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KMS STOCK BROKING COMPANY
PRIVATE LIMITED POLICIES AND
PROCEDURES SURVEILLANCE POLICY
FOR
STOCK BROKING OPERATIONS
1. Applicability:
The policy is applicable to the stock broking operations w.e.f. 01.08.2021
of KMS STOCK BROKING COMPANY PRIVATE LIMITED The
policy is approved in the meeting of Board of Directors of KMS STOCK
BROKING COMPANY PRIVATE LIMITED dated 13.07.2021.
The policy is framed in accordance with the provisions of SEBI Circular
No. SEBI/HO/ISD/ISD/CIR/P/2021/22 dated 01.03.2021, NSE
Circular No. NSE/SURV/48818 dated 01.07.2021 and CDSL
communique No. CDSL/OPS/DP/SYSTM/2021/309 dated 15.07.2021.
2. Surveillance Policy for Stock Broking:
The Stock Exchanges viz. NSE and BSE are providing alerts based
on predefined criteria to the all the stock brokers including
KMS STOCK BROKING COMPANY PRIVATE LIMITED through
their portals. As per applicable Circulars, KMS STOCK BROKING
COMPANY PRIVATE LIMITED is reviewing these alerts and
taking appropriate actions after carrying out due diligence viz.
either disposing off alerts with appropriate reasons/findings
recorded or filing Suspicious Transaction Report (STR) with
FIU-India in accordance with provisions of PMLA (Maintenance
of records) Rules,2005.
In addition to the same, KMS STOCK BROKING COMPANY
PRIVATE LIMITED has framed its Surveillance Policy for Stock
Broking operations to generate alerts as per guidance provided
in NSE Circular No. NSE/SURV/48818 dated 01.07.2021 based
on following criteria:
Trading activity in a single day by one client or group of clients
who have contributed more than 25% in a single scrip or a single
derivative contract.
A client or a group of clients who are either new client/ clients or
who have reactivated their trading account after significant time
gap and who have contributed more than 50% of the total
trading volume of a single scrip or derivative contract in a single
day.
Client or a group of clients dealing frequently in small quantities
in a scrip.
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Trading activity of a client found to be disproportionate
considering a reported income range details or networth.
A client who has submitted modification request for changes in
his/her/its demographic details of address, email id, mobile
number, bank details etc. at least twice in a month.
A client or a group of clients who have been found to have direct
or indirect connection with a listed company and who have
executed any transactions prior to any dissemination of any price
sensitive information by such listed company.
A client or group of clients having more than 20% volume of any
scrip listed in for ‘information list’ or ‘current watch list’.
A client or group of clients which persistently earn or incur high
amount of loss through their trading activities or clients who
appear to have executed trades with the objective of transfer of
profits or losses.
A client who is holding more than 5% of paid up capital of a listed
company and has pledged 100% of his/her/it’s such holding for
margin purpose and who has also significant trading volume in
the same scrip which he/she/it holds.
In case of a client or a group of clients who have been identified
as per any of the above 9 criteria and whose orders are placed
through a dealing office which is far from such client’s address as
per his/her/its KYC.
A client having demat account with KMS STOCK BROKING
COMPANY PRIVATE LIMITED and who has holding ina scrip of
more than 5% of paid up capital of a listed companywhich has
received the same shares though off-market transfer.
A client who has received shares of a listed company through
multiple off-market transfer and has pledged such shares.
Identification of IP addresses of clients to identify multiple client
codes trading from same IP address.
Clients who are connected with each other as per key KYC
parameters of the clients as updated by respective client.
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The stock broking operation shall review the alerts provided by
Stock Exchanges on an ongoing basis and shall ensure to process
the same as early as possible. In any case, these alerts will be
processed within 45 days from the date of generation of the alert
by the Stock Exchanges.
In case of any delay in disposing off any alerts, reasons for the
same shall be recorded.
The stock broking operation shall identify suspicious/
manipulative activities undertaken by any client through
monitoring of order(s) and trade(s).
