Policies & Procedures
The underlying document outlines various policies and procedures PH Financial and Investment Consultant Private Limited (PHFIC) framed with respect to its dealing with clients to ensure transparency and facilitate understanding on various aspects related to service delivery.
Kindly note that the below stated policies and procedures are subject to change from time to time; depending upon our internal risk management framework, market and external environment:
Procedure for Client Registration and Documents maintenance
- Persons and organizations are added as clients only after they have had a meeting with the Director / Employee of the company.
- The Application forms for opening an account are issued only when the management is satisfied with the client's financial capacity to trade in stock market and after the prospective client provides the valid reference for his account.
- The accounts are opened only after proper verification is done of the existence of the client. The person carrying out the in person verification is required to maintenance a proof of in-person verification by affixing his signature along with the in person verified stamp on the proof of identity or on the Client Registration form and only then the account will be opened in the back office and only after allotment of the UCC any trading can be started by the client.
- The copy of Client Registration Documents (CRD) are sent to the new client's along with the welcome letter specifying the brokerage, transaction charges, STT, stamp duty etc. With respect to existing clients the same will be provided to them on demand. The welcome letter will include the details of the UCC & email ID communicated by the client to the broker at the time of opening of the account.
- Know your client form duly complying with the mandatory requirements specified by the SEBI & Exchange are processed further along with franked Agreement / Stamp paper of requisite amount, Supporting documents, proof of bank account, etc are collected from all the clients.
- The company has the policy of approval of all application forms by the Director of the company before allowing trading to applicant.
- The details are entered in the back office software by the back office. Further a senior person acts like a checker to see that the details have been properly entered in the back office software to avoid any issue in future.
- Walk-in clients are not entertained and only clients through reference are enrolled.
- The clients only through reference are entertained. The financial capability of the client is assessed before opening of the account.
- The client registration modalities are carried out in-house and not outsourced.
- The documents are stored at the office and filed properly for easy retrieval whenever required.
- With reference to updation of clients financial information, the client are requested on periodic basis to provide the financial details. Also clients are required to inform about any changes in Bank account, Demat account or address by a letter.
Procedure for UCC Upload
From our back-end, we generate file for the client containing data in KYC of market segment, client code, client name, PAN, address in the format prescribed by NSE. The data generated are thereafter verified with KYC. On the data being found fully correct, the client is uploaded on UCC - site of NSE . The PAN card is verified through income tax website.
Procedure for Sales Practices followed by us
- The company is very particular about the client being registered and hence clients coming through reference or financial standing are only registered.
- The clients are appraised about the risk disclosure document and make them aware of the contents regarding the risk associated with the securities market.
- The company does not offer any freebies to the clients. All the services provided are charged as per the agreed term.
Procedure for Customer Category & Exposure Limits
- All customers will be categorized based on the details provided in their Client Registration form and will be profiled by the Head as under:-
Establish Client Profile
The Client would be profiled under following types. This will allow us to gain a better understanding of the risk of the client. In order to categorize the client into the appropriate risk ranking, Head will review/assess
- The type of client
- Size of the client
- Client Categorization
|a.||High Net Worth Individual (HNI) Client accounts||This category of clients will be the client Having specified Minimum margin in form of Cash or approved securities as described by the company from time to time.|
|b.||Retail Client Accounts||All other clients, not falling with in above category are provided with minimum limit as described by the company from time to time.|
The company will fix the exposure limit in value for each and every Client for which Buy/sell orders of any particular client will be executed in normal course based on Income Level for the year confirmed by the client and other considerations. PHFIC will not disclose the rational /logic of their decision (about fixation of the monetary limit). However if requested by the client for any specific transaction/s to be carried out as a special case then it may be considered on merit.
Procedure for Brokerage Rates
At present SEBI permits maximum brokerage @2.5%. The Company charges brokerage to their clients at the rate below this maximum limit. Each client will be intimated the rate at which brokerage will be charged to him. This rate will be revised by the Company based on volume of the Client's business/ market conditions / other relevant factors. Any change in the rate of brokerage will be intimated to the client in writing in advance.
We follow the following Procedure for Order Receipt and Execution
- The Organization setup is small and all the client are personally known to management, their financial position is known and the dealer is aware of the risk appetite of the client which helps in better control.
- The company has restricted the access to the dealing office only to the authorized persons who are dealers of the company.
- The approved clients are updated to the dealers who would be responsible for receiving, validating and entering the orders on behalf of them.
- Normally, the orders are received over phone or through personal instructions when they are in the office. The organization has a telephone recording system.
- The orders are received from the clients only or through an authorized person as may be informed to the organization.
- On execution of valid order into exchange system, dealers confirm the trade with the client so as to avoid any future dispute.
- At the end of the trading hours, the dealer informs the clients about the execution of the orders placed by the clients.
- After market hours, back office team informs the client about their executed trades for the day and also about their obligation towards Pay-in & Pay-out of funds & securities for the particular day.
Procedure for sending Contract Notes, Daily Margin statement, Quarterly Statement of Accounts to clients
- The organization sends contract notes and daily margin statement of both segments within 24 hours of execution of the trade (i.e. Within 1 day) by digitally signed emails or physical copy or both as per clients request. The quarterly statements of Funds and Securities are also sent electronically to the email id of the client or are hand delivered.
