CHAPTER I PRELIMINARY & DEFINITIONS
PRELIMINARY:
Short Title
These Bye-Laws shall be called as the “Bye-Laws for Enlisted Intermediary”.
Applicability of the Securities Laws
These Bye-Laws shall be subject to the provisions of the Securities Laws.
Definitions:
(1) “Asset under advice” shall have the same meaning as defined in Securities and Exchange Board of India (Investment Advisers) Regulations, 2013;
(2) “Approved office” means a registered office of an investment adviser or research analyst, including such premises or offices from which the investment adviser or research analyst engages in the business of providing investment advice / research analysis, as applicable;
(3) “Board” means the Board of Directors of BSE Ltd (“hereinafter referred to as Exchange / BSE”);
(4) “Books of accounts, records and documents” include books of accounts, records and documents which are required to be maintained manually, electronically or in any magnetic form under the regulatory framework specified by the SEBI/Exchange from time to time;
(5) “Branch office” means:
(a) any establishment or place described as a branch by the investment adviser / research analyst;
(b) any establishment carrying on either the same or substantially the same activity as that carried on by the head office relating to investment advice / research analysis;
(c) any other place which the Exchange may notify.
(6) “Bye-Laws” means these Bye-Laws of the Exchange for the time being in force and any amendments made thereto from time to time;
(7) “Committees” mean the committees formed by the Exchange in accordance with its Bye-Laws or as required by SEBI from time to time;
(8) “Constituent”/ “Client” means a person to whom an investment adviser provides investment advice under SEBI (Investment Advisers) Regulations, 2013 or a person to whom a research analyst provides a research report, under SEBI (Research Analysts) Regulations, 2014, as the case may be.
(9) “Enlisted Intermediary” means and includes an Investment Adviser or Research Analyst who is enlisted with the Exchange.
For avoidance of any doubt, it is clarified that the Enlisted Intermediary shall not include stock broker, trading member, custodian, authorized persons, market participants or such other entity as specified by the Exchange.
(10) “Independent Research Analyst” shall have the same meaning as provided in the Securities and Exchange Board of India (Research Analysts) Regulations, 2014 as amended from time to time;
(11) “Investment Advice” shall have the same meaning as provided in the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 as amended from time to time;
(12) “Investment Adviser” shall have the same meaning as provided in the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 as amended from time to time;
(13) “KMP” means Key Managerial Personnel as defined under the Companies Act, 2013 as amended from time to time;
(14) “Networth” shall have the meaning as assigned by SEBI for investment advisers or research analyst, from time to time;
(15) Notification or Communication shall include any communication that can be served at a business address and/or at a place of residence and/or at the last known address of the Enlisted Intermediary in any one or more of the following ways:
(a) by electronic mail
(b) by hand delivery
(c) by post
(d) by registered post
(e) under certificate of posting
(f) by speed post / courier services
(g) by affixing it on the door at the last known business or residential address
(h) by oral communication to the party in the presence of a third person
(i) by advertising it in at least one prominent daily newspaper having circulation in the area where the last known business or residential address of an addressee is situated.
Any communication sent by the Exchange to any party shall be deemed to have been properly delivered or served, even if such communication is returned to the Exchange as unclaimed/ refused/ undelivered, if the same is sent to the ordinary business address and/ or ordinary place of residence and/ or last known address of the party, in any one or more of the ways mentioned in clause (1) above;
(16) “Regulations”, unless the context indicates otherwise, includes business rules, circulars, notices, standard operating procedures, code of conduct and such other regulations issued by the relevant authority from time to time including for the administration and supervision of the Investment Advisers and Research Analysts;
(17) “Relative” shall have the same meaning as provided in the Securities and Exchange Board of India (Research Analysts) Regulations, 2014;
(18) “Relevant Authority/relevant authority” shall include the Board, the Securities and Exchange Board of India, Managing Director of BSE or such other person or committee, as the context may suggest;
(19) “Research Analyst” shall have the same meaning as provided in the Securities and Exchange Board of India (Research Analysts) Regulations, 2014;
(20) “Research Report” shall have the same meaning as provided in the in the Securities and Exchange Board of India (Research Analysts) Regulations, 2014;
(21) “Risk Disclosure Document” refers to the document, if any, to be issued by all investment advisers to all potential investors before registering them as
Constituents, detailing the basic risks involved in trading on the Stock Exchange and providing such other particulars as may be specified by the Exchange and/or SEBI from time to time in relation to investments by the Constituents;
(22) “SEBI” means the Securities and Exchange Board of India;
(23) “Securities/Security” shall have the meaning as assigned to the term in the Securities Contracts (Regulation) Act, 1956 and shall also include such other class of monetary transactions or instruments, scripless or otherwise, as may be permitted by SEBI.;
(24) “Securities Laws” includes, Securities and Exchange Board of India Act, 1992 (SEBI Act), provisions of the Companies Act 1956 and 2013 as administered by SEBI, Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, Securities and Exchange Board of India (Research Analysts) Regulations, 2014, Securities and Exchange Board of India (Intermediaries) Regulations, 2008, such other Acts, Regulations and Rules framed thereunder and any statutory modifications and re-enactment thereto;
(25) “Third Party Research Report” shall have the same meaning as provided in the Securities and Exchange Board of India (Research Analysts) Regulations, 2014;
CHAPTER II BOARD
1) The Exchange shall have all such powers and responsibilities as determined by the SEBI from time to time for administration and supervision of registered Investment Advisers / Research Analysts.
2) Powers of the Board of Directors
The Board of the Exchange may control, manage and regulate the administration and supervision of Enlisted Intermediary who is registered as Investment Advisers / Research Analysts with SEBI, subject to the provisions of the Securities and Exchange Board of India Act, 1992, SEBI (Investment Advisers) Regulations, 2013, SEBI (Research Analysts) Regulations, 2014 and any directives/circulars/regulations made and issued there-under.
3) Powers and Responsibilities of the Exchange shall include:
(a) Initial scrutiny of the application filed by an entity seeking registration as Investment Adviser or Research Analyst from SEBI;
(b) Initial scrutiny of changes suggested by an Enlisted Intermediary like change of name, address, change of shareholding, change of compliance officer/director etc., amalgamation, merger, take over, change in control, surrender of enlistment etc.
