Committee on Model Rule and Bye-laws of Stock Exchanges - SEBI - SMDRP/POLICY/CIR-52/2001

DEPUTY GENERAL MANAGER SECONDARY MARKET DEPARTMENT E-mail : mdrao@sebi.gov.in SMDRP/POLICY/CIR-52/2001 December 20, 2001 The Executive Directors/Managing Directors of all the Stock Exchanges Dear Sir, Sub: Committee on Model Rule and Bye-laws of Stock Exchanges. The Committee constituted by SEBI for examining the existing Articles and Memorandum of Association, Rules, Bye-laws and Regulations of Stock Exchanges and framing a uniform set of Rules and Bye-laws to be followed by all the stock exchanges of the country has submitted its report and the Model Rules for Stock Exchanges. Some of the Model Rules have already been implemented by the Stock Exchanges through SEBI Circulars and directives. For some rules suitable provisions already exist in SC (R) Act, 1956, SC (R) Rules, 1957 or in the GOI directives/Circulars and SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 etc. Some of the Model Rules are new amongst which some are related to corporatisation of Stock Exchanges and can be implemented only after all exchanges are corporatised. Some of the Rules may not be applicable in the same way for all stock exchanges. Besides, on account of the nature and constitution of stock exchanges, some of the new Model Rules can not be implemented as suggested. The Model Rules have been divided into 4 Parts. Part 'A' given in the Annexure contains rules which have already been implemented under SEBI directives etc. Reference of Model Rules, Subject matter and the corresponding Circulars issued by SEBI/GOI etc. have been made. It may be seen that while there may be a variation in language in the Model Rules, for most of Rules in Part A, however the basic principle underlying the Model Rules and the relevant SEBI Circular/GOI notification etc. is the same. Such rules have been identified with asterisks in Part A. In respect of Rules No. 5.5 (Compliance Officer), 6.8.1 (Special Authorisation by the Governing Board- Buy back of Membership), 7.20 (Declaration of Defaulter automatically), 7.34 (Apportionment of Consideration Realised/Other Realisation of Receivables) and 8.3.6 (Ethics Committee), SEBI Regulations/Circulars already issued in this regard will prevail. Part 'B' gives reference to the rules in Model Rules and the subject matter, which are to be introduced by the stock exchanges. Part 'C' gives reference to Model Rules. However introduction of these will have to await corporatisation/demutualisation of the stock exchanges. Part 'D' gives reference to the Model Rules, which are related to the basic legal structure of the various stock exchanges and may require an amendment to the existing SEBI Act, 1992, SC (R) Act, 1956, SC (R) Rules, 1957 and other relevant Rules, Regulations and laws etc. In order to bring about uniformity among stock exchanges and taking into account uniformity already brought about by SEBI through the directives/circulars so far issued to the stock exchanges, you are advised to implement the Rules under Part 'B'. In the case of Rules in Part 'A', the proposed rules may be adopted in case there is a material difference between these rules and the existing similar rules of the exchange. The Model Rules along with the Committee Report are enclosed for adoption after necessary approvals from the General Body/Governing Board of the Exchanges. However if there are any difficulties in implementation of these Rules, such difficulties may be brought to the notice of SEBI. A compliance report in this regard may be submitted to SEBI within 2 months. The Exchanges will be suitably advised for introduction of Rules under Part 'C' and 'D' Yours faithfully, S.V. Muralidhar Rao Encl: As Above PART-A (RECOMMENDATIONS IN PROPOSED MODEL RULES VIS-A-VIS SEBI ACT,1992, SC (R) ACT,1956, SC (R) R,1957, SEBI (STOCK BROKERS AND SUB BROKERS) REGULATIONS, 1992, SEBI CIRCULARS AND GOI DIRECTIVES/CIRCULARS CLAUSE SUB CLAUSE SUBJECT SEBI Act, SC (R) Act, SC (R) R, SEBI Circulars and GOI Directives/Circulars 3 CONSTITUTION, OBJECTS AND CAPITAL / CORPUS 3.2.4 Safe Deposit Vaults / Custodial / Depository Services As per Regulation 19 (a) (vii) of SEBI (Depositories Participants) Regulations, 1996, a clearing corporation or a clearing house of a stock exchange may be registered as a depository participant. 3.2.11 Clearing House, Clearing Corporation or Clearing Bank SEBI's circular dated SMD/SED/RCG/270/96 dated January 19, 1996. 3.2.13 Information and Publications SEBI's circular no. SE/10118 dated October 12, 1992 and SMD/POLICY/CIR-32/97 dated December 03, 1997 regarding dissemination of information to investors and brokers. 3.2.16 Promotion of Other Companies SEBI's circular no. SMD- II/POLICY/CIR-37/99 dated November 26, 1999 and SMD-I/POLICY/CIR-40/99 dated December 16, 1999 regarding floating of Floating of a Subsidiary/Company by a Stock Exchange for membership of other Stock Exchange. 4. FUNCTIONARIES 4.2 Governing Board SEBI's circular no. SMD/SED/6919/93 dated April 20, 1993 regarding composition of Governing Board 4.3 Standing Committees SEBI's circular no. SMD/SED/6919/93 dated April 20, 1993* *Model Rule: There shall be Standing Committees to be constituted in the ratio of 40:60 between members and non members to discharge functions in the specific areas such as arbitration, claims against defaulters, disciplinary action and investors services. 