- The activity of sending contract notes, daily margin statement and quarterly statement of accounts to clients has not been outsourced to any person.
- The log reports are maintained for the documents sent electronically and in case of documents sent by courier the proof of dispatch (POD) is maintained and in case of hand delivery, acknowledged copies of the documents sent are maintained.
- Duplicate copies are not required as log reports are maintained for the electronically sent documents.
- In case of electronic contract notes send to clients, the maintenance of log, client consent and copy of contract notes is maintained in non-tamperable form.
Policy for Client Code Modification
To frame the guidelines for modification to client codes post trade execution and reporting of such client code Modifications.
- Brief about Client Code Modification:
Client Code Modification means modification / change of the client codes after execution of trades
Stock Exchanges provide a facility to modify any client code after the trade has been executed to rectify any error or wrong data entry done by the dealers at the time of punching orders. However, such Client Code modification is subject to certain guidelines as to the time limit within which the client code modification is to be carried out, terminal / system on which such modifications can be done etc. The facility is mainly to provide a system for modification of client codes in case genuine errors in punching / placing the orders. It is to be used as an exception and not a routine. To prevent misuse of the facility Stock Exchanges levy penalty / fine for all non-institutional client code modifications.
- Scope of the Policy:
This policy covers all the Client Code Modifications carried out / to be carried out in any of the client accounts subject to the guidelines issued by the SEBI / Stock Exchanges from time to time.
For the purpose of this Policy, only the following types of trades shall be modified / allowed to be modified:
- Punching error / typing error of client codes due to any genuine error or mistake in order entry, while punching the order, by any dealer.
- Trade entered for wrong client due to any miscommunication from the client /should be as per applicable laws, rules and regulation of SEBI / EXCHANGES.
- Institutional / Non institutional trades modified to broker error/pro account.
- General Conditions:
- The Modification to the client code is to be done only in exceptional cases and not as a routine one.
- The reason for modification has to be ascertained and analyzed and genuiness is to be established and also its impact on the clients should be studied before the modification.
- Its is imperative that the issue should be reported to the senior level Manager/ Director and only with his approval , the modification shold be carried after being satisfied that it is genuine , the same is required to be done to protect the interests of the client.
- The client code Modification shall be carried out only as per the process as may be prescribed by SEBI / STOCK EXCHANGES
The penalty or fine, if any, levied on PHFIC for any wrong trade occurred due to any miscommunication from client / as per applicable laws , rules and regulations of SEBI / EXCHANGE borne by the client
- Training Program:
Training program should be conducted to all the dealers and they should be explained how code modifications can be misused and what steps should be taken to avoid the same . It should also be explained , that code modifications should not be encouraged to the clients except for cases like 'punching errors / relatives accounts'
- Modifications to client code post trade execution
- On Line Modification:
- Genuine punching errors in client codes while placing orders shall be allowed to be modified
- Client code modification facilities shall be disabled from all the dealer terminals.
- Client code modification shall be carried out only after prior permission from the Director of the company.
- While carrying out code modification, genuineness of the punching errors shall be verified against corroborative circumstantial evidences like similarities of codes, trades in immediately preceding codes, square off trades without holdings or position or any such other evidences shall have to be taken into account.
- Complete records of daily online trade modifications shall be maintained in soft form.
- All such Genuine Error code modification shall be carried out through UCC registered ËœP H Financial & Investment Consultants Pvt Ltd (ERROR CODE) account. Any rate difference including transactions costs shall be settled between the concerned accounts by passing JV of appropriate amount.
Procedure for Payment, Receipt of funds from / to clients
- Generally, the clients have given consent to the company to maintain running accounts on their behalf to avoid trouble of receiving / paying funds on daily basis.
- Generally, company collects and releases funds through banking channels i.e. Account Payee Cheques, RTGS.
- The back office keeps proper co-ordination with clients regarding Pay-in and Pay-out of shares and then releases or receives the cheques to/from the clients. If shares are not received as per the settlement dead line date, the shares will be auctioned as per the norms of the exchange.
- Generally, organization releases payments of the clients either by RTGS or hand delivery of A/c payee cheques in the name of respective clients to the Clients /authorized persons as intimated by the clients or by courier to clients address.
- Generally, organization receives payments from the clients either by hand delivery, courier, self collection of account payee cheques or RTGS.
- The organization does not use the client funds/securities for unauthorized purposes
- The company will use its own funds towards the various positions that they would take in the proprietor account and accordingly the required funds for pay in will be inputted from the own account. Additionally the pay out of funds towards the own trade would be transferred to the own account
- The company has a policy of accepting cheques from the clients from their respective registered bank account only and the company issues account payee cheques to the clients favoring thei r registered account.
Procedure for Receipt, Delivery of Securities from /to Clients
- The company has received authority from clients to maintain shares on their behalf to avoid trouble of receiving / giving shares on daily basis. Proper record for securities received / given to the clients is maintained.
- The company receives the deliveries of securities from the clients in the pool accounts intimated to the clients.
- For delivery of securities, company has payout process in clients demat account, for which daily report is prepared.