(c) Approval of Advertisements proposed to be advertised by an Enlisted Intermediary.
(d) Supervision including inspection of an Enlisted Intermediary both on-site and offsite.
(e) Grievance redressal of clients against an Enlisted Intermediary.
(f) Administrative action including imposition of penalties, issuance of warning/caution letter and referring to SEBI for enforcement action against an Enlisted Intermediary.
(g) Monitoring activities of an Enlisted Intermediary by obtaining audit reports, periodical reports etc.
(h) Monitoring compliance of regulations/circulars/notices by an Enlisted Intermediary.
(i) Submission of periodical reports to SEBI.
(j) Maintenance of database of an Enlisted Intermediary.
(k) Collection and administration of fee.
4) Power of Board to Amend Bye-Laws and Regulations of the Exchange
Subject to the provisions of the Securities and Exchange Board of India Act, 1992, the SEBI (Investment Advisers) Regulations, 2013 or the SEBI (Research Analysts) Regulations, 2014, as the case may be and any circular or regulations issued thereunder, the Board is empowered to make and to amend the Bye-Laws and Regulations of the Exchange from time to time, for all or any of the matters relating to administration and supervision of an Enlisted Intermediary, take action(s) against an Enlisted Intermediary, share and disseminate information of an Enlisted Intermediary and to do all such incidental or related activities.
5) Power to Make Regulations
Without prejudice to the generality of the foregoing and subject to directions/circulars issued by SEBI, the Board is empowered to make Regulations, for all or any of the following matters:
(a) Enlistment, continuance and discontinuance of a registered Investment Advisers and Research Analysts;
(b) Conditions, levy of fees for enlistment or subscription for enlistment or for continuance of enlistment with the Exchange;
(c) Supervision and administration of the conduct of an Enlisted Intermediary;
(d) Other charges payable by an Enlisted Intermediary as may be specified from time to time;
(e) norms, procedures, terms and conditions for enlistment;
(f) forms and conditions of agreements to be entered into and the time, mode and manner for performance of agreements between an Enlisted Intermediary and their clients, incorporating the terms and conditions as may be specified by SEBI from time to time;
(g) prescription, from time to time, of networth, of capital adequacy and other norms which shall be required to be maintained by an Enlisted Intermediary;
(h) Action(s) for disobedience or contravention of the Bye-Laws and Regulations of the Exchange or of applicable compliance/requirements specified by SEBI, of general discipline to be maintained by an Enlisted Intermediary , including expulsion or suspension;
(i) Initiation of action(s) against an Enlisted Intermediary or suspension or cancellation of enlistment with the Exchange and consequences thereof;
(j) Issuance of such business rules/circulars and code of conduct as it may deem fit;
(k) Appointment of Committee or Committees for any of the purposes of the administration and supervision of an Enlisted Intermediary;
(l) Such other matters in relation to the Exchange as may be specified under the provisions of the Articles of Association, Bye-Laws or as may be necessary or expedient for administration and supervision of an Enlisted Intermediary.
(m) maintenance of records and books of accounts by an Enlisted Intermediary as it may deem fit and records as required under applicable laws;
(n) inspection of an Enlisted Intermediary and audit of records and books of accounts of an Enlisted Intermediary;
(o) prescription, from time to time and administration of penalties, fines and other consequences, including suspension/cancellation of enlistment for defaults or violation of any requirements and code of conduct and criteria for re-enlistment, if any, promulgated hereunder;
(p) claims, settlement of disputes and complaints arising between an Enlisted Intermediary and their clients;
(q) norms and procedures for arbitration and conciliation;
(r) dissemination of information, announcements to be placed;
(s) any other matter as may be decided by the Board/relevant authority.
6) Power of Board to Delegate
The Board is empowered to delegate, from time to time, to the Committee(s) or to the Managing Director of the Exchange or to any person, such of the powers vested in it and upon such terms as they may think fit, to manage all or any of activities to be carried out in the Byelaws from time to time, revoke, withdraw, alter or vary all or any of such powers.
7) Delegation of Power of Board to Amend Regulations of the Exchange
The Board may, subject to such conditions and limitations, as it may deem fit, delegate such of its powers, except the power to make, amend, add to and rescind Bye-Laws to such person/s or committee(s), as it may deem fit and proper, with power to such person/committee to sub-delegate, all or any of the powers vested in it, upon such terms, conditions, limitations and to such extent as it may deem fit, to manage all or any of the affairs of the Exchange and to revoke, withdraw, alter or vary all or any of such powers.
8) Board to Issue Directions
The Board may issue or authorize any person to issue circulars, guidelines, norms, procedures, terms and conditions, directives, orders, notices, decisions, rulings, standard operating procedure, and the like in respect of any or all such matters.
9) Code of Ethics
The members of the Board and of such of the Committees and such other person(s) as specified by SEBI/the Board shall adhere to the Code of Ethics as may be framed from time to time, if any.
10) Code of Conduct
The members of the Board and such other person(s)/Committee(s) as specified by SEBI/the Board shall adhere to the Code of Conduct framed from time to time.
11) Indemnity
The Exchange, its directors and officials shall not be liable for any claim/dispute/ difference/proceedings arisen in relation to or incidental to any services provided by an Enlisted Intermediary.
CHAPTER III COMMITTEE
Constitution
1) The Board of Directors may constitute committees (“Committee/s”) from time to time to manage and oversee the administration and supervision of an Enlisted Intermediary.
2) All such committees shall function/ operate in accordance with the provisions appearing in directives/circulars/regulations issued by SEBI/ the Board from time to time and the Bye-Laws stated herein or in accordance with the Articles of Association of the Exchange.
3) The Committee(s) appointed by the Board shall consist of such persons as may be specified by SEBI/ the Board from time to time.
4) The tenure of the members of a Committee shall be such as may be specified, in case of a Committee, by the Board, and in case of a sub-committee, by the Committee that constitutes such sub-committee.
Powers of Committee
5) The Board may delegate from time to time to the Committee(s) such of the powers vested in it and upon such terms as it may think fit, to manage all or any of the affairs of the Exchange as provided in these Bye-Laws and from time to time, to revoke, withdraw, alter, or vary all or any of such powers.
6) The Committee shall have such responsibilities and powers as may be delegated to it by the Board/SEBI/Relevant Authority from time to time.
