shares, etc. in respect of transactions routed through it and it shall not do anything which is likely to harm the
interest of the client with whom and for whom they may have had transactions in securities.
31. The stock broker and client shall reconcile and settle their accounts from time to time as per the Rules,
Regulations, Bye Laws, Circulars, Notices and Guidelines issued by SEBI and the relevant Exchanges where the
trade is executed.
32. The stock broker shall issue a contract note to his constituents for trades executed in such format as may be
prescribed by the Exchange from time to time containing records of all transactions including details of order
number, trade number, trade time, trade price, trade quantity, details of the derivatives contract, client code,
brokerage, all charges levied etc. and with all other relevant details as required therein to be filled in and issued in
such manner and within such time as prescribed by the Exchange. The stock broker shall send contract notes to
the investors within one working day of the execution of the trades in hard copy and/or in electronic form using
digital signature.
33. The stock broker shall make pay out of funds or delivery of securities, as the case may be, to the Client within one
working day of receipt of the payout from the relevant Exchange where the trade is executed unless otherwise
specified by the client and subject to such terms and conditions as may be prescribed by the relevant Exchange
from time to time where the trade is executed.
34. The stock broker shall send a complete `Statement of Accounts’ for both funds and securities in respect of each of
its clients in such periodicity and format within such time, as may be prescribed by the relevant Exchange, from
time to time, where the trade is executed. The Statement shall also state that the client shall report errors, if any, in
the Statement within such time as may be prescribed by the relevant Exchange from time to time where the trade
was executed, from the receipt thereof to the Stock broker.
35. The stock broker shall send daily margin statements to the clients. Daily Margin statement should include, inter-
alia, details of collateral deposited, collateral utilized and collateral status (available balance/due from client) with
break up in terms of cash, Fixed Deposit Receipts (FDRs), Bank Guarantee and securities.
36. The Client shall ensure that it has the required legal capacity to, and is authorized to, enter into the relationship with
stock broker and is capable of performing his obligations and undertakings hereunder. All actions required to be
taken to ensure compliance of all the transactions, which the Client may enter into shall be completed by the Client
prior to such transaction being entered into.
ELECTRONIC CONTRACT NOTES (ECN)
37. In case, client opts to receive the contract note in electronic form, he shall provide an appropriate e-mail id to the
stock broker. The client shall communicate to the stock broker any change in the email-id through a physical letter.
If the client has opted for internet trading, the request for change of email id may be made through the secured
access by way of client specific user id and password.
38. The stock broker shall ensure that all ECNs sent through the e-mail shall be digitally signed, encrypted, non-tamper
able and in compliance with the provisions of the IT Act, 2000. In case, ECN is sent through e-mail as an
attachment, the attached file shall also be secured with the digital signature, encrypted and non-tamperable.
39. The client shall note that non-receipt of bounced mail notification by the stock broker shall amount to delivery of the
contract note at the e-mail ID of the client.
40. The stock broker shall retain ECN and acknowledgement of the e-mail in a soft and non-tamperable form in the
manner prescribed by the exchange in compliance with the provisions of the IT Act, 2000 and as per the extant
rules/regulations/circulars/guidelines issued by SEBI/Stock Exchanges from time to time. The proof of delivery i.e.,
log report generated by the system at the time of sending the contract notes shall be maintained by the stock
broker for the specified period under the extant regulations of SEBI/stock exchanges. The log report shall provide
the details of the contract notes that are not delivered to the client/e-mails rejected or bounced back. The stock
broker shall take all possible steps to ensure receipt of notification of bounced mails by him at all times within the
stipulated time period under the extant regulations of SEBI/stock exchanges.
41. The stock broker shall continue to send contract notes in the physical mode to such clients who do not opt to
receive the contract notes in the electronic form. Wherever the ECNs have not been delivered to the client or has
been rejected (bouncing of mails) by the e-mail ID of the client, the stock broker shall send a physical contract note
to the client within the stipulated time under the extant regulations of SEBI/stock exchanges and maintain the proof
of delivery of such physical contract notes.
42. In addition to the e-mail communication of the ECNs to the client, the stock broker shall simultaneously publish the
ECN on his designated web-site, if any, in a secured way and enable relevant access to the clients and for this
purpose, shall allot a unique user name and password to the client, with an option to the client to save the contract
note electronically and/or take a print out of the same.
LAW AND JURISDICTION
43. In addition to the specific rights set out in this document, the stock broker, sub-broker and the client shall be entitled
to exercise any other rights which the stock broker or the client may have under the Rules, Bye-laws and
Regulations of the Exchanges in which the client chooses to trade and circulars/notices issued thereunder or Rules
and Regulations of SEBI.
44. The provisions of this document shall always be subject to Government notifications, any rules, regulations,
guidelines and circulars/notices issued by SEBI and Rules, Regulations and Bye laws of the relevant stock
exchanges, where the trade is executed, that may be in force from time to time.