- The company also reconciles its pool account, collateral account, own account, and client beneficiary account on a monthly basis.
- The company has subscribed for speedy facility to monitor online the activities of pool and other accounts. Shares in CDSL account goes through hand delivery.
- The information of the pool account from the NSDL and CDSL are imported directly in the system. Additionally the direct payout details by the exchange are also imported in the back office software. The person in charge of securities transaction and who tracks the pay-in and pay-out of the securities goes on running the updated statements taken from the depository. The back office keeps a check and where the securities are received from any other account, which is different than the account as specified; follow-up is made with the client to incorporate the new account in their master, if proper proof for the same is provided. In case if the shares are received from a different account then the letter for the same with relevant documents of the new account is called for and incase if the client is not able to provide than the shares are marked as not delivered and auctioned.
- The organization has a policy of maintaining client shares in a separated Demat account exclusively held for Client collateral/ client margin shares. The back office department of securities has proper control and checks that the client shares are used only for the client to whom it belongs. Additionally daily reconciliation of the shares lying in the demat account and the client wise details as per the back office report is done on regular basis.
Procedure for Penalty / Delayed Payment Charges
PHFIC may levy late payment charges to the clients who have not cleared their dues towards settlement / margin obligations within the time prescribed by the exchanges from time to time at specified rate as decided from time to time, till the dues are cleared. Further where the Company has to pay any fine or bear any punishment from any authority in connection with / as a consequence of / in relation to any of the orders/ trades/ deals / actions of the client, the same shall be borne by the client.
Procedure for Policy for internal shortages
- The internal shortage if any existing within the organization is informed to the exchange so that proper auction of the same can be done by the exchange and the journals / bills / debit notes for the same are debited to the client in whose account the shortfall has occurred.
- In case if an auction is not made by the exchange then both the clients are appraised of the situation and in case of the client in whose account the internal shortage has occurred, the buying transaction is done in the exchange and when after 2 days the shares are received from the exchange, the shares are delivered to the old buying clients who could not receive the shares due to internal shortage.
Procedure for Shortages in obligations arising out of netting
If the client defaults on its existing obligation and in the event the trade has been internally netted off by PHFIC , PHFIC shall have the right to square off the position of the client to make good the shortages arising thereof. PHFIC shall not be responsible for losses to the Client on account of such square off. All losses to the Client on this account shall be borne solely by the Client and the Client shall indemnify.
Procedure for refusal of order for Penny Stocks:
Although the term 'Penny Stock' has not been defined by NSE/ SEBI, a penny stock generally refers to a stock which has the below mentioned characteristics:
- It has a small market capitalization.
- It trades at a price less than its face value.
- It has unsound fundamentals.
- It is illiquid.
PHFIC Pvt. Ltd. acknowledges that it is a client's privilege to choose the shares/ scripts in which he/ she wants to trade. However, the company would like to pay special attention, when it comes to dealing in penny stocks. To this end: The company may refuse the request of the client to deal in penny stocks, without assigning any reason for the same.
Any large order of purchase or sale of such stocks should be referred to the head of the Dealing Department, and subsequently may or may not be placed for execution.
Clients must ensure that trading in such stocks does not result in creation of artificial volume, or false or misleading appearance of trading. Further, clients should ensure that trading in such stocks does not operate as a device to inflate or depress or cause fluctuations in the prices of such stocks.
Clients are expected not to place orders in such stocks at prices, which are substantially different from the prevailing market prices. Any such order is liable to be rejected at the sole discretion of the company.
In case of sale of such stocks, the client should ensure that the delivery of shares to the company before the pay-in date.
Procedure for Collection, maintenance & reporting of margins
- In the cash segment, the company does not collect margin as the same is not mandatory. Thus, in the cash segment the trade done on behalf of clients are monitored properly and in case of clients who are new, the senior manager /back office may take a call of collecting margin / early pay in of the shares if risk is felt by the senior manager, as may be required.
- The company is not providing a margin trading facility.
- In the Derivatives Segment,
- No transactions are executed for clients until the initial margin has been collected from them. Funds or shares are received from the clients as margin.
- The client shares received as margin are kept in the separate client margin demat account or with the clearing member as may be required.
- The cheques received from and issued to clients as margin, are deposited in the 'Client margin account.'
- The exposure of the client is accessed on the basis of the margin received from them.The director/ senior manager at times is required to take decision on the orders of the clients on the basis of their assessment of the risk appetite of the client and the trades being done by them.
- The margin report downloaded from the exchange is uploaded after checking the amount lying with the organization. The uploading of the margin report is done by the back office staff and the status of the uploaded file is checked on the same day regarding the success or failure.
Right to sell clients securities or close clients positions, without giving notice to the client on account of non payment of dues. (Limited to settlement/margin obligations)
PHFIC would have the discretion to square off the position of the Client, with no obligation of communicating the same to the Client, in following circumstances:
- In case of intra-day Trades, if the open position is neither squared off nor converted to Delivery by Client(s) within the stipulated time.
- In case of Trades, where Mark to Market Loss on the open position has reached the stipulated % of the margins placed and the Client(s) have not taken any steps either to replenish the margin or reduce the Mark to Market Loss.