7) A Committee so constituted may constitute, subject to the terms and conditions of its constitution, such sub-committees for such purposes as it may deem fit. The constitution, powers and responsibilities of such sub-committee(s) may be determined by the Committee which constitutes such sub-committee(s).
8) The Committee may from time to time, authorize the Managing Director of the Exchange or such other person(s) to carry out such acts, deeds, and functions in accordance with such provisions as may be laid down in this regard for fulfilling the responsibilities and discharging the powers delegated to it by the Board.
Disqualification of member of the Committee
9) No person shall be eligible to be a member of a Committee(s), if he suffers any disqualification as provided in the Articles of Association of Exchange or as specified by the Board or SEBI. A member of the Committee shall, ipso facto, be deemed to have vacated the office, if he suffers any such disqualification, provided however that nothing done in good faith by such person in his capacity as a member of such Committee shall be rendered invalid merely because such act, deed, matter or thing may have been done by him after his disqualification but without knowledge of his disqualification.
Meetings of the Committee
10) A Committee may meet for dispatch of business, adjourn, and otherwise regulate its meetings and proceedings as it thinks fit and may determine the quorum necessary for the transaction of business.
11) Subject to directives/regulations issued by SEBI, the quorum for a meeting of the Committee, shall be one-third of the total strength of the Committee, unless any higher quorum is specified by the appointing authority; if a fraction appears when determining the quorum such fraction shall be omitted.
12) The Chairman of the Committee or any employee of the Exchange under the authority of the Chairman may at any time convene a meeting of such Committee.
13) Decisions at any meeting of the Committees shall be taken by majority of the members. Every member of the Committee shall have only one vote except that in the case of an equality of votes, the Chairman of the Committee who presides over the meeting shall have a second or casting vote.
14) At all meetings of the Committee, the Chairman shall ordinarily preside and in his absence, the members of the Committee present may choose one from amongst themselves to be the Chairman of such meeting in accordance with the manner specified, if any, by SEBI/the Board. A member of the Committee shall disclose his interest in the business, if any, before the meeting and shall abstain from discussions, voting and decisions on the said matter. If the Chairman is interested in the business of the meeting, he shall abstain from chairing the meeting.
15) No vote by proxy shall be allowed either on a show of hands or on a poll in respect of any matter.
Chairman
16) The members of the Committee may elect a Chairman from amongst themselves, who shall be the chairman of the Committee in accordance with directives/regulations issued by SEBI, if any.
17) The Chairman may assume and exercise all such powers and perform all such duties as may be delegated to him by the Committee from time to time.
18) The Chairman, and in his absence, a person elected by the Committee, shall be entitled to exercise any or all the powers exercisable by the Committee whenever he be of the opinion that immediate action is necessary, subject to such action being confirmed by the Committee.
19) The Committee, at its meeting at which a quorum is present, shall be competent to exercise all or any of the powers and discharge all such functions as are vested in or exercisable by such Committee.
CHAPTER IV ENLISTMENT OF AN INTERMEDIARY
(1) The rights, privileges, duties and responsibilities of an Enlisted Intermediary shall be subject to and in accordance with all applicable laws, Bye-Laws of the Exchange and directions/circulars/notices issued by the Exchange from time to time. The enlistment shall be personal and the same is non-transferable and/or non- assignable except as otherwise provided by SEBI/the Exchange.
Eligibility
(2) An intermediary shall be enlisted with the Exchange only upon satisfaction of the conditions prescribed by the SEBI / the Exchange.
(3) An Enlisted Intermediary shall have such minimum qualifications/ certifications as may be prescribed by the SEBI / the Exchange from time to time.
Enlistment
(4) An application seeking enlistment with the Exchange will be required to be made to the Exchange in the manner specified and such applicant shall comply with all the norms, criteria and requirements prescribed by SEBI/Exchange.
(5) The application of every applicant shall be dealt with by the Exchange as it may deem fit, which may be admitted or rejected at the sole discretion of the Exchange without communicating the reason thereof.
(6) The application for enlistment shall be made in such formats as may be specified by the Exchange from time to time.
(7) The application shall be submitted along with such fees, annual subscription fees, deposit(s) and other sums in such form and in such manner as may be specified by the SEBI / Exchange from time to time.
(8) The applicant shall have to furnish all such declarations / undertakings / documents as may be specified from time to time by the SEBI / Exchange.
(9) The Exchange may enlist the applicant provided the applicant satisfies the conditions and other procedures and requirements of enlistment.
(10) The Exchange may specify prerequisites, conditions, formats, and procedures for application for enlistment, continuance, termination, re-enlistment, surrender of
enlistment etc.
(11) If for any reason the application of an entity is not considered, the application fee or enlistment fee, if any, or part thereof as may be decided by the Exchange in its discretion, may be dealt with in such manner as the Exchange deems fit.
(12) The Exchange, pursuant to the advice from SEBI, may at any time after admitting an entity as an Enlisted Intermediary cancel/withdraw the enlistment if he has in or at the time of his application for enlistment as an Enlisted Intermediary or during the inquiry made by the relevant authority preceding his enlistment:
(a) made any willful misrepresentation; or
(b) suppressed any material information required of him as to his character and antecedents; or
(c) has directly or indirectly given false particulars or information or made a false declaration.
(13) Conditions for Enlistment
(a) Enlisted Intermediary shall adhere to the Bye-Laws and Regulations of the Exchange and shall comply with such operational parameters, rulings, notices, circulars, norms, guidelines, standard operating procedures, and instructions of the Exchange, as may be applicable.
(b) Enlisted Intermediary shall comply with such requirements as may be specified by SEBI from time to time regarding advertisements and issuance of circulars in connection with their activities.
(c) Enlisted Intermediary shall furnish declarations relating to such matters and in such forms as may be prescribed by the Exchange from time to time.
(d) Enlisted Intermediary shall furnish to the Exchange an Auditors’ Certificate in such form and at such intervals certifying that the requirements specified/prescribed from time to time by the Exchange pertaining to their operations have been complied with.
(e) Enlisted Intermediary shall furnish such information and periodic returns pertaining to their operations as may be required by the Exchange from time to time.
(f) Enlisted Intermediary shall furnish audited and/or unaudited financial or quantitative information, reports and statements, periodic/ad-hoc reports as may be required by the Exchange from time to time.