4.5 Selection Committee SEBI's circular no. SMD-II/52 dated January 10, 1996 for selected of ED. 4.7 Ethics Committee SEBI Circular dated May 17, 2001 regarding Code of Ethics for Directors and Functionaries of Exchanges 4.9 Administrative Set-up * SEBI circular no. SMD/SED/6919/93 dated April 20, 1993 * Model Rule: The Governing Board shall be responsible to provide adequate and competent administrative set-up, including the Company Secretary 5 ELECTION / SELECTION OF NEW MEMBERS / TRADING MEMBERS 5.1 Legal Requirements / Position 5.1.1 Number of Members / Trading Members SEBI Circular No. SMD-II/ALLSE/CIR-02/2000 dated January 10, 2000 has provided that The exchanges will have freedom to increase the membership or dealership subject to compliance of all the legal requirements, without the approval of SEBI. 5.2 Conditions Precedent for Eligibility 5.2.1 For Individuals Rule 8(1) of SCRR, 1957 5.2.4 For Companies / Bodies Corporate 5.2.4.1 5.2.4.2 Legal Requirements Rule 8(3) (4) and (4A) of SCRR, 1957 5.2.4.3 Disqualification of Designated Directors / Nominees Rule 8(3) (4A) (iv) of SCRR, 1957 5.2.4.5 Minimum Experience Rule 8(3) (4A) (v) of SCRR, 1957 5.2.4.7 Financial Requirements SEBI Circular No. SMD/SED/9012/93 dated May 14, 1993 5.2.4.7.1 Minimum Paid-up Capital SEBI Circular No. SMD/SED/9012/93 dated May 14, 1993 5.2.4.7.2 Maintenance of Net Worth SEBI Circular No. SMD/SED/9012/93 dated May 14, 1993 5.2.4.7.3 Additional Financial and Other Requirements SEBI Circular No. SMD/SED/9012/93 dated May 14, 1993 5.2.5 General Conditions 5.2.5.3 Past Experience As per Rule 8(2)(a) of SCRR, the person should have worked for not less than 2 years as a partner with or as an authorised assistant or authorised clerk or remisier or apprentice to, a member* *As per this clause of Model Rules, apart from above, experience as sub broker or dealer or portfolio manager or investment consultant is also included. 5.2.5.6 Bankruptcy Rule 8(1) (C) of SCRR, 1957 5.2.5.7 Compounded with Creditors Rule 8(1) (D) of SCRR, 1957 5.2.5.8 Fraud Rule 8(1) (E) of SCRR, 1957 5.2.5.13 Expelled Member / Trading Member or Defaulter Rule 8(1) (H) of SCRR, 1957 5.2.5.15 Previous Rejection Rule 8(1) (I) of SCRR, 1957 5.2.5 Waiver of Qualification As per SCRR, The Governing Board is empowered to waive qualifications pertaining to experience.* *Model Rules have authorised Governing Board to waive requirements of both educational qualifications and past experience in certain cases 5.3 Other Norms 5.3.1 Other Financial Requirements and Norms Rule 8(4A) (II) of SCRR, 1957 5.3.2 Specifying Stock broking and Allied Activities as Main Objects SEBI Circular No. SMD/Policy/ Cir-11/98 dated March 16, 1998. 5.5 Compliance Officer Regulation 18 A of SEBI (Investment Advice by Intermediaries) (Amendment) Regulations 2001, has made it mandatory for every stock broker to appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc issued by the Board or the Central Government and for redressal of investors grievances and the compliance officer appointed under SEBI Regulations would also be responsible for complying with the stock exchange regulations and would be different from the member itself. 6 PARTNERSHIP FIRMS, REPRESENTATIVE MEMBERS / TRADING MEMBERS, CLEARING MEMBERS, MEMBERSHIP/ TRADING MEMBERSHIP, REMISIERS, , APPROVED USERS AND SUB-BROKERS 6.1 Partnerships 6.5 Multiple Membership / Trading Membership Eligibility Criteria 6.5.4 Conditions Precedent for Multiple Membership As per SEBI Circular No. SMD-DBAII/Policy/CIR-47/2000 dated October 10, 2000, the condition of operating membership card for a minimum period of 5 years for multiple membership was relaxed for all members.* *As per Model Rules, this condition is subject to waiver if the member meets the net worth criteria separately for each of the stock exchanges. 6.5.5 Criteria for Applying for Multiple Membership / Trading Membership -------Same as above------- 6.5.6 Non-Applicability of Criteria When Net Worth Criteria Met -------Same as above------- 6.5.7 Exchange of Report Between Stock Exchanges GOI Circular no. F.No.1/26/SE/91 dated August 21, 1991 6.5.8 Entrance Fee, Admission Fee, Annual Subscription and Base Minimum Capital GOI Circular no. F.No.1/26/SE/91 dated August 21, 1991 6.5.9 Number of Stock Exchanges GOI Circular no. F.No.1/26/SE/91 dated August 21, 1991* *Model Rules have put a condition that at least one authorised representative/designated partner of the firm/designated director should be resident at each additional stock exchange where he is the member. 6.5.10 Governing Board and Standing Committees GOI Circular no. F.No.1/26/SE/91 dated August 21, 1991 provides that an individual member should not be on the Governing Board of more than one exchange and if the membership entity has more than one member than as many stock exchanges as the number of memberships, provided same person is not on the Governing Board* *Model Rules have made applicable above provisions on membership of both Governing Board and Standing Committees. 6.7 Continuous Requirements for Membership / Trading Membership 6.7.2 Capital Adequacy SEBI Circular No. SMD/SED/CIR/93/22570 dated October 21, 1993 6.7.3 Fund Based Activities Rule 8(1)(f) and Rule 8(3) (F) of SCRR, 1957 prohibit a member from doing business other than securities business. 6.7.4 Minimum Trading Activities GOI Circular No. 1/26/SE/91 dated August 21, 1991 has provided for an illustrative definition of an inactive member as turnover of say, one tenth, of the average turnover of members of the exchange.* *Model Rules have defined the same as at least one tenth of the average turnover of the members of the exchange or trading for a minimum of 50 trading days. 6.8 Buy-Back / Surrender of Membership / Trading Membership 6.8.1 Special Authorization by the Governing Board* *SEBI Circular SMDRP/ Policy/ 06/ 2001 dated February 01, 2001 has provided for buy back of the membership rights of the inactive members by the stock exchanges, within the existing legal framework. * Model Rules have provided for approval of SEBI for buyback scheme. 6.10 Termination of Membership / Trading Membership 6.10.1 Adjudged Bankrupt Rule 8(3) (b) of SCRR, 1957 6.10.2 Convicted of Fraud Rule 8(3) (c) of SCRR, 1957 6.10.3 Engaged in Other Business Rule 8(3) (f) of SCRR, 1957 6.16 Remisiers 6.16.10 Remisier not to Sign Contract Notes SEBI Circular No. SMD/POLICY/ CIRCULAR/3-97 dated March 31, 1997. 