- In all other cases where the margin or security placed by the Client(s) falls short of the requirement or the limits given to the Client(s) have been breached.
- Where the Client(s) have defaulted on their existing obligation/ failed to make payments /deliver securities within the stipulated time.
The Client accepts to comply with requirement of payment of Margin/settlement obligations of the Client, immediately, failing which PHFIC may sell, dispose, transfer or deal in any other manner the securities/margin already placed with it as Margin or square-off all or some of the outstanding positions of the Client as it deems fit at its sole discretion without further reference to the Client and any resultant or associated losses that may occur due to such square -off/sale shall be borne by the Client and PHFIC shall be fully indemnified and held harmless by the Client in this behalf at all times.
Any reference in the terms to sale or transfer of securities by PHFIC shall be deemed to include sale of securities which form part of the Margin maintained by the Client. In exercise of PHFIC right to sell securities, the Client agrees that the choice of specific securities to be sold shall be solely at PHFIC discretion without any reference to client. Such liquidation or close out of positions shall apply to any segment in which the Client does business with PHFIC.
The provisions specified herein do not confer any liability on PHFIC to square off the clients positions. It shall be the responsibility of the client to pay to PHFIC any due payable to PHFIC irrespective of whether PHFIC exercises its right to square off the positions of the client in accordance with the provisions given herein above. However, in the event of extreme volatility and / or client's open (outstanding) position resulting in mark to market losses beyond PHFIC, threshold limit any time during a trading session, and /or clients positions or collateral being not saleable, thereby forcing PHFIC to liquidate any position of the respective client's available positions and collateral, same shall be done by PHFIC during the course of a trading session without recourse to the client.
Conditions under which client is not allowed to take further positions or PHFIC may close existing positions
PHFIC shall have the right to refuse to execute trades/allow the client to take further positions in the following circumstances:
- Technical failure.
- Securities breaching the limits specified by the Exchange/regulators from time to time.
- Securities submitted in physical form for settlement.
- Regulatory restrictions/directives from SEBI, Exchange etc
- Outstanding dues not cleared.
- Shortfall/breach of threshold limits as per Risk Policy prevalent from time to time.
- Any suspicious trading patterns observed by Risk /Surveillance Dept.
- Other conditions as specified by PHFIC from time to time in view of market conditions, regulatory requirements, internal policies etc.
PHFIC shall also have a right to close existing positions of the clients in the abovementioned circumstances and PHFIC shall not be responsible for any loss incurred by the Client due to any of aforesaid conditions of refusal or closure of positions and the client shall keep PHFIC indemnified at all points of time in this regard.
Procedure for Temporarily suspending or closing of client's account at the client's request
PHFIC may at any time, temporarily suspend the account of the client in following circumstances:
- Based on a written request of the client their accounts can be suspended at any time
Trades in the account of the client during the period of such temporary suspension shall not be permitted. The account shall be reactivated on submission of a written request for reactivation by the client.
Procedure for Monitoring of debit balances
- The monitoring of the debits of clients is done on daily basis.
- We have a system of periodic reconciliation of client accounts and even try to nullify the account on periodic basis, so as to make the balances Nil atleast once in a quarter. The fund and securities account for a quarter are sent to client when the balances are made nil as above. The statements of accounts sent on quarterly basis and are confirmed by clients by email or by physical documents.
- For the recovery of old Debts, if required, we would go through the legal methods like arbitration or court of law.
- We are not in the funding activity
- In respect of clients having outstanding debit balances, the past history of trading and the financial standing is considered and depending on the risk perception additional trading would be allowed or the trading for the client may be stopped if required.
Procedure for Investor Redressal Mechanism
- The register of complaints is centrally maintained under the observation and control of the Compliance officer.
- The e-mail id for redressal of investor grievances is informed to the clients by the quarterly statements sent and even on the website of the organization.
- Whenever we receive the Complaint we record in Complaint Register.
- The compliance officer/director is responsible to see that there are no investors Complaint pending.
- There is an escalation mechanism in case if any investor complaint does not get redressed by the staff in charge,
- As no complaints are received, requirement of analysis is not required, however the same will be analysed as and when complaints are received.
- The senior manager personally looks into the regular operations and monitors and controls the operations to ensure that cheques received from clients are properly accounted in the respective client ledger only.
- In case if any transactions carried out in dormant accounts (not being operated in last three months), then before entering the transaction the dealers enquires about the reac tiv ation letter/code of the client, from the back office before entering the trade and thus enters a trade only after verifying the authenticity of client entering the order.
- No employee of the organization are exercising POA to operate client's bank and demat accounts
Procedure for Suspicious Transactions
The organization has a proper PMLA policy and the same has been implemented within the organization. Any transaction that is done by a client specified under High risk category or done by an NRI client or trades done in scripts which are found to be illiquid or manipulative nature are tracked. If such transactions are found to be problematic then further scrutiny or enquiry is made by the principal officer and if found to be suspicious then the same is informed to the FIU.
Trading Member has maintained and preserved all such records of transactions which are prescribed under Rule 3 of PMLA and has ongoing Training program for staff members and investors. Any transaction that gets covered under the requirement of PMLA transactions, the information regarding any trade of such nature can be enquired and found out as and when required.