(g) Enlisted Intermediary shall extend full co-operation and furnish such information and explanation as may be required for the purpose of any inspection or audit authorized by the relevant authority or other authorized official of the Exchange.
(14) Registration with SEBI
No person shall continue to be an Enlisted Intermediary of the Exchange if the certificate of registration as an Investment Adviser / Research Analyst granted by SEBI does not subsist.
In an event, the registration granted by SEBI to an Enlisted Intermediary as an Investment Adviser / Research Analyst is withdrawn/ cancelled / rescinded, then such Enlisted Intermediary shall be ipso facto deemed to delisted with the Exchange.
(15) When a person/ entity is enlisted as an Enlisted Intermediary of the Exchange, intimation of the person’s/ entity’s enlistment shall be sent to such person/ entity.
(16) If the Enlisted Intermediary fails to obtain the registration as an Investment Adviser / Research Analyst from SEBI, then the enlistment granted by the Exchange shall automatically stand withdrawn.
(17) Enlistment right is Personal, Non-assignable and Non-transferable
(a) Every Enlisted Intermediary of the Exchange shall, upon enlistment be issued an enlistment certificate or entitlement slip or such document as the Exchange may deem fit as proof of having been admitted to the benefits and privileges of an Enlisted Intermediary with the Exchange. The enlistment as Enlisted Intermediary shall not be transferable or transmittable except as herein mentioned.
(b) The enlistment granted to an Enlisted Intermediary shall be personal, non- assignable and non-transferable.
(c) Any nomination / transfer / transmission of the enlistment granted to an Enlisted Intermediary shall be in accordance with direction/circular/notice/requirement issued by SEBI/the Exchange from time to time and shall be effected only after receipt of SEBI’s approval.
(18) Change In Status or Constitution or Control of the Enlisted Intermediary
(a) The Exchange shall not recognize any change in status or constitution or change in control of the Enlisted Intermediary or change in partners or directors of the Enlisted Intermediary unless the same is approved by SEBI.
(b) Any change in status or constitution or change in control of an Enlisted
Intermediary shall be carried out only in accordance with
direction/circular/notice/requirement issued by SEBI/ the Exchange from time to time.
(19) Actions for non-compliance with regulatory requirements
(a) The Exchange shall be entitled to take all such steps as are necessary to give effect to direction/order issued by SEBI against the Enlisted Intermediary.
(b) Without prejudice to provisions of the Bye-Laws above, every Enlisted Intermediary shall comply with the requirements as specified by the Exchange and/or SEBI from time to time and shall be liable to various action(s) including, issuance of warning/caution letter as may be specified by the Exchange and/or SEBI from time to time for non-compliance of the regulatory requirements.
Provided however the penalties / fines may be imposed upon Enlisted Intermediary as directed by SEBI.
(20) Withdrawal / Rescission / Surrender of Enlistment
(a) The enlistment granted to an Enlisted Intermediary may be withdrawn by the Exchange, in the event, registration granted by SEBI as an Investment Adviser / Research Analyst is cancelled or on such grounds as SEBI / the Exchange may specify from time to time.
(b) In case, the Enlisted Intermediary applies for surrender of the registration granted by SEBI, the enlistment shall also be withdrawn with grant of the approval of surrender and during the subsisting period, the Enlisted Intermediary shall be duty bound to comply with the Bye-Laws.
(21) Termination of enlistment
(a) Any Enlisted Intermediary may cease to be enlisted with the Exchange, if one or more of the following occurs:
(i) by resignation;
(ii) by death;
(iii) by withdrawal /expulsion in accordance with the provisions contained in the Bye-Laws;
(iv) by dissolution in case of a partnership firm;
(v) by winding up or dissolution in the case of a company or a body corporate;
(vi) by cancellation of registration of an Investment Adviser / Research Analyst
by SEBI;
(vii) by violation of any applicable law or attracting any disqualification/s which warrants the cessation of enlistment right.
(b) Liability of Past Enlisted Intermediary
An Enlisted Intermediary who shall for any reason cease to be enlisted with the Exchange, shall nevertheless remain liable for and shall pay to the Exchange all monies which shall be due by him towards the Exchange at the time of his ceasing to be an Enlisted Intermediary.
(22) Failure to pay Charges/fees
Save as otherwise provided in the Bye-Laws of the Exchange, if an Enlisted Intermediary fails to pay his annual subscription, fees, charges or any other monies which accrue out of his enlistment and stand due towards the Exchange within the prescribed time, then it shall be liable for suitable action(s) as prescribed by the Exchange from time to time.
(23) Criteria for Continuation of Enlistment
An Enlisted Intermediary, shall at all times, continue to comply with the extant securities laws, requirements specified by SEBI and shall ensure that registration granted by SEBI is not subject to any impediment/restriction/suspension.
CHAPTER V DUTIES AND OBLIGATIONS OF AN ENLISTED
INTERMEDIARY Jurisdiction
(1) In relation to any dispute/claim arising out of or in connection with or in relation to anything specified in the Bye-Laws, the civil courts in Mumbai shall have the exclusive jurisdiction and the jurisdiction of other courts shall be deemed to have been excluded. The provisions of the Bye-Laws shall not apply to any dispute between Enlisted Intermediary acting as Investment Advisers /Research Analyst and their clients to which the Exchange is not a party to.
Indemnity
(2) The Exchange shall not be liable for any advice / recommendation / research service/ analysis provided by the Enlisted Intermediary.
All advisory services / research activities are subject to requirement specified by SEBI / the Exchange from time to time
(3) The Enlisted Intermediary shall mandatorily comply with various requirements / compliances, as specified by SEBI / the Exchange from time to time while rendering investment advice/ conducting research activities / preparing research analysis or report including but not limited to
(a) Segregation of Advisory and Distribution Activities and Segregation of research activities from other business activities
(b) Account Opening, Documentation, and Agreement with a client
(c) Fees chargeable by an Investment Adviser / Research Analysts
(d) Qualification and Certification’s requirements
(e) Maintenance of record and Undertaking Audit
(f) Risk profiling and suitability for a client in case of Investment Adviser
(g) Display and dissemination of details on website and in other communication channels.