The stock broking operation shall, in case of reporting of any
transaction as STR to FIU-India, shall evaluate whether any
further action including suspension of the trading activity of the
suspect client(s), reporting to Stock Exchanges/SEBI and/or
other Regulatory Authorities.
The stock broking operation shall maintain records for such
period as is prescribed under PMLA (Maintenance of Records)
Rules, 2005, and Securities Contracts (Regulation) Rules, 1957
and any other directions as may be issued by SEBI/ Stock
Exchanges from time to time.
3. Surveillance Policy for operations as Depository Participant:
CDSL is providing transactional alerts on biweekly basis based
on threshold defined by CDSL to the all the Depository
Participants including KMS STOCK BROKING COMPANY PRIVATE
LIMITED through CDSL report download utility. As per applicable
Communiques, KMS STOCK BROKING COMPANY PRIVATE
LIMITED is reviewing these alerts and taking appropriate
actions after carrying out due diligence viz. either disposing off
alerts with appropriate reasons/findings recorded or filing
Suspicious Transaction Report (STR) with FIU-India in
accordance with provisions of PMLA (Maintenance of records)
Rules,2005.
In addition to the same, KMS STOCK BROKING COMPANY
PRIVATE LIMITED has framed its Surveillance Policy for Stock
Broking operations to generate alerts as per guidance provided
in NSE Circular No. NSE/SURV/48818 dated 01.07.2021 based
on following criteria:
Multiple Demat accounts opened with same PAN/mobile
number/ email ID/ bank account details/ address. While
reviewing BO account details, the details of existing BO shall also
be considered.
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Email/ letters sent to clients on their registered email ID/address
which bounces/ returns undelivered.
A BO who has submitted modification request for changes in
his/her/its demographic details of address, email id, mobile
number, bank details, POA holder, Authorised Signatory etc. at
least twice in a month.
Frequent off-market transfer of securities more than twice in a
month without genuine reasons.
Off-market transactions not commensurate with the
income/networth of the BO.
Pledge transactions not commensurate with the income/networth
of the BO.
High value off-market transfer immediately after modification of
either email ID/mobile number/ address without genuine reason.
Review of reasons for off-market transfer provided by the BO
which appears non-genuine based on either profile of the BO or
on account of reason codes, including frequent off-market
transfer with reason code gift/donation to unrelated parties
and/or with reason code off-market sales.
Sudden increase in transaction activity in a newly opened
account in a short span of time. An account in which securities
balance suddenly reduces to zero and an active account with
regular transaction suddenly becomes dormant.
The DP shall review the alerts provided by CDSL on fortnightly
basis and shall ensure to process the same as early as possible.
In any case, these alerts will be processed within 30 days from
the date of generation of the alert by CDSL.
In case of any delay in disposing off any alerts, reasons for the
same shall be recorded.
The DP shall identify suspicious/ manipulative activities
undertaken by any client through monitoring of transaction(s)
The DP shall, in case of reporting of any transaction as STR to
FIU-India, shall evaluate whether any further action including
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disassociating with the suspect client(s) and reporting to
CDSL/SEBI and/or other Regulatory Authorities.
The DP shall maintain records for such period as is prescribed
under PMLA (Maintenance of Records) Rules, 2005, and
Securities Contracts (Regulation) Rules, 1957, SEBI (Depository
and Participants) Regulations,1996, DP Operating Instructions
and any other directions as may be issued by SEBI/ Stock
Exchanges from time to time.
4. Process of disposal of alerts and action:
The designated officials who are tasked to review the alerts on
daily basis shall review the same.
If the designated official finds after review and due diligence that
the alert is required to be closed, the official shall close the same
with appropriate remarks.
If the designated official after due diligence and making such
inquiry as such official finds necessary comes to a conclusion that
the alert warrants an action, the official will forward the same
with his/her views to the Compliance Officer for his/her approval.
The Compliance Officer, after review of the alerts along with the
submitted comments of the designated official, decides to close
the alert, he/she shall close it with appropriate remarks. If the
Compliance Officer finds that action in respect of such alert is
warranted, he/she shall take such actions including filing STR
with FIU-India, informing to Stock Exchanges and CDSL and/or
discontinue the relationship with the client.