Procedure for NEAT Terminal
- The NEAT terminal are given only to person as may be authorized by the director. The trading limit for each terminal / client is determined on the basis of the deposit / value of collaterals / credit lying in the ledger accounts etc
- The operators / dealers working in the organization are taken after due scrutiny and interview. The credentials of the dealers are also assessed and their past experience is vouched to access the creditability and reliability of the dealer. The trend / trading pattern of the clients / dealers are reviewed by the end of the day. The dealers are under the direct control of the director. Such strict entry methods help in controlling and ensuring that dealers are not entering any unauthorized trades.
- The compliance officer has control on the various details of the dealers including their NCFM certification and their expiry details. The certificates which are due to expire are informed to the dealer's approx 3 month in advance so that they may take effective steps to see that their certificate are renewed before the date of expiry.
Procedure for Closure of Client accounts/ Dormant accounts
P H Financial & Investment Consultants Pvt. Limited (PHFIC) as a matter of policy accepts and realizes that the investor community is made of traders as well as investors. Whereas traders trade frequently, the investors trade with long gaps. The inactive client policy is framed keeping the same in mind.
- On closure of client account/ client being declared inactive, All the securities of the client are transferred into the last known demat account of the client.
All the funds of the client are returned to the client.
Trading in the client account is stopped.
- Client declared inactive by passage of time:
Any client who has not traded continually for a period of 3 months and has also not renewed his running Account authorization will automatically be moved to the 'inactive' category.
- Client declared inactive by law:
Any client will be moved to the 'inactive' category if required by law.
- Producer to active the client.
To reactive the account, the client is expected to write to PHFIC requesting for activation of the account,based on which the account would be active after due diligence by PHFIC.
Procedure for Deregistration of a client
Deregistration/Termination of the client may be with mutual consent of the parties or by giving Notice. Such deregistration / termination shall not effect the rights and liabilities of the parties in respect of the transactions executed before the date of such deregistration/termination.
PHFIC may at any time, at its sole discretion and without prior notice to the Client, prohibit or restrict or block the Client's account or related services and the Client's ability to trade due to regulatory requirements, prevention of money laundering regulations, market conditions and other internal policies. Further PHFIC may Freeze the Client Account in following Scenario:
- Non submission of important documents for verification.
- On account of any regulatory orders issued against the client.
- On account of any legal strictures passed against the client.
The account shall be reactivated under the following circumstances:
- On the vacation of regulatory/legal orders against the client.
- Submission of all important documents required for verification.
- Fresh submission of all KYC documents required for registration
In addition, PHFIC may interalia terminate/freeze trading facilities due to regulation. requirements and to comply with provisions of Prevention of Money Laundering Regulations or due to suspicious activities observed by surveillance department or due to internal risk perception. Such Clients may be re-admitted on submission of fresh KYC's and supporting documents/explanation resolving the earlier observations for de-registering.
Conflict of Interest Policy:
M/s P H Financial & Investment Consultants Pvt Ltd was incorporated on 08.02.1994 under The Companies Act, 1956. Presently M/s P H Financial & Investment Consultants Pvt Ltd is registered as a Stock Broker with National Stock Exchange of India Limited (NSE) & Bombay Stock Exchange of India Limited (BSE), for providing financial services in Indian Capital Markets to the individual, corporate, financial institutions etc. SEBI vide its Circular No. CIR/MIRSD/5/2013 dated 27.08.2013 has laid down the guidelines required registered intermediaries to establish and implement a conflict of interest policy. To adhere to the SEBI's guidelines, the company is required to take all reasonable steps to identify or manage conflicts of interest of its clients. We are presently governed by the provisions for avoidance of conflict of interest as mandated in the respective regulations along with relevant circulars issued from time to time by SEBI. Our associated persons are educated for the compliance of these guidelines. Guidelines for dealing with Conflict of Interest are as follows:
- We lay down with active involvement of senior management and internal procedures to identify and avoid or to deal or manage actual or potential conflict of interest develop an internal code of conduct governing operations and formulate standards of appropriate conduct in the performance of their activities, and ensure to communicate such policies, procedures and code to all concerned.
- All time maintain high standard of integrity in conduct of our business,
- Ensure fair treatment of clients and no discrimination between them,
- Ensure that personal interest does not, at any time conflict with our duty, our clients and client's interest always takes primacy in our advice, investment, decisions and transactions,
- Make appropriate disclosure to the clients of possible source or potential area of conflict of interest which would impair our ability to render fair, objective and unbiased services,
- Endeavour to reduce opportunities for conflict through prescriptive measures such as through information barriers to block or hinder the flow of information from one department to another,
- Not communicate the material non published information while dealing in securities on behalf of others,
- Not in any way contribute to manipulates the demand for or supply of securities in the market or to influence prices of securities,
- Not have an incentive structure that encourages sale of products not suiting the risk profile of our clients,
- Not shared information received from clients or pertaining to them, obtained as a result of dealing, for their personal interest, Our Board shall put in place adequate systems for implementation of these circulars and provide necessary guidance enabling identification, elimination or management of conflict of interest situation. Our Board shall review the compliance of this circular periodically. We shall conduct assessment of our existing procedures on conflict of interest on periodic basis and bring them in line with the requirements of these guidelines.