Office Related Procedure
(4) No Enlisted Intermediary shall carry on in any office or premises any activity connected with or pertaining to its operations as an investment adviser / research analyst enlisted with the Exchange unless it has intimated to the Exchange the full address of such office or premises with details of the activity proposed to be so carried on therein and the person in whose supervision and control it is to be so carried.
(5) An Enlisted Intermediary shall ensure that all employees and persons acting on his behalf shall subscribe at all times to high standards of professional expertise and integrity.
(6) An Enlisted Intermediary shall at all times maintain such infrastructure, staff, communication facilities and records so as to be able to service his Constituents satisfactorily and as per the requirements specified by SEBI / the Exchange.
(7) Where the Exchange deems it necessary, in the public interest to do so, it may at its own instance or on a complaint from another Enlisted Intermediary or Constituent, seek explanation from such other Enlisted Intermediary regarding the level of service or professional conduct of the Enlisted Intermediary or any of his staff where such service or conduct has been found unsatisfactory or contrary to principles enumerated in the Bye-Laws of the Exchange, or notifications, directions or circulars issued there under.
(8) The Enlisted Intermediary shall co-operate and provide requisite information / explanation to the Exchange for effective and speedy resolution of Constituent’s grievances.
Supervision
Procedures to be followed
(9) Each Enlisted Intermediary shall establish, maintain, and enforce procedures to supervise its business and to supervise the activities of its employees that are designed to achieve compliance with requirements prescribed by SEBI / the Exchange including the Bye-Laws of the Exchange and any notifications, directions, etc. issued there under as well as the relevant statutory Acts, Rules and Regulations.
(10) An Enlisted Intermediary shall maintain such records and make available for inspection by any person authorized in this behalf by the Exchange, such information related to research activities or investment advice, including the financial condition of the investment adviser / research analyst, as prescribed by SEBI / the Exchange.
(11) An Enlisted Intermediary shall pay such fees, charges, liabilities, annual subscription, deposits, and other sum as the Exchange may notify from time to time, within such time and manner as required by the Exchange.
(12) An Enlisted Intermediary must inform the Exchange of any change in the status, constitution, change in promoters/partners/directors/KMPs, operation, change in control, change in location of operation, change in details of Constituents and activities of the investment adviser / research analyst, which change shall be effected only subject to receipt of such approvals and/or following such procedure as may be specified by SEBI / the Exchange.
(13) An Enlisted Intermediary shall co-operate, provide information and documents as sought during inspection by SEBI/Exchange.
Internal Inspections
(14) Each Enlisted Intermediary shall endeavor to conduct a review, of its activities and services relating to investment advice / research annually which shall be designed to assist in detecting and preventing violations and achieving compliance with Securities and Exchange Board of India Act, 1992 and Regulations framed thereunder, Bye-Laws of the Exchange, and regulations, circulars, notices, guidelines, standard operating procedures issued by SEBI/the Exchange from to time.
Internal Audit
(15) Each Enlisted Intermediary shall conduct a complete internal audit at such periodicity, by such professionals and having such scope as may be prescribed by SEBI/ the Exchange time to time.
Written Approval
(16) Each Enlisted Intermediary shall establish procedures for review and endorsement by an appropriate senior officer in writing, of the record of all acts and correspondences of its employees, pertaining to research reports issued and/ or solicitation on investment advice provided, as the case may be.
Relation between Enlisted Intermediary and the Constituents
(17) At the time of establishing a relationship with a new Constituent, the Enlisted Intermediary must take reasonable steps to assess the background, genuineness, beneficial identity, financial soundness of such person, and his investment objectives by obtaining all necessary documents, as may be prescribed by SEBI/ the Exchange from time to time.
(18) The Enlisted Intermediary shall also perform such other specific verification of the Constituent as may be deemed necessary by him or as may be required by SEBI and/or the Exchange or in terms of any law for the time being in force.
(19) The Enlisted Intermediary shall, before registering a Constituent, furnish him with a document which shall be in such format and shall also be accompanied by such documents, including segregation into mandatory and non-mandatory documents, and shall have such further and other requirements, as may be specified by SEBI and/or the Exchange.
(20) The Enlisted Intermediary may use Constituent’s Know Your Client (KYC) information which is available with a KYC Registration Agency registered with SEBI under the Securities and Exchange Board of India {KYC (Know Your Client) Registration Agency} Regulations, 2011, subject to such conditions and restrictions as may be specified by SEBI or the Exchange from time to time.
(21) The Enlisted Intermediary shall provide to SEBI and/ or the Exchange, the information relating to service rendered to the clients and fees collected thereof, in such manner and at such periodicity as may be specified by SEBI and/or the Exchange.
(22) The Enlisted Intermediary who maintains their own websites, shall display the set of standard documents required in connection with registration of a Constituent as may be specified by SEBI and/or the Exchange.
(23) The Enlisted Intermediary shall evolve policies and procedures for such matters pertaining to dealings with the Constituent and the treatment of the Constituent, as may be specified by SEBI and/or the Exchange and shall disclose the same to the Constituent or display the same in such manner as may be specified.
(24) The Enlisted Intermediary shall make his Constituent aware of details relating to services related thereto, particulars of SEBI registration number, employee would be primarily responsible for the Constituent’s affairs, the precise nature of associated liability and the risk, by issuing to the Constituent a copy of the model Risk Disclosure Document which shall be in such format or any other document as may be prescribed by SEBI and/ or the Exchange from time to time. The Investment Adviser shall furnish a copy of the relevant documents relating to investment advice, being in the form of Risk Disclosure Document or other documents to all his Constituents.
(25) The Enlisted Intermediary shall provide to his/its Constituents (at no extra costs) with extracts of relevant provisions governing the rights and obligations of Constituents as may be specified by SEBI / the Exchange, to the extent it governs the relationship between the Enlisted Intermediary and its/his Constituents.
(26) The Enlisted Intermediary may also bring to the notice of his Constituents any indictments, penalties, etc. imposed on him by the Exchange or SEBI or any other regulatory authority.
(27) The Enlisted Intermediary shall act in a fiduciary capacity towards his Constituents and shall make adequate disclosure of the relevant material information.
(28) The Enlisted Intermediary shall strictly adhere to the principles of segregation of activities as specified by SEBI from time to time.
(29) The Enlisted Intermediary shall always be in compliance with the obligations cast upon him by SEBI/Exchange.