6.18 Sub-brokers 6.18.1 Appointment SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 provide for registration of sub brokers. 6.18.3 Non-Compliance of Requirements GOI Circular No. 14/8/SE/85 dated December 30, 1985 provides that The Stock-broker with whom a sub-broker is associated should be directly responsible for any acts of commission or omission on the part of the sub-broker, notwithstanding any agreement or arrangement entered into between the stock broker and the sub-broker. 7. NOMINATION, TRANSFER, TRANSMISSION AND DECLARATION OF DEFAULTER 7.20 Declaration of Defaulter Automatically As per GOI Circular no. 1/26/SE/ 91 dated August 21, 1991, Default by a member at one Stock Exchange should automatically lead to his being declared a defaulter at other Stock Exchanges. SEBI Circular no.. SMD/POLICY/CIR-24/97 dated September 26, 1997 has, inter alia, stated that if associates of defaulter-broker are holding membership in other stock exchanges, then action, if any, required to be taken against such associate members, should be decided by the respective stock exchanges after examining the relevant facts*. *Model Rules have extended the ipso facto declaration of a member as a defaulter if he falls within the definition of an Associate in relation to a stock broker who is declared a defaulter as per Para 7.20 of the Model Rules. 7.25 Consequences of Declaration of Defaulter 7.25.3 Prohibition to Re-admission Rule 8 (1) (h) of SCRR, 1957.* *Model Rules have, provided that a defaulter or expelled member shall not be readmitted to the exchange for a minimum period of 5 years. 7.31 Re-admitted Defaulter Ineligible for Holding Positions SEBI Circular no. SMd/Policy/IECG/5548/96 dated December 09/ 1996 prohibits an individual member who has been declared a defaulter or failed to meet his liabilities in ordinary course or compounded with his creditors from becoming a member of the Governing Board. These provisions are also applicable to whole time directors of the corporate member*. *The Model Rules have extended the applicability of the above provisions to membership of standing committees, other committees and position of office bearer of the exchange apart from the Governing Board. 7.34 Apportionment of Consideration Realised / Other Realisation of Receivables 7.34.1 Dues of the Exchange /Clearing House / Clearing Corporation /SEBI SEBI Circular no SMD (B) /Cir/ misc-04/1624/94 dated March 22, 1994 had advised the exchanges that claims of investors against defaulter members should be ranked on par and ratably distributed. Further vide SEBI Circular No.SMD/AA/SU/1939/96 dated May 21, 1996, the claims of SEBI are to be treated on par with the claims of exchange and clearing house. * *Model Rules have, however, put the claims of investors at second level of priority of distribution. 7.34.2 Liabilities Relating to Contracts -----Same----- 7.34.3 Balance -----Same----- 7.34.4 Apportionment in case in Defaulter/Deemed Defaulter in Relation to Multiple Membership/ Trading Membership GOI Circular no. 1/26/SE/ 91 dated August 21, 1991 has provided that apportionment of the assets of the defaulter members against the claims must be done strictly Stock exchange wise. If there is, however, a surplus of the assets at any particular Stock Exchange, the same may be distributed against the claims at other Stock Exchanges. 8. CONSTITUTION AND POWERS OF GENERAL MEETING, GOVERNING BOARD, STANDING COMMITTEES, CHAIRMAN, MANAGING DIRECTOR, COMPANY SECRETARY, AUDITOR, LEGAL ADVISOR AND SCRUTINEERS 8.3 Standing Committees 8.3.1 Committee for Settlement of Claims Against Defaulters, Disciplinary Action and Investors Services Committees and Conciliation and Arbitration Panels SEBI Circular Nos. SMD-II/ 11615/92 dated November 20, 1992 and Order dated April 20, 1993 has provided for nomination on the standing committees in the ratio of 40:60 between members and non members. * *Model Rules have provided for constitution of 4 new standing Committees (Investors Services Committee, Ethics Committee, Audit Committee and Membership Selection Committee) apart from Defaults Committee (renamed as Settlement of Claims against Defaulters), Disciplinary Action Committee and Arbitration Committee. Further nomination of 5 members on Committee for Settlement of Claims against Defaulters, Disciplinary Action, Investors Services Committee and Conciliation and Arbitration Panels in the ratio of 40:60 between members and non members has been recommended. 8.3.2 Alteration in Number of Members -------Same------- 8.3.6 Ethics Committee 8.3.6.1 Nomination SEBI Circular dated May 17, 2001 regarding Code of Ethics for Directors and Functionaries of Exchanges has prescribed for formation of an Ethics Committee with not more than 40% of the members being elected directors/members of the exchange.. 8.3.6.2 Definitions 8.3.6.2.1 Functionaries SEBI Circular defines Functionaries as officers of the rank of GM and above* *Model Rules define Functionaries as Manager and above 8.3.6.2.2 Family SEBI Circular dated May 17, 2001 regarding Code of Ethics for Directors and Functionaries of Exchanges 8.3.6.2.3 Securities -------Same------- 8.3.6.3 General Principles SEBI Circular as above has prescribed general standards for directors and functionaries of the exchange * *Model Rules have applied the same on elected members and functionaries of the exchange. 8.3.6.4 Prohibition of Dealings in Securities in Proprietary Account by Elected Members of the Governing Board SEBI Circular dated May 17, 2001 regarding Code of Ethics for Directors and Functionaries of Exchanges 8.3.6.5 Disclosure of Dealings in Securities by Functionaries of the Exchange SEBI Circular as above has not fixed any minimum monetary limit of dealing in securities for disclosure.* *Model Rules have prescribed the limit as may be fixed by the Governing Board. 8.3.6.6 Disclosure of Dealings in Securities by the Elected Members of the Governing Board SEBI Circular as above has prescribed the disclosure requirements for directors of the Exchange.