Policy on pre-funded instruments Mode of payment
With reference to NSE Circular No. NSE/INSP/2011/118 dated June 9, 2011 on the drafted policy on pre-funded Instrument which has been approved by Board/Management/Key Personnel's are given hereunder. The Policy is subject to the Rules and Regulation of the Exchange from time to time.
Pre-funded Instrument includes Demand draft, Pay Order, Banker's Cheque, etc. A pre-funded instrument issued by the bank against cash shall not be accepted for amount of INR 50,000 or more.
All Pre-funded instruments having aggregate Value of Rs. 50,000/- or more, per day per client must be accepted if the same are accompanied by the name of the bank account holder and number of the bank account debited for the purpose, duly certified by the issuing bank.
The mode of certification may include the following:
- Certificate from the issuing bank on its letterhead or on a plain paper with the seal of the issuing bank.
- Certified copy of the requisition slip (portion which is retained by the bank) to issue the instrument.
- Certified copy of the passbook/bank statement for the account debited to issue the instrument.
- Authentication of the bank account-number debited and name of the account holder by the issuing bank on the reverse of the instrument.
RTGS/NEFT/Online bank transfer etc
Receipt from clients using Electronic Fund transfer shall be accepted only if the name of client with the bank name is reflected on our online bank statement or on receipt of copy of the instruction to the bank stating the account number debited must accompany the purchase application.
The member reserves the right to reject the payment, post acceptance and/or processing of the same without any recourse to the Client, if any of the requisite documents/declarations are unavailable or incomplete, and in such case the member shall refund the money without interest. Such Refunds will be marked "A/c. payee only" and will be in favour of clients only.
Internal control policy with respect to broking operations
Client Due Diligence:
We apply the usual client due diligence measures prescribed under KYC norms. Additionally, we also take reference of a client or person known to us in respect of walk-in clients. The format in which we conduct the client due diligence is part of our KYC form.
Assessment of financial capability of client:
We take from clients a self-declaration, which states their total networth in terms of their net assets and liabilities. Such self declaration has to be generally supported by one of the following documents:
- Copy of ITR acknowledgement.
- Copy of Annual Returns.
- Copy of Form No. 16 : In case of salary income.
- Networth certificate.
- Salary slip.
- Bank Account Statement for last six months.
- Copy of Demat Account holding statement.
- Any other document substantiating ownership of assets.
Process of record keeping and retrieval of client registration documents:
All client registration documents, once checked, found complete and verified as such and the accounts opened, are stored in locked cabinets in a sequential manner. We can retrieve either the physical records on an easy basis.
Updation of client financial and other client particulars:
We have now started on an annual basis the process of sending out,
- Client Master
- Self-declaration for financial status to all clients asking them to confirm the details in client-master and update the financial particulars. It should be an annual exercise of updation of client particulars.
Client Master Modification:
On an annual basis, there is a regular updation happening. However, in between, if the client wants to modify any details, he/she/it is enabled to do so by submitting to us the documentary proof of modified detail.
Systems and Process adopted for UCC upload:
From our back-end, we generate file for the client containing data of market segment, client code, client name, PAN, address in the format prescribed by NSE. The data generated are thereafter verified with KYC. On the data being found fully correct, the client is uploaded on UCC - site of NSE. After uploading, we run a check, on the UCC-site, by entering the specific client, whether or not the client details are actually uploaded on UCC-site.
Precaution with respect to dormant accounts:
All dormant accounts (inactive for six months and more) are made inactive in our system. Hence it is not possible to execute a transaction in dormant accounts. However, a client can re-activate his/her/its dormant account by giving us in writing in prescribed format to activate the account and also stating the reason for keeping the account dormant.
Investor Redressal Mechanism:
It is not our policy to record complaints received through telephone call. However, complaints received through letter, e-mail and personal representation (we urge upon client to put it in writing and give it to us) are duly recorded by us.
System in place to generate alerts for suspicious transaction:
Alerts are based on following factors:
- Sudden disproportionate increase in client'strading.
- A client trading beyond declared financial capacity.
- Introducing third party cheques in settlement of pay-in dues.
- Making off-market transfers to the same demat account(s) immediately after receiving securities in payout.
- Introducing Demand Drafts in settlement of payin dues.
- Any other act that arouses suspicion.
If a client is always indulging in one or all of the above in an ongoing manner, we put him/her/it under special watch.
NISM-Series-VII: Securities Operations and Risk Management Certification Examination (SORM)
- SEBI Notification No.LAD-NRO/GN/2010-11/21/29390 published in the Gazette of India on December 10, 2010.