(30) The Enlisted Intermediary shall not furnish any false or misleading information or advice to induce the Constituent to do business in particular securities and which would enable the Enlisted Intermediary to make unfair gains.
Obligations of Research Analysts
(31) The Research Analysts shall have written internal policies and procedures governing the ownership and conflict of interest as prescribed by the Exchange/ SEBI, from time to time.
(32) The Research Analysts shall disclose all material information about itself including its business activity, compensation, terms and conditions of the research analysis or report, details of associates and such other information as may be necessary.
(33) The Research Analyst shall take all necessary steps to ensure that the facts in its research analysis or reports are based on reliable information and in compliance with the requirements specified by the Exchange/ SEBI, from time to time.
(34) The Research Analyst shall ensure independence of its research activities from its other business activities and shall maintain an arms-length relationship.
(35) The Research Analyst, while issuing research report or providing recommendation/ opinions, shall comply with the obligations and responsibilities imposed by SEBI/ the Exchange.
(36) The Research Analyst shall not issue a research report selectively to internal trading personnel or a particular client/class of clients in advance of other clients who are entitled to receive the same.
(37) The Research Analyst, when distributing any Third-Party Research Report, shall mandatorily review such report for any untrue statement of material facts or any false or misleading information.
Disclosure of investor complaints, arbitration details and disciplinary action
(38) Unless otherwise directed by SEBI or any other competent authority, court or tribunal, the Exchange may disclose the details of the complaints lodged by Constituents/ investors against the Enlisted Intermediary on its website or on any other website designated for this purpose, including the details pertaining to arbitration/ dispute resolution and penal action taken by the Exchange or SEBI against the Enlisted Intermediary, in such format and update the same at such periodicity as may be specified by SEBI.
Code of conduct for Enlisted Intermediary
(39) Adherence to SEBI Code of Conduct: The Enlisted Intermediary shall at all times
adhere to the Code of Conduct as specified by SEBI from time to time
(40) The Enlisted Intermediary, in the normal course of his business, shall observe high standards of just and equitable principles while performing its activities.
(41) In conducting the activities, the Enlisted Intermediary shall act honestly and fairly, in the best interest of its Constituents.
(42) The Enlisted Intermediary shall have and employ the resources and procedures which are needed for proper performance of its business activities.
(43) The Enlisted Intermediary shall ensure that the fiduciary and other obligations imposed on them and their staff by various statutory acts, rules and regulations is complied with.
(44) The Enlisted Intermediary shall ensure that the employees of the Enlisted Intermediary are adequately trained in operating and providing the activity of investment advice and/ or research analysis and are aware of their own, and their organization’s responsibilities as well as the relevant statutory acts governing the investment adviser / research analyst, the Bye-Laws of the Exchange, including any additions or amendments thereof and are duly authorized to undertake activities relating to investment advice / research analysis.
(45) The Enlisted Intermediary shall be responsible for all the actions regarding investment advice / research analysis provided by him.
(46) No Investment Adviser or any person associated with the Investment Adviser shall make improper use of the Constituent’s securities or funds for the purposes other than those intended and except in the manner specified by the Exchange /SEBI.
(47) No Enlisted Intermediary shall publish and circulate or cause to be published or circulated, any notice, circular, advertisement, newspaper article, investment service or communication of any kind unless such Enlisted Intermediary can establish, if called upon, that such activity was for bona-fide purpose.
(48) Enlisted Intermediary must at all times ensure that great care is taken not to misrepresent in any way, the services provided by it to the Constituent.
(49) The Enlisted Intermediary shall not disclose the name, address, beneficial identity or any other information/ particulars furnished by its Constituent, to any other party or person, save and except, providing the same to the Exchange as and when required by it or pursuant to any order or direction, issued by any competent
authority, tribunal, forum or court or SEBI or as may be required to be disclosed
pursuant to any law, regulations, circulars, directives etc.
(50) No Enlisted Intermediary shall-
(a) engage in any act or practice in the course of their business, which would operate as a fraud or deceit upon any person in connection with the purchase or sale of any security; or
(b) advise / recommend to buy, sell or deal in securities on behalf of a person associated with him; or
(c) indulge in falsification of their books, accounts and records to avoid their obligation or for the purpose of manipulation; or
(d) engage in any act or practice while providing investment advice / research analysis to his Constituents leading to duping his Constituents.
CHAPTER VI ARBITRATION
Definitions:
“Arbitrator” shall mean a sole arbitrator or a panel of arbitrators.
“Act” shall mean the Arbitration and Conciliation Act, 1996 and includes any statutory
modification, replacement or re-enactment thereof, for the time being in force.
(1) Reference to Arbitration
All claims, differences or disputes between the Enlisted Intermediary and his client arising out of or in relation to investment advice or research analysis including report shall be subject to the Bye-Laws and Regulations of the Exchange or with reference to anything incidental thereto or in pursuance thereof or relating to their validity, construction, interpretation, fulfillment or the rights, obligations and liabilities of the parties thereto shall be submitted to dispute resolution mechanism in accordance with the manner provided by SEBI / the Exchange and provisions of the Bye-Laws and Regulations.
(2) Provisions of the Bye-Laws and Regulations deemed to form part of all agreements and contracts
In all agreements and contracts which are made or deemed to be made between the Enlisted Intermediary and his client would be subject to the Bye-Laws and Regulations of the Exchange, the provisions relating to arbitration as provided in the Bye-Laws and Regulations or in such circulars issued by SEBI / the Exchange from time to time shall form and shall be deemed to form part of the agreements and contracts and the parties shall be deemed to have entered into an arbitration agreement in writing by which all claims, differences or disputes of the nature as prescribed by SEBI shall be submitted to arbitration as per the provisions of the Bye-Laws and Regulations issued by SEBI/ the Exchange.
(3) Limitation period for reference of claims, differences or disputes for conciliation/ arbitration
All claims, differences or disputes referred shall be resolved by way of dispute resolution mechanism within the period prescribed by SEBI from time to time.
(4) Power of the Relevant Authority to prescribe Regulations
(a) The Relevant Authority may, from time to time specify Regulations for the following:
i) The procedure to be followed by the parties in arbitral proceedings.