* *Model Rules have applied the same on elected members of the exchange 8.3.6.7 Avoidance of Conflict of Interest SEBI Circular dated May 17, 2001 regarding Code of Ethics for Directors and Functionaries of Exchanges 8.3.6.8 Disclosure of Beneficial Interest SEBI Circular as above has prescribed the disclosure requirements for directors of the Exchange.* *Model Rules have applied the same on elected members of the exchange 8.3.6.9 No Role of the Elected Members of the Governing Board in the Day- to- Day Functioning of the Exchange SEBI Circular as above describes the role of Chairman/President and directors of the Exchange.* *Model Rules have applied the same on elected members of the exchange 8.3.6.10 Access to Information SEBI Circular as above describes the role of directors of the Exchange regarding access to information.* *Model Rules have applied the same on elected members. 8.3.6.11 Misuse of Position SEBI Circular as above describes the role of directors/Committee members regarding access to information.* *Model Rules have applied the same on elected members/Committee members. 8.3.6.12 Compliance Officer SEBI Circular dated May 17, 2001 regarding Code of Ethics for Directors and Functionaries of Exchanges 8.5 Managing Director 8.5.1 day-to-day Administration and Executive Powers SEBI Order dated April 20, 1993 circulars no. SMDRP/ Policy/Cir-25/99 dated August 12, 1999 IEMI/LKS/MI/ 2990/95 dated August 08, 1995 have described the powers, duties and functions of the Executive Directors.* *However Model Rules have listed out specific areas of duties, responsibilities, functions and powers of the Executive Dirtector. 9 ELECTION, NOMINATION AND APPOINTMENT OF MEMBERS OF THE GOVERNING BOARD, VACANCIES IN THE GOVERNING BOARD AND ADMINISTRATIVE SET-UP 9.1 Governing Board 9.1.1 Election of Members Conditions of Eligibility 9.1.1.1 Nationality SEBI circular SMD/POLICY/ IECG/5694/96 December 20, 1996. 9.1.1.2 Standing SEBI circular SMD/POLICY/ IECG / 2-97 February 25, 1997 9.1.1.3 Default SEBI circular SMD/POLICY/ IECG/5694/96 December 20, 1996. 9.1.1.4 Suspended SEBI circular SMDRP/Policy/ Cir-33/98 November 12, 1998 9.1.1.5 Cancellation of Registration SEBI circular SMD/POLICY/IECG/5694/96 December 20, 1996 9.1.1.6 Criminal Prosecution SEBI Circular no. SMDRP/Policy/Cir-33/98 November 12, 1998: The persons falling in the category of Notified Persons as per the Special Courts(Trial of Offences Relating to Transactions in Securities) Act, 1992, would not continue on the Governing Board and would not be eligible to be elected to the Governing Board for two years from the date the person is de-notified under the said Act* *Model Rule : he is facing charges of criminal offence and the relevant statutory authority has filed criminal prosecution against such member. 9.3 Retiring Elected Members SEBI circular SMD /SED/6919/93 dated April 20, 1993 9.5 Retirement SEBI circular SMD /SED/6919/93 dated April 20, 1993 9.6 Retirement Provisions Not to Apply SEBI circular SMD-II/11615/92 dated November 20, 1992. 9.8 Public Representatives 9.8.1 Number SEBI circular SMD /SED/6919/93 dated April 20, 1993 and SMD/Policy/CIR-9/98 dated february 24, 1998. 9.8.2 Qualification SEBI circular SMD /SED/6919/93 dated April 20, 1993 9.8.4 Panel and Its Ratio SEBI circular SMD /SED/6919/93 dated April 20, 1993 9.8.6 Term SEBI circular SMD-II/11615/92 dated November 20, 1992. 9.9 SEBI Nominees 9.9.1 Number of Nominees SEBI circular SMD /SED/6919/93 dated April 20, 1993 9.9.2 Holding Office at Pleasure of SEBI SEBI circular SMD /SED/6919/93 dated April 20, 1993 9.10 Managing Director 9.10.1 Selection Through Independent Process SEBI circular SMD-II/52 dated January 10, 1996. 9.10.2 Terms and Conditions of Appointment SEBI circular SMD-II/52 dated January 10, 1996. 9.10.3 Appointment and Tenure SEBI circular SMD-II/11615/92 dated November 20, 1992 SEBI circular SMD /SED/6919/93 dated April 20, 1993* *Model Rules have provided for superannuation age of ED as 60 years and tenure of 5 years, subject to renewal. 9.11 Election Procedure for Elected Members 9.11.8 Election of Chairman SEBI circular SMD /SED/6919/93 dated April 20, 1993 11 DISCIPLINARY PROCEEDINGS 11.5 Causes Requiring Disciplinary Action SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 11.5.1 Misconduct 11.5.2 Unbusinesslike Conduct 11.5.2.1 Fictitious Names SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. 11.5.2.2 Fictitious Dealings SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. 11.5.2.3 Circulation of Rumours SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. 11.5.2.4 Prejudicial Business SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. 11.5.2.5 Market Manipulation and Rigging SEBI (Stock Brokers and Sub Brokers) Regulations 1992, prescribing Code of Conduct for Stock brokers. 11.5.3 Unprofessional Conduct 11.5.3.5 Dealings with Unregistered Sub-brokers SEBI Circular vides SMD/Policy/cir-3/97 dated March 31, 1997. 12 FINANCE AND ACCOUNTS AND PAYMENT OF ENTRANCE FEE, ADMISSION FEE, ANNUAL SUBSCRIPTION AND BASE MINIMUM CAPITAL BY MEMBERS/TRADING MEMBERS AND ASSOCIATES 12.1.4 Financial Statement and Balance Sheet SEBI Circular SMDRP/POLICY /CIR-04/01 dated January 22, 2001* *Model Rules have also provided for submission on half yearly basis, other details like size and utilisation of SGF, IPF, ISF etc. 12.3.1.10 Suspension on Failure to Maintain Base Minimum Capital SEBI Circular SMD/SED/Cir/93/22570 darted October 21, 1993.