45. The stock broker and the client shall abide by any award passed by the Arbitrator(s) under the Arbitration and
Conciliation Act, 1996. However, there is also a provision of appeal within the stock exchanges, if either party is not
satisfied with the arbitration award.
46. Words and expressions which are used in this document but which are not defined herein shall, unless the context
otherwise requires, have the same meaning as assigned thereto in the Rules, Byelaws and Regulations and
circulars/notices issued thereunder of the Exchanges/SEBI.
47. All additional voluntary clauses/document added by the stock broker should not be in contravention with
rules/regulations/notices/circulars of Exchanges/SEBI. Any changes in such voluntary clauses/document(s) need to
be preceded by a notice of 15 days. Any changes in the rights and obligations which are specified by
Exchanges/SEBI shall also be brought to the notice of the clients.
48. If the rights and obligations of the parties hereto are altered by virtue of change in Rules and regulations of SEBI or
Bye-laws, Rules and Regulations of the relevant stock Exchanges where the trade is executed, such changes shall
be deemed to have been incorporated herein in modification of the rights and obligations of the parties mentioned
in this document.
INTERNET & WIRELESS TECHNOLOGY BASED TRADING FACILITY PROVIDED BY STOCK BROKERS TO CLIENT
(All the clauses mentioned in the ‘Rights and Obligations’ document(s) shall be applicable. Additionally, the
clauses mentioned herein shall also be applicable.)
1. Stock broker is eligible for providing Internet based trading (IBT) and securities trading through the use of wireless
technology that shall include the use of devices such as mobile phone, laptop with data card, etc. which use
Internet Protocol (IP). The stock broker shall comply with all requirements applicable to internet based
trading/securities trading using wireless technology as may be specified by SEBI & the Exchanges from time to
time.
2. The client is desirous of investing/trading in securities and for this purpose, the client is desirous of using either the
internet based trading facility or the facility for securities trading through use of wireless technology. The Stock
broker shall provide the Stock broker’s IBT Service to the Client, and the Client shall avail of the Stock broker’s IBT
Service, on and subject to SEBI/Exchanges Provisions and the terms and conditions specified on the Stock
broker’s IBT Web Site provided that they are in line with the norms prescribed by Exchanges/SEBI.
3. The stock broker shall bring to the notice of client the features, risks, responsibilities, obligations and liabilities
associated with securities trading through wireless technology/internet/smart order routing or any other technology
should be brought to the notice of the client by the stock broker.
4. The stock broker shall make the client aware that the Stock Broker’s IBT system itself generates the initial
password and its password policy as stipulated in line with norms prescribed by Exchanges/SEBI.
5. The Client shall be responsible for keeping the Username and Password confidential and secure and shall be
solely responsible for all orders entered and transactions done by any person whosoever through the Stock
broker’s IBT System using the Client’s Username and/or Password whether or not such person was authorized to
do so. Also the client is aware that authentication technologies and strict security measures are required for the
internet trading/securities trading through wireless technology through order routed system and undertakes to
ensure that the password of the client and/or his authorized representative are not revealed to any third party
including employees and dealers of the stock broker
6. The Client shall immediately notify the Stock broker in writing if he forgets his password, discovers security flaw in
Stock Broker’s IBT System, discovers/suspects discrepancies/ unauthorized access through his
username/password/account with full details of such unauthorized use, the date, the manner and the transactions
effected pursuant to such unauthorized use, etc.
7. The Client is fully aware of and understands the risks associated with availing of a service for routing orders over
the internet/securities trading through wireless technology and Client shall be fully liable and responsible for any
and all acts done in the Client’s Username/password in any manner whatsoever.
8. The stock broker shall send the order/trade confirmation through email to the client at his request. The client is
aware that the order/ trade confirmation is also provided on the web portal. In case client is trading using wireless
technology, the stock broker shall send the order/trade confirmation on the device of the client.
9. The client is aware that trading over the internet involves many uncertain factors and complex hardware, software,
systems, communication lines, peripherals, etc. are susceptible to interruptions and dislocations. The Stock broker
and the Exchange do not make any representation or warranty that the Stock broker’s IBT Service will be available
to the Client at all times without any interruption.
10. The Client shall not have any claim against the Exchange or the Stock broker on account of any suspension,
interruption, non-availability or malfunctioning of the Stock broker’s IBT System or Service or the Exchange’s
service or systems or non-execution of his orders due to any link/system failure at the Client/Stock
brokers/Exchange end for any reason beyond the control of the stock broker/Exchanges.
Additional Rights And Obligations’ of the Rights and Obligations Document (Annexure-4 of SEBI circular
no. CIR/MIRSD/16/2011 dated August 22, 2011) and shall read as under:
The stock broker / stock broker and depository participant shall not directly / indirectly compel the clients to
execute Power of Attorney (PoA) or Demat Debitand Pledge Instruction (DDPI) or deny services to the client if
the client refuses to execute PoA or DDPI.