The report of such instances along with adverse observations and
details of actions taken shall be submitted to the Stock
Exchanges/ CDSL within 7 day from date of identification of such
instances.
The records of alerts generated, disposed of as closed and details
of action taken wherever applicable shall be maintained with such
security measures as would make such records temper proof and
the access is available on to designated officials under the
supervision of the Compliance Officer.
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5. Obligations of Compliance Officer/ Designated Director and Internal
Auditor of the Stock Broking Business and Depository Participant
operations:
The surveillance activities of the stock broking operations and
that of DP operations shall be conducted under overall
supervision of the Compliance Officer of KMS STOCK BROKING
COMPANY PRIVATE LIMITED. The policy implemented by KMS
STOCK BROKING COMPANY PRIVATE LIMITED in accordance
with the provisions of Prevention of Money Laundering Act,
2002 and rules made thereunder as Reporting Entity.
A quarterly MIS shall be put up by the Compliance Officer to the
board and the Designated Director giving number of alerts
generated during the quarter, number of alerts closed, number of
alerts on which action taken with details of action taken and
number of alerts pending at the end of the quarter along with
reasons for pendency and action plan for closure. The Board as
well as the Designated Director shall be appraised of any
exception noticed during the disposal of the alerts.
The Designated Director shall be responsible for all surveillance
activities carried out by the trading member.
KMS STOCK BROKING COMPANY PRIVATE LIMITED shall submit
its surveillance policy to the internal auditor for stock broking
operations and internal auditor of DP operations for review and
shall satisfy the queries/questions, if any, raised by the internal
auditor with respect to the implementation of the surveillance
policy, its effectiveness and the alerts generated.
6. Obligation of Quarterly reporting of status of the alerts generated
for Stock Broking Operations and Depository Participant
Operations:
A quarterly statement providing duly approved status of alerts in
respect of stock broking operations on quarterly basis shall be
submitted to BSE and NSE in the following format within 15 days
after the end of the quarter:
A. Status of Alerts generated by the Trading Member:
Name No. of No. of new No. of No. of No. of
of Alert alerts alerts alerts alerts alerts
under generated Verified referred pending/
process at in the & to under
the quarter Closed Exchange process
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beginning in the (*) at the
of quarter quarter end of
quarter
Page 7 of 8
B. Details of alerts referred to the Exchange
Sr. No. Date of Type of Brief Date
Alert Alert observation referred to
and details Exchange
of action
taken
C. Details of any major surveillance action taken (other than
alerts referred to Exchanges) if any during the quarter
Sr. No. Brief action taken during the quarter
In case KMS STOCK BROKING COMPANY PRIVATE LIMITED does not
have anything to report, a “NIL Report”shallbe filed within 15 days
from the end of the quarter.
A quarterly statement providing duly approved status of alerts in
respect of DP operations on quarterly basis shall be submitted to
CDSL in the following format within 15 days after the end of the
quarter:
A. Status of Alerts generated by the Depository Participant:
Name No. of No. of new No. of No. of No. of
of Alert alerts alerts alerts alerts alerts
under generated Verified referred pending/
process at in the & to under
the quarter Closed Exchange process
beginning in the (*) at the
of quarter quarter end of
quarter
B. Details of any major surveillance action taken (other than
alerts reported to CDSL) if any during the quarter
Sr. No. Brief action taken during the quarter
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In case KMS STOCK BROKING COMPANY PRIVATE LIMITED DP
operation does not have anything to report,a “NILReport” shall be
filed within 15 days from the end of the quarter.
7. Schedule of the implementation of the policy:
The policy shall be implemented by stock broking operations with
effect from 01.08.2021. The first reporting by Stock Broking
operations shall be submitted within 15 days of 30.09.2021.
The policy shall be implemented by DP operations with effect from
01.10.2021. The first reporting by DP operations shall be
submitted within 15 days of 31.12.2021.
8. Review of Policy:
The Surveillance Policy shall be reviewed on periodic basis and at least
once a year by the Compliance Officer to ensure that the same is updated
in line with market trends, updated regulations and practices.
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