* *As per Model Rules, When a member/trading member or designated partner or representative member / trading member fails to provide base minimum capital as provided under Rule 12.3.1.1, the Managing Director shall order deactivation of the trader work station/s suspending his business forthwith. PART-B (To be Implemented by the Stock Exchanges) CLAUSE SUB CLAUSE SUBJECT 3 CONSTITUTION, OBJECTS AND CAPITAL / CORPUS 3.1 Constitution 3.2 Objects 3.2.1 The Interest of Investors, Issuers, Brokers, Sub-Brokers, Dealers and Any Other Intermediaries 3.2.2 Buildings 3.2.3 Acquisition of Property 3.2.5 Management and Disposal of Property 3.2.6 Borrowings of Monies 3.2.7 Investments 3.2.8 Payments and Disbursements 3.2.9 Subscriptions 3.2.10 Funds and Trusts 3.2.12 Licences and Privileges 3.2.14 Technical and Business Knowledge 3.2.15 Membership of Other Bodies 3.2.17 Incidental Powers 3.3 Delegation of Powers 3.4 Capital/Corpus 4 FUNCTIONARIES 4.1 General Body 4.4 Audit Committee 4.6 Membership / Trading Membership Selection Committee 5 ELECTION / SELECTION OF NEW MEMBERS / TRADING MEMBERS 5.1 Legal Requirements / Position 5.1.2 Membership / Trading Membership - a Personal Privilege 5.1.3 Right of Membership / Trading Membership Inalienable 5.1.4 Forfeited or Lapsed Right of Membership / Trading Membership 5.1.5 Failure to Pay Subscription and Other Fees 5.1.6 Membership / Trading Membership Selection Committee 5.2 Conditions Precedent for Eligibility 5.2.3 For Firms 5.2.4 For Companies / Bodies Corporate 5.2.4.4 Age of Designated Directors / Nominees 5.2.4.6 Other Business 5.2.4.8 Promoters , Identity and Undertaking 5.2.4.9 Approval from the Exchange for Change in Shareholding Pattern 5.2.5 General Conditions 5.2.5.1 Educational Qualification 5.2.5.2 Professional Qualification 5.2.5.4 Common Applicability of Conditions 5.2.5.5 Financial Soundness 5.2.5.9 Unsound mind 5.2.5.10 Insolvent 5.2.5.11 Moral Turpitude 5.2.5.12 Other Business Rule 8(1) (F) of SCRR, 1957 and SEBI Circular no. SMD/VRN/ 1476/ 95 dated 27.04.1995 provide that the member should severe his connection with other business on admission. Model Rules provide that the member is given a period of 3 months to severe his connection from other business. 5.2.5.14 Guilty of Contravention 5.4 Branch Office 6 PARTNERSHIP FIRMS, REPRESENTATIVE MEMBERS / TRADING MEMBERS, CLEARING MEMBERS, MEMBERSHIP/ TRADING MEMBERSHIP, REMISIERS, , APPROVED USERS AND SUB-BROKERS 6.1 Partnerships 6.1.1 Who May Form Partnership 6.1.2 Other Business* As per the Model Rules, the firm and partners are given 3 months to severe connection with other business. 6.1.3 Partner in One Firm Only 6.1.4 Partnership with Non-members / Non-trading Members Forbidden 6.1.5 Partnership with Suspended / Surrendered Members / Trading Members Forbidden 6.1.6 Contingent Partnership 6.1.7 Partnership Interest not be Assigned 6.1.8 Fictitious Partnership Names Forbidden 6.1.9 Misleading Names 6.1.10 Transactions With Individual Partners 6.1.11 Governing Board Sole Judge of Partnership 6.1.12 Permission Necessary 6.1.13 Changes in Partnership 6.1.14 Intimation in Prescribed Form 6.1.15 Notice of Formation of and Changes in Partnership 6.1.16 Withdrawal of Permission 6.1.17 Names to be Printed 6.1.18 Liability of Member / Trading Member Partners 6.1.19 Liability of Partners 6.1.20 Joint and Several Liability 6.1.21 Member / Trading Member Working in Firm Name 6.1.22 Partnership Dissolved on Declaration of a Defaulter 6.1.23 Register of Partnership Firms 6.1.24 Representative Member / Trading Member 6.1.24.1 Who may Authorize 6.1.24.2 Number of Representative Members / Trading Members 6.1.24.3 Approval or Rejection of Application 6.1.24.4 Termination 6.1.24.5 Notice of Termination 6.1.24.6 Register of Representative Members / Trading Members 6.1.24.7 Registration and Removal 6.2 Transactions in the Market by Representative Member / Trading Member 6.2.1 Transactions Not in Own Name 6.2.2 Authorizing Member s / Trading Member s Responsibility 6.2.3 Representative Member s / Trading Member s Business 6.2.4 Indemnity 6.2.5 Representative Member / Trading Member When to Issue Contract Notes 6.3 Composite Member / Trading Member and Component Members / Trading Members 6.3.1 One or More Additional Membership / Trading Membership 6.3.2 Fulfillment of all Eligibility Criteria 6.3.3 Limit on Number of Memberships / Trading memberships 6.3.4 Payment of Fees 6.3.5 Networth Requirement 6.3.6 Number of Votes 6.3.7 Trading Right 6.3.8 Disassociation 6.3.9 Joint and Several Liability 6.3.10 Books of Accounts 6.3.11 Action to Operate Against All 6.3.12 When Ceases to be a Member / Trading Member 6.3.13 Liability How Crystallises 6.4 Additional Membership / Trading Membership Rights 6.5 Multiple Membership / Trading Membership Eligibility Criteria 6.5.1 Disclosure 6.5.2 Requirements to be Fulfilled 6.5.3 Books of Accounts 6.7 Continuous Requirements for Membership / Trading Membership 6.7.1 Refresher Course 6.7.5 Right Vesting in Governing Board When Business/ Nomination not Activated/Exercised 6.7.6 Right of Nomination for Deceased Members 6.7.7 Payment of Dues 6.8 Buy-Back / Surrender of Membership / Trading Membership 6.8.2 Prohibition to Re-issue Buy-back / Surrender Right 6.8.3 Notice of Surrender 6.8.4 Acceptance or Refusal of Surrender 6.9 Notice of Resignation 6.9.1 Written Notice Required 6.9.2 Objection 6.9.3 Acceptance or Refusal of Resignation 6.10 Termination of Membership / Trading Membership 6.10.4 Minimum Networth, Working Capital and Assets 6.10.5 Company / Body Corporate 6.10.6 Eligibility Criteria Not Maintained 6.10.7 Expulsion Rules to Apply 6.11 Intimation of Death of Member / Trading Member 6.12 Claims Against Deceased Member / Trading Member 6.12.1 Conditions Precedent Before Exercise of Right of Nomination 6.12.2 Conditions Precedent Applicable to Liquidation or Dissolution 6.13 Payment of Deceased Member s / Trading Members Obligations 6.14 Continuance of Deceased Member s / Trading Member s Business 6.15 Additional Terms in the Case of a Company / Body Corporate 6.15.1 Articles of Association 6.15.2 Shareholding 6.15.3 Alteration in Structure 6.15.4 Expulsion of Member Company 6.16 Remisiers 6.16.1 Remisier Not to be Another s Employee 6.16.2 Remisier to Act for One Member / Trading Member Only 6.16.3 