In particular, and without prejudice to the generality of the foregoing power, such procedure may, inter alia, provide for the following:
(a) the forms to be used;
(b) the fees to be paid;
(c) the mode, manner and time period for submission of all pleadings by both the parties;
(d) matters relating to requests from the parties for amending or supplementing the pleadings; and
(e) the consequences upon failure to submit such pleadings by the parties.
ii) The procedure to be followed by the arbitrator in conducting the arbitral proceedings. In particular, and without prejudice to the generality of the foregoing power, such procedure may, inter alia, provide for
(a) adjournment of hearings; and
(b) terms and conditions subject to which the arbitrator may appoint experts to report on specific issues and the procedure to be followed in arbitral proceedings upon such an appointment.
iii) Different set of arbitration procedures for different claims, differences or disputes after taking into consideration such circumstances and facts as the relevant authority may deem fit, which circumstances and facts may include the value of the subject matter and the persons who are involved as parties to such claims, differences or disputes.
v) The claims, differences or disputes which may be referred to a sole arbitrator and the claims, differences or disputes which may be referred to a panel of arbitrators.
v) The procedure for selection of persons eligible to act as arbitrators.
vi) The procedure for appointment of arbitrator.
vii) The terms, conditions and qualifications subject to which any arbitrator may be appointed.
viii) Determination of the number of arbitrators on the panel of arbitrators.
ix) The time period within which a substitute arbitrator has to be appointed in case the office of the arbitrator falls vacant for any reason whatsoever.
x) The matters to be disclosed by any person who is approached in connection with his possible appointment as an arbitrator.
xi) The procedure to be adopted by the parties for challenging the appointment of arbitrator.
xii) The place of arbitration for each reference and the places where the arbitrator can meet for consultation, for hearing witnesses, experts, or the parties, or for inspection of documents, goods or other property.
xiii) The making of the arbitral award including the manner in which a decision is to be taken in the case of panel of arbitrators and the form and contents of the arbitral award.
xiv) The arbitral award shall also include an arbitral award on agreed terms. Prescriptions as to the contents of the arbitral award may include provisions for costs and where the arbitral award is for the payment of money, may include interest payable on principal sum due.
xv) The amount of deposit or supplementary deposit, as the case may be,
as an advance for the costs which it expects will be incurred in respect of the claim, difference or dispute; provided where a counter-claim is submitted to the arbitrator, a separate amount of deposit for the counter-claim may also be prescribed.
xvi) The administrative assistance which the Exchange may render in order to facilitate the conduct of arbitral proceedings.
xvii) All matters regarding the mode and the manner of service of notices and communications by the parties including communication addressed to arbitrator. Any other matter which in the opinion of the relevant authority is required to be dealt with in the Regulations to facilitate arbitration.
(b) The relevant authority from time to time may amend, modify, alter, repeal, or add to the provisions of the Regulations.
(5) Disclosure by persons to be appointed as arbitrators
Every person who is approached in connection with his possible appointment as an arbitrator, shall disclose to the relevant authority in writing any circumstances likely to give rise to justifiable doubts as to his independence and impartiality. If the person discloses any circumstances which in the opinion of the relevant authority are likely to give rise to justifiable doubts as to his independence and impartiality, then he shall not be appointed as an arbitrator.
(6) Disclosure by persons appointed as arbitrators
An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the relevant authority in writing any circumstances referred to in Bye-Law (5) above, which have come to his knowledge after his appointment as an arbitrator.
(7) Termination of mandate of the arbitrator
The mandate of the arbitrator shall terminate if:
a) the arbitrator withdraws from office for any reason; or
b) in the opinion of the relevant authority, the arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to
act without undue delay including failure to make the arbitral award within the time period specified by the relevant authority. Such a decision of the relevant authority shall be final and binding on the parties; or
c) the mandate of the arbitrator is terminated by the relevant authority upon receipt of written request for the termination of the mandate of the arbitrator from both the parties to the arbitration; or
d) the arbitrator discloses any circumstances referred to in Bye-Laws (5) and (6) which in the opinion of the relevant authority are likely to give rise to justifiable doubts as to his independence and impartiality.
e) the arbitral proceedings are terminated as provided for herein.
(8) Supplying of vacancy to the office of the arbitrator
At any time before the making of the arbitral award should the office of the arbitrator fall vacant for any reason whatsoever including any vacancy due to the illness or death of the arbitrator or termination of the mandate of the arbitrator by the relevant authority or otherwise, the vacancy shall be filled in the manner prescribed by SEBI/ the Exchange from time to time.
(9) Consideration of recorded proceedings and evidence
Unless otherwise agreed by parties, any arbitrator who has been appointed by the relevant authority to supply a vacancy to the office of the arbitrator may repeat any hearings previously held.
(10) Order or ruling of previous arbitrator; not invalid.
An order or ruling of the arbitrator made prior to the termination of his mandate shall not be invalid solely because his mandate has been terminated; Provided that when the termination has been effected pursuant to Bye-Law (7) (d), the order or ruling of the arbitrator made prior to termination of his mandate shall become invalid unless otherwise agreed upon by the parties.
(11) Interim arbitral award and interim measures ordered by the arbitrator
The arbitrator may be empowered to make an interim arbitral award as well as pass interim measures.
Appearance in arbitral proceedings by counsel, attorney or advocate
In arbitral proceedings where one of the parties is a Client, then the Client apart from appearing in person shall also be permitted to be represented by a counsel, attorney or advocate or as prescribed by SEBI/ the Exchange. If the Client chooses to appear by counsel, attorney or advocate, then the Enlisted Intermediary shall also be granted a similar privilege.
a) Time for appointment of Arbitrator
The appointment of arbitrator or panel of arbitrators shall be completed within the stipulated time as may be prescribed by SEBI/ the Exchange.
b) Adjournment
Adjournment, if any, shall be granted by the arbitrator only in exceptional cases that too for bonafide reasons and the same shall be recorded in writing.
c) Time for Completion of Arbitration
The arbitrator(s) shall conclude the arbitration reference by issuance of an arbitral award within such time period as may be prescribed by SEBI/ the Exchange from time to time.
d) Request for extension
The time for making of arbitral award may be extended in the manner prescribed by SEBI/ the Exchange from time to time.