- NSE Circular no. NSE/INSP/16536 December 15, 2010
- NSE Circular no. NSE/INSP/27495 September 02, 2014
- BSE Notice no.20101215-19 dated December 15, 2010 5.BSE Notice no. 20140902-8 dated September 02, 2014
SEBI issued Notification no. LAD-NRO/GN/2010-11/21/29390 dated December 10, 2010 , according to which, following categories of associated persons associated with a registered stock broker/trading member/clearing member in any recognized stock exchanges, who are involved in, or deal with any of the following:
- Assets or funds of investors or clients,
- Redressal of investor grievances
- Internal control or risk management, and
- Activities having a bearing on operational risk,
It is further decided by SEBI, the requirement of passing NISM Series VII certification would be optional for those associated persons handling the basic clerical or elementary functions in the above stated areas and whose work is supervised by NISM Series VII Securities Operations and Risk Management Certification certified personnel. The activities that can be classified as basic elementary level / Clerical level are as follows:-
- Internal control or risk management
- Inwarding of collateral's/cheques
- Person performing maker entries
- Maker entry in the database
- Photocopying, printouts, scanning of documents
- Preparing of MIS
- Sending of letters/reports to clients, Exchanges, SEBI
- Attending calls, etc.
- Redressal of investor grievances
- Inwarding of complaints
- Seeking documents from clients
- Person performing maker entries
- Maker entry in the database
- Photocopying, printouts, scanning of documents
- Preparing of MIS
- Sending of letters/reports to clients, Exchanges, SEBI Updation, data entry, uploading on SCORES.
- Attending calls, etc.
- Activities having a bearing on operational risk and dealing with assets or funds of investors or clients
- Person performing maker entries
- Maker entry in the database
- Preparing MIS
- Generating reports, Files
- Photocopying, printouts, scanning of documents
- Dispatching documents to clients
- Sending of letters/reports to clients, Exchanges, SEBI
- Attending calls, etc.
However, any of the works (as stated herein above) being performed by such persons, obtaining, NISM-SORM Certification shall be optional provided that they are supervised by his / her supervisor who shall have to obtain / continue to have NISM - SORM Certification or such other prescribed certification at all times.
Compliance to above circular issued by the SEBI will be ensured from time to time.
Identification of Beneficial Ownership
The identification of beneficial ownership is done by the compliance department for all existing clients and all new clients shall be accepted only after verifying the beneficial owner of the client account which is either individual or non individual whether company/partner/unincorporated association/body of individuals on parameters stated below:
- The ownership of the individual account is to be identified at the time of opening of the account as stated in the Demat account and the bank account which stands in the name of the account holder.
- Identification of beneficial ownership of accounts other than individuals or trust shall be done based on the controlling ownership interest as an individual or identifiable group which means the following:
- more than 25% of shares or capital or profits in case of a company
- more than 15% of the capital or profits of the partnership in case of a Partnership.
- more than 15% of the property or capital or profits of the unincorporated association or body of individuals in case of an unincorporated association or body of individuals.
- Where a trust is a client the beneficial ownership is to be identified and established by identifying the settler of the trust, the trustee, the protector or the beneficiaries with 15% or more interest in the trust and any other person exercising ultimate effective control over the trust through a chain control or ownership.
The intention is to identify the identity of the natural person, who, whether acting alone or together or through one or more juridical person exercises control through ownership or who ultimately has controlling ownership interest. However, where the client or owner of controlling interest is a company listed on a recognized stock exchange or is a majority-owned subsidiary of such a company identification of the beneficial owner of such companies is not required.
Client Due Diligence Process
RISK MANAGEMENT POLICY
For Cash Segment & Future & Option
The objective of the Risk management function is to ensure that all risks, which threaten the business of Stock and Share Markets, are recognized, controlled and reduced to an acceptable level while all applicable regulatory requirements of the various regulatory authorities are complied with.
- Risk based approach:
Classification of both the new and existing clients into high, medium or low risk category depending on parameters such as the customer's background, type of business relationship, transactions etc. Application of each of the client due diligence measures on a risk sensitive basis and adoption of an enhanced customer due diligence process for high risk categories of customers and vice -Ã¡-versa.
- Limit Setting:
Limits shall be monitored on periodic basis, taking following criteria's: Turnover, Exposure, past trends, Location, Deposit/Collateral.
- Margins & Trading:
Margin must be collected on all derivative trades. Client level margin will be at management discretion in cash segment. Trading in illiquid scrip shall not be permitted.
- Pay-in Of Fund & Stock:
Third party pay-in of securities & fund will not be accepted. Same way pay out of shares and fund will be directly done to client account only. No securities belonging to one client be used/transferred for Own purpose or for other client.
Cash will not be accepted under any circumstances. Collection of cheques from clients must be done by T+2 days except clients who have authorized us to have running account balance.
- Periodic settlement of Fund and Securities:
As per the SEBI guidelines, the balances of clients will be settled, as per their specification either once in a month or once in 3 months.
With respect to the transactional alerts being downloaded from the Exchange/ Exchanges /generated by the Company, the following activities will be carried based on UCC parameters:
- Client(s) Information
Due Diligence of its client(s) will be carried out on a continuous basis. It will also be ensured that key KYC parameters are updated on a continuous basis as prescribed by SEBI and latest information of the client is updated in UCC database of the Exchange/ Exchanges. Based on this information, the Company will establish groups / association amongst clients to identify multiple accounts / common account / group of clients.
In order to analyze the trading activity of the Client(s) / Group of Client(s) or scrips identified based on above alerts, Company will:
- Seek explanation from such identified Client(s) / Group of Client(s) for entering into such transactions.