Ex-members/Trading Members as Remisiers 6.16.4 Remisiers not to Engage in Forward Business 6.16.5 Procedure 6.16.5.1 Application 6.16.5.2 Discharge Certificate 6.16.5.3 Absence of Discharge Certificate 6.16.6 Permission Necessary 6.16.7 Approval or Rejection of Application 6.16.8 Commission Terms 6.16.9 Annual Fee 6.16.11 Remisier not to Advertise 6.16.12 Remisier s Personal Business 6.16.13 Sub-agent 6.16.14 Remisier not to Share Brokerage with Clients 6.16.15 Refusal to Registration 6.16.16 Suspension 6.16.17 Cancellation 6.16.18 Termination 6.16.19 Register of Remisiers 6.16.20 Inspection of Register 6.17 Approved Users 6.17.1 Appointment 6.17.2 Number of Trader Work Stations 6.17.3 Minor Ineligible 6.17.4 Defaulter or Expelled Member / Trading Member Ineligible 6.17.5 Suspended Member / Trading Member 6.17.6 Permission of Managing Director Necessary 6.17.7 Common Applicability of Provisions 6.18 Sub-brokers 6.18.2 Compliance With the Provisions 6.18.4 Common Applicability of Provisions 7. NOMINATION, TRANSFER, TRANSMISSION AND DECLARATION OF DEFAULTER 7.1 Nomination / Transfer 7.1.1 Nomination by Member / Trading Member 7.1.2 Standing of Minimum Years 7.1.3 Right of Membership / Trading Membership and Right of Nomination of Deceased Member / Trading Member or Defaulter or Deemed Defaulter 7.1.3.1 Nomination in case of Defaulter/Deemed Defaulter 7.1.3.2 Right of Nomination Not to be Exercised by Former Member/Trading Member 7.1.3.3 Right of Nomination in Case of Death 7.1.3.4 Nomination in Case of Deceased Member/Trading Member 7.2 Forms of Applications 7.2.1 By Individual 7.2.2 By Company / Body Corporate 7.2.3 By Partnership Firm 7.2.4 Application for Permission 7.3 Forms of Nomination 7.3.1 Form For Member / Trading Member Nominating During His Life Time 7.3.2 Form of Nomination in Favour of a Family Member 7.3.3 Form for Legal Heirs / Legal Representatives 7.3.4 Nomination Irrevocable 7.4 Notice of Nomination 7.5 Candidates to be Recommended 7.6 Objections 7.7 Member s / Trading member s Duty to Report 7.8 Dues and Claims 7.8.1 Dues of the Exchange 7.8.2 Liabilities Relating to Contracts 7.9 Consideration of Application 7.10 Inquiry 7.11 Admission of New Members / Trading Members 7.12 Admission Under Misrepresentation 7.13 Fresh Nomination 7.14 Payment of Entrance and Admission Fees and Annual Subscription 7.15 Intimation Letter for Election / Selection 7.16 Certificate of Admission to Membership / Trading Membership 7.17 Publication of Notice 7.18 Declaration of Defaulter / Deemed Defaulter 7.19 Declaration of Deemed Defaulter 7.21 Members Duty to Inform 7.22 Compromise Forbidden 7.23 Post Declaration of Defaulter Process 7.23.1 Defaulter s Books and Documents 7.23.2 List of Debtors and Creditors 7.23.3 Defaulter to Give Information 7.24 Assets to vest in the Committee and Procedure to be Applicable 7.25 Consequences of Declaration of Defaulter 7.25.1 Cessation of Membership / Trading Membership at Once 7.25.2 Lapse of Membership / Trading Membership Right 7.26 Surrender of Names of Clients and Books a Condition of Eligibility 7.27 Full Payment a Condition of Eligibility 7.28 Defaulter When not to be Re-admitted 7.29 Conditions of Re-admission for Defaulters 7.30 Expelled Member / Trading Member not to be Re-admitted 7.32 Defaulter Provisions Applicable to Director incase of Company / Body Corporate 7.33 Exercise of Right of Nomination by the Governing Board Where Right of Membership / Public Trading Membership Vested in the Exchange 7.34 Apportionment of Consideration Realised / Other Realisation of Receivables 7.34.5 Surplus 8. CONSTITUTION AND POWERS OF GENERAL MEETING, GOVERNING BOARD, STANDING COMMITTEES, CHAIRMAN, MANAGING DIRECTOR, COMPANY SECRETARY, AUDITOR, LEGAL ADVISOR AND SCRUTINEERS 8.1 General Meeting 8.1.1 Number of Members/Trading Members 8.1.2 Adoption of Statement of Accounts 8.1.3 Appointment and / or Removal of Statutory Auditor 8.1.4 Election of Members to the Governing Board 8.1.5 Dealing with Immovable Property 8.1.6 Dealing with Funds 8.1.7 Distribution of Dividend, Bonus, etc 8.1.8 Extra-Ordinary General Meeting May Make Bye-laws 8.2 Powers of the Governing Board 8.2.1 Jurisdiction 8.2.2 General Powers 8.2.3 Governmental Powers 8.2.3.1 Chairman, Managing Director, Standing Committees Internal Auditor and Legal Advisor 8.2.3.2 Casual Vacancies 8.2.3.3 Admission, Expulsion and Control of Members/ Trading Members 8.2.3.4 Imposition of Penalties 8.2.3.5 Regulation of Business 8.2.3.6 Regulations 8.2.3.7 General Control 8.2.3.8 Review 8.2.3.9 General Power 8.2.4 Administrative Powers 8.2.4.1 Fees and Charges 8.2.4.2 Borrowing 8.2.4.3 Dealing With Immovable Property 8.2.4.4 Dealing With Funds 8.2.4.5 Payment Towards Charitable Purpose 8.2.4.6 Investment of Surplus Funds 8.2.4.7 Legal Proceedings 8.2.4.8 Personnel Policy for Employees 8.2.4.9 Stock Exchange Facilities 8.2.5 Legislative Powers 8.2.5.1 Power to Make Rules, Bye-laws and Regulations 8.2.5.2 Amendments to Regulations 8.2.5.3 Suspension of Rules, Bye-laws and Regulations 8.2.6 Other General Powers 8.2.6.1 Delegation of Powers 8.2.6.2 Review 8.2.6.3 Delegation of Powers in Emergency 8.2.7 Decision of Governing Board Final 8.2.8 Governing Board as Trustees 8.2.9 Indemnity to the Governing Board 8.3 Standing Committees 8.3.3 Audit Committee 8.3.5 Investors Services Committee 8.3.7 Limitation of Constituting other Committees 8.3.8 Removal of Member 8.3.9 Casual Vacancy 8.3.10 Vacation of Office 8.3.11 Retiring Members 8.5 Managing Director 8.5.2 Delegation of Powers 8.5.3 General Operations Powers 8.6 Company Secretary 8.7 Auditors 8.7.1 Appointment and Duties of Statutory Auditor 8.7.2 Vaccine 8.7.3 Internal Auditor 8.8 Practising Company Secretary 8.9 Legal Advisor 8.10 Scrutineers 9 ELECTION, NOMINATION AND APPOINTMENT OF MEMBERS OF THE GOVERNING BOARD, VACANCIES IN THE GOVERNING BOARD AND ADMINISTRATIVE SET-UP 9.1.1.7 Not Complying with Conciliation/Arbitration