9911796707
TMI BlogStandard Operating Procedure in the cases of Trading Member / Clearing Member leading to defaultX X X X Extracts X X X X X X X X Extracts X X X X ..... d /or non-defaulting clients / TM(s) of the CM, in the likely event of default by TM / CM, there is a need for Standard Operating Procedure ("SoP") enumerating the steps to be taken by the SEs / CCs / Depositories in such cases where SE / CC is of the view that TM / CM is likely to default in repayment of funds or securities to its clients. 3. In order to harmonize the action amongst all SEs / CCs / Depositories in a time bound manner this SoP has been prepared in consultation with SEs, CCs and Depositories so as to achieve uniformity in implementation of actions. The SoP lays down the actions to be initiated by the SEs / CCs / Depositories within a time frame after detection of the early warning signals as laid out in the Circular dated December 17, 2018 and other triggers as laid down in this circular untill declaration of defaulter of TM / CM by the SE / CC. Once the TM is declared defaulter, the proceedings shall be in compliance with the bye-laws, rules and regulations of SE / CC respectively. 4. On analysis of early warning signals or any of the following triggers, if the SE / CC is of the view that the TM / CM is likely to default in the repayment of funds / securities t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Within 1 trading day of disablement 4.7 ISE shall inform other SEs about the disablement immediately and the other SEs shall disable the said TM on receipt of information and the other SEs shall Issue a notice / circular in this regard. Within 1 trading day of receipt of intimation of disablement from ISE 4.8 TM may also stand suspended to act as a client with any other TM / CM in any other segment / SEs. Within 1 trading day of the date of receipt of information of disablement from ISE 4.9 In case of open positions of clients / TM, CM shall liquidate / square off the open positions. Within 15 trading days from the date of receipt of information by the CM. 4.10 a) All SEs shall immediately direct other TM / CM so as not to alienate the unencumbered surplus funds / securities held by them for such TM registered as a client. b) CM shall invoke the BGs of TM and all unencumbered funds of TM to be transferred to SE on demand. CM shall also ensure that the BG do not expire in the intervening period else they shall invoke even before the receipt of instructions from SE. Within 1 trading day of the date of receipt of information of disablement from ISE Upon inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Attorney in favour of the defaulting TM given by its clients. Within 1 trading days from the date of receipt of information of disablement 4.18 If the TM is also a Depository Participant (DP), the Depositories shall depute its officials / auditor to monitor the transactions in demat securities of the clients of TM and / or transfer the demat accounts of the clients to another DP. Within 3 trading days from the date of receipt of information of disablement 4.19 Depositories shall initiate concurrent audit for 100% verification of debit transfers executed from the client accounts and account closures processed by the DP. Within 7 trading days from the date of receipt of information of disablement 4.20 Depositories shall provide the details of pledges that were invoked by Banks/ NBFCs with whom TM's own securities were pledged in the previous 30 days to the SE / CC. Within 15 trading days from the date of receipt of information of disablement Action by ISE /SEs / CCs and Banks 4.21 Issuance of instruction to the banks that the balance in all the bank accounts of TM / CM shall be frozen for debits by Banks. Within 1 trading day of receipt of information of disable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TM shall not be considered for settlement, for which the TM shall provide an undertaking to the SEs / CC. TM to provide indemnity to the SEs to make available the funds to meet any shortfall in meeting investor's claim (other than those who have withdrawn their claim). Clients withdrawing their claim will have to submit unconditional withdrawal letter to the SEs. Within 30 trading days from crystallization of balances 4.26 Issuance of SCN for declaration of TM as a defaulter and the list of members to whom the notice is issued shall be placed on the website of the SE and on such other place, as the relevant authority may deem fit. After finalization of assets and liabilities as per forensic audit or audit by SEs 4.27 SEs shall intimate the clients about the issuance of the notice / SCN to declare the TM as defaulter including through email / SMS. Within 3 trading days of the issuance of SCN 5. The above action shall equally apply to a likely event of default by a CM who is also a TM. However, in case of likely default of a Professional CM, the action to be initiated by the CM shall fall upon the CC. 6. As soon as TM is disabled that information shall be shared by ISE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r monthly development report. 12. This circular is being issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 read with Section 10 of the Securities Contracts (Regulation) Act, 1956 and Section 19 of the Depositories Act to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. Yours faithfully, Rachna Anand General Manager Market Intermediaries Regulation and Supervision Department Encl: Annexure A Annexure A To be on Stamp / Franked Paper of appropriate value and notarized AFFIDAVIT OF UNDERTAKING CUM INDEMNITY BOND TO BE SUBMITTED BY MEMBER TO ………… [NAME OF THE STOCK EXCHANGE / CLEARING CORPORATION] This Undertaking cum Indemnity Bond is signed at Mumbai on this ________day of _______, 20. By I/We, Member of ……….. [Name of The Stock Exchange / Clearing Corporation] (bearing Trading / Clearing No. ________), having office at …………………………………………………, (herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alties, proceedings / actions, damages, consequential or otherwise, arising there from or occasioned thereby. 4) No proceeding/suit/action/claims would be adopted by me/us against ………… [Name of the Stock Exchange/ Clearing Corporation] for any act done with respect to issuance of instruction to the bank/s mentioned above for freezing of my/our account/s held with the bank/s. 5) I / We agree to indemnify and keep ………… [Name of the Stock Exchange/ Clearing Corporation] and/or its successors/assigns indemnified from time to time, and at all times hereafter, against all claims, demands, damages, liabilities, proceedings, losses, actions, charges and expenses made or suffered or incurred or caused or likely to suffer / incur directly or indirectly, to ………… [Name of the Stock Exchange/ Clearing Corporation] and/or its successors/assigns on account of freezing of my/our account/s held with bank/s. 6) I/ We shall keep the Bank appropriately notified of the obligations undertaken by me / us herein and authorizing them to honour the instructions from ………… [Name of the Stock E ..... 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