- Seek documentary evidence such as bank statement / demat transaction statement or any other documents to satisfy itself:
- In case of funds, Bank statements of the Client(s) / Group of Client(s) from which funds pay- in have been met, to be sought. In case of securities, demat account statements of the Client(s)/Group of Client(s) from which securities pay-in has been met, be sought.
- The period for such statements may be at least +/- 15 days from the date of transactions to verify whether the funds / securities for the settlement of such trades actually belongs to the client for whom the trades were transacted.
- After analyzing the documentary evidences, the Company will record its observations for such identified transactions or Client(s)/Group of Client(s).
- In case adverse observations are recorded, the Company will report all such instances to the Exchange/ Exchanges within 45 days of the alert generation. The Company may seek extension of the time period from the Exchange / Exchanges, wherever required.
- Monitoring and reporting
Following procedure will followed for monitoring and reporting of alerts:
- Receipt of Alerts from Exchange/ Exchanges generated.
- Time frame for disposition of alerts and if there is any delay in disposition, reason for the same shall be documented.
- Suspicious / Manipulative activity identification and reporting process.
- Record Maintenance.
- A MIS shall be put up to the Board on the number of alerts pending at the beginning of the quarter, generated during the quarter, disposed off during the quarter and pending at the end of the quarter. Reasons for pendency shall be discussed and appropriate action will be taken. The Board shall be apprised of any exception noticed during the disposition of alerts.
- The surveillance process shall be conducted under overall supervision of its Compliance Officer.
- Compliance Officer will be responsible for all surveillance activities carried out by the Company and for the record maintenance and reporting of such activities.
- Based on facts and circumstances, the Company will exercise its independent judgment and will take adequate precaution.
Limit Setting & Risk Management Structure
Limit Setting & Risk Management Structure is initiated to assure that the cumulative value of all unexecuted orders placed from the terminals is below a threshold limit set and manage the risk of the Company / clients from the volatility of the stock market. It has the course of pre-defined limits / checks such as and Single Order Value Limits, User Order value Limit, Order Price limit and value limit, Cumulative open order value check (unexecuted orders) are in place and only such orders which are within the specified parameters are allowed to be pushed into exchange trading engines.
No user in the system is having unlimited limits on the above parameters. When client limits are exceeded, prior approval is required before allowing the client to execute further trades.
Due to certain incidents of erroneous orders being executed on the Exchange Platform, SEBI has come out with directions to put checks and balances by the Stock Brokers. To prevent aberrant orders or uncontrolled trades, Minimum Pre-Trade Risk controls for all categories of orders placed on Stocks, Exchange Traded Funds, etc. order level checks shall be placed in the Trading terminals as per the Exchange directions which is periodically reviewed.
A. Below limits have been set:
- Orderwise value limit for each Dealer / Client / Segment for each order.
- User value limit for each USER ID based on order level also.
- Security wise limit for each USER ID for each segment.
Turnover and Obligation Limits for new clients is based on the Income Range, Category of Clients, etc. Such Limits fixed for clients shall be subject to review depending upon their turnover, payment pattern, background, references etc. The risk identification and assessment processes reviewed periodically to review existing risks and identify new risks.
P.H. Financial and Investment Consultants Pvt. Ltd.
Policy on Prohibition & Circulation of Unauthenticated News
The following policy and procedure apply to all the employees/temporary staff/jobbers employed with P. H. Financial investment & Consultants Pvt Ltd from time to time.
The following policy and procedure has been introduced for the below mentioned key reasons.
In view of above, the said policy and procedure has been framed to achieve the following aims
- Being a SEBI registered intermediary, we need to adhere to the code of conduct for the stock brokers and respective regulations of various intermediaries registered with SEBI
- To ensure that the proper internal controls, checks and balances are in place to govern the conduct of our employees and to make them aware that the circulation of unauthenticated news or rumors by them can cause considerable damage to the normal functioning of the\ market and distort the price discovery mechanisms.
- To comply with the SEBI circular No Cir/ISD/1//2011dated March 23,2011.
- To protect the operational integrity of P. H. Financial investment & Consultants Pvt Ltd by exercising due diligence to prevent circulation of any unauthenticated news from its side.
- To prevent its staff from indulging in any form of chats or circulation of unauthenticated news or rumours that can cause damage to the market and in turn to company's image and reputation.
- To avoid any liability (civil/criminal), prosecution, negative publicity which can follow from the involvement of Staff in circulation of any rumours or unauthenticated news.
- To comply with all the relevant regulations, legislations, circulars etc.
- THE POLICY:
- Employees/temporary staff/jobbers etc employed with P. H. Financial lnvestment & consultants Pvt Ltd. are directed not to encourage or circulate rumours or unverified information obtained from client, industry, any trade or any other sources without verification.
- Access to Blogs/Chat forums/ etc. and authority to post on them is restricted to Compliance Officer of the Company.
- Logs of usage of such Blogs/Chat forums must be kept as records and the same should be Maintained in compliance with laws, rules/regulations which govern the Broking entity and business in lndia.
- lf any employee of the Company receives any market related news in the form of mail/blog or any other manner, it should be forwarded or circulated only after the same has been approved by the Compliance officer of the Company. The employees and the compliance officer of the Company are strictly directed to adhere to this principle as failing to do so by them would result in violation of rules and regulations and they would be held liable for their actions.