Award 9.1.1.8 Not Resolving Complaints of Investors 9.1.1.9 Not Maintaining Base Minimum Capital 9.2 Designated Partner or Designated Director/Nominee as Member 9.4 Retirement Age 9.7 Conditions Applicable to Company/Body Corporate 9.8 Public Representatives 9.8.3 Disqualification 9.8.5 Failure to Recommend Panel 9.8.7 Vacancy 9.8.8 Report to SEBI 9.8.9 Retirement Age 9.9 SEBI Nominees 9.9.3 Vacancy 9.9.4 Report to SEBI 9.10 Managing Director 9.10.4 Explanation from the Managing Director 9.10.5 Not to Engage in Any Business 9.11 Election Procedure for Elected Members 9.11.1 Notice of Election 9.11.2 Proposal of Candidates 9.11.3 Notice of Candidates 9.11.4 Ballot When Not Necessary 9.11.5 Scrutineers 9.11.6 Voting 9.11.7 Elected Candidates 9.12 Vacancies in the Governing Board 9.12.1 Vacancy in the Office of Chairman 9.12.2 Leave 9.12.3 Vacancy 9.12.3.1 Suspension of Payment 9.12.3.2 Unsound Mind 9.12.3.3 Absence 9.12.3.4 Death, Suspension or Expulsion 9.12.3.5 Criminal Prosecution 9.12.3.6 Not Complying With the Arbitration Award 9.12.3.7 Not Resolving the Complaints of Investors 9.12.3.8 Not Maintaining Base Minimum Capital 9.12.3.9 Resignation 9.13 Expulsion from the Governing Board 9.14 Conversion Not Requiring Vacation 9.15 Filling up of Causal Vacancies - Elected Members 9.16 Powers of Surviving Members 9.16.1 Where Quorum Exists 9.16.2 To Act to Make Quorum 9.17 Resignation of All Elected Members 10 MEETINGS 10.1. Meetings of Members 10.1.1 Annual General Meeting 10.1.1.1 When and Who May Convene 10.1.1.2 Business 10.1.1.2.1 Balance Sheet and Auditor's Report 10.1.1.2.2 Appointment of Statutory Auditor 10.1.1.2.3 Other Business 10.1.2 Extra-Ordinary General Meetings 10.1.2.2 How Convened and Who Will Convene 10.2.1.3 Not to Alter Governing Board Resolution 10.1.3 Notice of Meetings 10.1.4 Requirement of Quorum 10.1.4.1 Quorum 10.1.4.2 No Quorum Adjournment of Meeting 10.1.4.3 Adjournment of Meeting 10.1.4.4 Who May Be Present at Meetings 10.1.4.5 Who May Not Be Entitled to be Present at Meetings 10.1.4.6 Clarifications at Meetings 10.1.4.7 Suspended Member Not to be Present and Vote 10.1.4.8 Chairman of Meeting 10.1.4.9 Decision of Majority 10.1.4.10 Voting by Proxy 10.1.4.11 Voting 10.1.4.12 Poll 10.1.4.13 Validity of Votes 10.1.4.14 Casting of Votes 10.1.4.15 Minutes 10.2 Meetings of the Governing Board 10.2.1 Regulation of Meetings 10.2.2 Ordinary Meetings 10.2.3 Special/Urgent/Emergency Meetings 10.2.3.1 10.2.3.2 Special Meeting 10.2.3.3 Urgent and Emergency Meetings 10.2.3.4 Notice of Special/Urgent/Emergency Meetings 10.2.3.5 Business When Not to be Stated 10.2.3.6 Quorum 10.2.3.7 Interested Member Not to be Included in Quorum 10.2.3.8 Co-option of Members for Making up Quorum 10.2.3.9 Chairman to Preside 10.2.3.10 Voting 10.2.3.10.1 Personal Interest 10.2.3.10.2 Member of Committee 10.2.3.10.3 Absence During Hearings 10.2.3.11 Quorum 10.2.3.12 Majority 10.2.3.13 Chairman to Have a Casting Vote 10.2.3.14 Special Majority Resolution 10.2.3.15 Ordinary Resolution by Circular 10.2.3.16 Adjourned Meeting 10.2.3.17 Proceedings 10.2.3.18 Governing Board Need Not Give Reasons 10.2.3.19 Members/Trading Members And Others to Appear Before Meetings 10.2.3.20 Minutes 10.3 Meetings Of Standing Committees 10.3.1 Who May Convene And When 10.3.2 Quorum 10.3.3 Voting 10.3.4 Proceedings 10.3.5 Leave 10.3.6 Custody of Minutes 11 DISCIPLINARY PROCEEDINGS At present, the provisions relating to disciplinary proceedings are incorporated partly in the Rules and Partly in the Byelaws of stock exchanges. Clear cut provisions relating to the disciplinary action to be taken by the Governing Board, the Disciplinary Action Committee and the managing Director 11.1 Jurisdiction for Taking Disciplinary Action 11.2 The Governing Board May Expel Any Member/Trading Member 11.2.1 Upon Recommendation by the Disciplinary Action Committee 11.2.2 For Admission Under Misrepresentation 11.2.3 Expulsion of a Member 11.2.4 Expulsion by Special Resolution Only 11.2.5 Expulsion Rule to Apply 11.2.6 Explanation Before Expulsion 11.2.7 Consequences of Expulsion 11.2.7.1 Membership/Trading Membership Rights Forfeited 11.2.7.2 Lapse of Right of Nomination 11.2.7.3 Office Vacated 11.2.7.4 Rights of Creditors Unimpaired 11.2.7.5 Fulfillment of Contracts 11.2.7.6 Members/Trading Members Not to Deal 11.2.8 Withdrawal of Admission to Dealings on the Exchange 11.2.9 Reconsideration/Review 11.3 The Disciplinary Action Committee 11.3.1 Penal Actions 11.3.2 Explanation Before Suspension 11.3.3 Consequences of Suspension 11.3.3.1 Suspension of Membership/Trading Membership Rights 11.3.3.2 Rights of Creditors Unimpaired 11.3.3.3 Fulfillment of Contracts 11.3.3.4 Further Business Prohibited 11.3.3.5 Members/Trading Members Not to Deal 11.3.4 Pre-determination of Penalties 11.3.5 Imposition of Penalties 11.3.6 Commutation 11.3.7 Failure to Pay Fines and Penalties 11.3.8 Re-consideration/Review 11.3.9 The Managing Director 11.3.9.1 Disablement / De-activation Until Compliance of Requirements 11.3.9.2 Action No Subject to Appeal 11.4 11.4.1 Exclusive Powers in Disciplinary Matters 11.4.2 Appeal of the Governing Board 11.4.3 Authority to Call for Information 11.4.4 Withdrawal/suspension of Admission and Re-admission to Dealings on the Exchange 11.4.5 Reconsideration/Review 11.5 Causes Requiring Disciplinary Action 11.5.1 Misconduct 11.5.1.1 Fraud 11.5.1.2 Commission of an Offence 11.5.1.3 Violation 11.5.1.4 Improper Conduct 11.5.1.5 Aiding and/or Abetting the Breach of Rules, Bye-laws and Regulations 11.5.1.6 Failure to Submit to or Abide by Arbitration 11.5.1.7 Failure to Testify or Give Information 11.5.1.8 Failure to Submit Special Returns 11.5.1.9 Failure to Submit Accounts 11.5.1.10 Failure to Compare or Submit Accounts in Respect of Defaulters 11.5.1.11 False or Misleading Returns 11.5.1.12 Vexatious Complaints 11.5.1.13 Failure to Pay Dues and Fees 11.5.2 Unbusinesslike Conduct 11.5.2.6. Unwarrantable Business 11.5.2.7 Compromise 11.5.2.8 Dishonoured Cheque 11.5.2.9 Failure to Carry out Transactions with Clients 11.5.3 Unprofessional Conduct 11.5.3.1 Kerb Trading 11.5.3.2 Business in Securities in Which Dealings Not Permitted 11.5.3.3 Business for Defaulting Client 11.5.3.4 Dealings with Clients 11.5.3.6 Business for Insolvent 11.5.3.7 Business Without Permission When Under Suspension 11.5.3.8 Business For or With Suspended or Expelled Member/ Trading Member or Defaulter 11.5.2.9 Business for Employees of Other Members/Trading Members 11.5.2.10 Business for Exchange Employees 11.5.2.11 Advertisement 11.5.2.12 Evasion of Margin Requirements 11.5.2.13 Brokerage Charge 11.6 RESPONSIBILITY/LIABILITY OF MEMBER/TRADING MEMBER FOR DESIGNATED PARTNERS, DESIGNATED DIRECTORS /NOMINEES IN THE CASE OF A COMPANY/BODY CORPORATE, APPROVED USERS, AUTHORISED REPRESENTATIVES, AGENTS, SUB-BROKERS, REMISIERS AND EMPLOYEES 11.7 Liquidation and/or Suspension of Business 11.7.1 Prejudicial Business 11.7.2 Unwarrantable Business 11.7.3 Unsatisfactory Financial Condition 11.8 Members/Trading Members and Others to Testify and Give Information 11.9 Permission Necessary for Legal Representation 11.10 Notice of Penalty and Suspension of Business 12 FINANCE AND ACCOUNTS AND PAYMENT OF ENTRANCE FEE, ADMISSION FEE, ANNUAL SUBSCRIPTION AND BASE MINIMUM CAPITAL BY MEMBERS/TRADING MEMBERS AND ASSOCIATES 12.1 Finance and Accounts 12.1.1 Subscriptions and Receipts 12.1.2 Operation of Accounts 12.1.3 Expenses and Accounts 12.2 Entrance/Admission Fee/Annual Subscription 12.2.1 Entrance Fee 12.2.2 Admission Fee 12.2.3 Annual subscription 12.3.4 Failure to Pay Entrance Fee, Admission Fee or Annual Subscription 12.2.5 Other Charges or Fees 12.3 For Members/Trading Members or Designated Partners of Partnership Firms, Representative Members/Trading Members 12.3.1 Base Minimum Capital 12.3.1.1 Provision as to Base Minimum Capital 12.3.1.2 Form of Base Minimum Capital for Members/Trading Members, Designated Partners, Representative Members/Trading Members 12.3.1.3 Manner of Holding of Base Minimum Capital 12.3.1.4 Manner of Holding Base Minimum Capital of Representative Member/Trading Member 12.3.1.5 Value of Base Minimum Capital to be Maintained 12.3.1.6 First Charge/Paramount Lien on Base Minimum Capital 12.3.1.7 Change of Securities 12.3.1.8 Conditions of Other Approved Securities 12.3.1.9 Return of Base Minimum Capital to Members/Trading Members or Designated Partners or Representative Members/Trading Members 12.3.1.11 Letter of Declaration 12.3.1.12 Nomination Form for Return of Base Minimum Capital and other Credit Amounts/Securities Lying with the Exchange/Clearing Corporation 12.4 For Remisiers 12.4.1 Annual Fee 12.4.2 Other Charges or Fees 12.4.3 Base Minimum Capital 12.4.3.1 Provision as to Base Minimum Capital 12.4.3.2 Form of Base Minimum Capital 12.4.3.3 Manner of Holding of Base Minimum Capital 12.4.3.4 First Charge or Paramount Lien on Base Minimum Capital 12.4.3.5 Letter of Declaration 12.4.3.6 Return of Base Minimum Capital 12.5 Approved Users 12.5.1 Annual Subscription 12.5.2 Other Charges/Fees 12.6 Remuneration of Agents and Employees PART-C (MAY BE IMPLEMENTED AFTER DEMUTUALISATION/CORPORATISATION OF THE EXCHANGE) 8. CONSTITUTION AND POWERS OF GENERAL MEETING, GOVERNING BOARD, STANDING COMMITTEES, CHAIRMAN, MANAGING DIRECTOR, COMPANY SECRETARY, AUDITOR, LEGAL ADVISOR AND SCRUTINEERS 4.8 Chairman SEBI's circular no. SMD/SED/6919/93 dated April 20, 1993 Model Rule: There shall be a Chairman elected by the Governing Board as provided hereinafter and he shall be holding his position in a non-executive capacity. 8.4 Chairman The redignation of President as Chairman and functions and powers of Chairman as recommended by the Committee may be implemented after demutualisation/ corporatisation. 8.4.1 Chairman to Preside -------Same------- 8.4.2 Chairman to Deal at Meetings Only -------Same------- 8.4.3 Representative of the Exchange -------Same------- 8.4.4 Ex-Officio Member of Committees -------Same------- 8.4.5 Calling of Meetings -------Same------- 8.5 Managing Director The redesignation of Executive Director as Managing Director may be implemented by Exchanges after demutualisation/ corporatisation. 9.11 Election Procedure for Elected Members 9.11.8 Election of Chairman SEBI circular SMD /SED/6919/93 dated April 20, 1993 has provided for election of chairman from members of the Governing Board. However the provision pertaining to non executive Chairman may be implemented by Exchanges after demutualisation/ corporatisation. The Recommendations of the Committee pertaining to the abolition of the positions of Vice-President, Honorary Treasurer and Trustees may be implemented after demutualisation/corporatisation of the stock exchange. PART-D (AMENDMENT OF SCRR/SEBI REGULATIONS REQUIRED FOR IMPLEMENTATION) CLAUSE SUB CLAUSE SUBJECT 5 ELECTION / SELECTION OF NEW MEMBERS / TRADING MEMBERS 5.1 Legal Requirements / Position 5.2 Conditions Precedent for Eligibility 5.2.2 Non-Citizens of India (Rule 8(1)(b) of SCRR, 1957 provides that no person shall be eligible to be elected as a member of a stock exchange if he is not a citizen of India, provided that the Governing Body may in suitable cases relax this condition with the prior approval of Central Government. Dispensing with any requirement of relaxation by the Governing Board in this regard may require the amendment to Rule 8(1) (b) of SCRR, 1957.) 6.6 Clearing Member The recommended provisions pertaining to constituting different categories of clearing members may require amendment of SEBI (Brokers and Sub-Brokers) Regulations, 1992 6.6.1 Categories of Clearing Member -------Same------- 6.6.1.1 Trading cum Clearing Member -------Same------- 6.6.1.2 Custodian Clearing Member -------Same------- 6.6.1.3 Professional Clearing Member -------Same------- 6.6.1.4 Trading-Cum-Professional Clearing Member -------Same-------