Arbitrator’s Award
a) Every award shall be made in writing and shall be signed by the arbitrator.
b) The award shall state the reasons upon which it is based, unless –
i) the parties have agreed that no reasons are to be specified; or
ii) the award is in terms agreed by the parties.
c) The award shall state its date and the place of arbitration, and the award
shall be deemed to have been made at that place.
(15) Publication of Award
Once the award is prepared, a signed copy of the award shall be delivered to each party.
(16) Award Binding on Parties and their Representatives
The parties to the reference shall at all times and under all circumstances abide by and forthwith carry into effect the award of the arbitrators which shall be final and binding on the parties and their respective representatives notwithstanding the death of or legal disability occurring to any party before or after preparation of the award and such death or legal disability shall not operate as a revocation of the reference or award.
(17) Implementation of Arbitral Award
Notwithstanding anything contained in the Bye-Laws, an Enlisted Intermediary shall be bound to implement the award which has attained finality, failing which, the Enlisted Intermediary shall be liable for suitable action(s) by the Exchange including withdrawal of enlistment.
(18) Arbitration proceedings subject to the provisions of the Act
The arbitration proceedings as provided for by the provisions of the Bye-Laws and Regulations shall be subject to the provisions of the Act to the extent not provided for in the Bye-Laws or the Regulations.
(19) Administrative assistance
The parties shall be deemed to have arranged for administrative/ministerial assistance of the relevant authority to facilitate the conduct of the arbitral proceedings.
(20) Jurisdiction
All parties to a reference to arbitration under the Bye-Laws and Regulations and the persons claiming under them, shall be deemed to have submitted to the exclusive jurisdiction of a competent court.
(21) Exclusion
For removal of doubts, it is hereby clarified that the Exchange shall not be construed to be a party to the agreements and contracts referred to under the Bye-Laws; and the provisions of this Chapter shall not apply in case of claims, differences or disputes between the Exchange and an Enlisted Intermediary and no arbitration shall lie between the Exchange and an Enlisted Intermediary.
(22) Appellate Arbitration
Any party aggrieved by an arbitral award may prefer an appeal as provided under Section 34 of the Act, as amended from time to time.
(23) Arbitration Fees, Forms and Procedure
The fees to be paid, the forms to be used and the procedure to be followed in connection with reference to arbitration under the Bye-Laws or by way of circulars/notices issued by SEBI/the Exchange from time to time.
(24) Fees and Charges
The fees in arbitration and the charges for submitting and regulating the proceedings of the reference shall be payable in advance and in case of failure, neglect or refusal on the part of a party or parties to pay accordingly, the other party shall be responsible for making such payment in advance without prejudice however to his right if any to recover the same from such party or parties failing, neglecting or refusing to pay. It shall be a condition precedent to the hearing of any reference that the prescribed fees and charges shall have been paid in advance by the party or parties to the reference.
Provided further, that in case of failure, neglect or refusal on the part of a Enlisted Intermediary, against whom a reference to arbitration has been filed, to pay the arbitration fees, the Exchange shall be entitled to debit the same from the security deposits/assets of the Enlisted Intermediary.
(25) Set-off and Counter-Claim
On a reference to arbitration by one party, the other party or parties shall be entitled to claim a set-off or make a counter-claim against the first party provided such set-off or counter-claim arises out of or relates to advisory services, research activities, and contracts made subject to the Bye-Laws and Regulations of the Exchange and subject to arbitration as provided therein and provided further such set-off or counter-claim is presented together with full particulars at or before the first hearing of the reference but not afterwards unless permitted by the arbitrator.
(26) Operation of Contracts
All agreements which are made subject to the Bye-Laws and Regulations of the Exchange shall be deemed to have been made and shall take effect as if such agreements were made, entered into and were to be performed in the city of Mumbai. The parties to such agreements and contracts shall be deemed to have submitted to the exclusive jurisdiction of the Courts in Mumbai where the Exchange is a party to any proceeding.
Provided however that a competent court as provided by SEBI/ the Exchange shall have jurisdiction in respect of the arbitration proceedings.
(27) Secretarial Duties
The Exchange may render secretarial assistance to the dispute resolution mechanism or as required by SEBI from time to time.
(28) Indemnity
No party shall bring or prosecute any suit or proceedings whatsoever against the Exchange, the relevant authority, or any director or employee of the Exchange acting under his authority or against the arbitrators for or in respect of any matter or thing purporting to be done under the Bye-Laws.
CHAPTER VII
DISCIPLINARY PROCEEDINGS, PENALTIES, SUSPENSION AND EXPULSION Disciplinary Jurisdiction
1) The Exchange may expel or suspend and/or impose fine under censure and/or warn and/or withdraw the enlistment of the Enlisted Intermediary if it be guilty of contravention, non- compliance, disobedience, disregard, non-compliance or evasion of any of the Bye-Laws or of any resolutions, orders, notices, directions or decisions or rulings or standard operating procedures of the Exchange / SEBI or of any conduct, proceeding or method of business which the Exchange in its absolute discretion deems dishonorable, disgraceful or unbecoming of an intermediary or is inconsistent with just and equitable principles of its activities or detrimental to the interests, good name or welfare of Exchange or prejudicial or subversive to its objects and purposes.
Penalty for Misconduct, Un-businesslike Conduct and Unprofessional Conduct
2) In particular and without in any way limiting or prejudicing the generality of the provisions in Rule (1) above, an Enlisted Intermediary shall be liable for expulsion or suspension or withdrawal of all or any of its enlistment and/or for payment of a fine and/or to be censured, reprimanded or warned for any misconduct, un¬businesslike conduct or unprofessional conduct in the sense of the provision In that behalf contained herein.
Misconduct
3) An Enlisted Intermediary shall be deemed guilty of misconduct for any of the following or similar acts or omissions namely:
a) Fraud: If it is convicted of a criminal offence or commits fraud or a fraudulent act which in the opinion of the Exchange is rendered as unfit to be an intermediary;
b) Violation: If it has violated provisions of any statute governing the activities, business and operations of the Exchange, Research Analysts, Investment Advisers and advisory business in general;
c) Improper Conduct: If in the opinion of the Exchange it is guilty of
dishonorable or disgraceful or disorderly or improper conduct on the Exchange or of willfully obstructing the business of the Exchange;
d) Breach of Bye-Laws and Regulations: If it shields or assists or omits to report any investment adviser / research analyst whom it has known to have committed a breach or evasion/ non-compliance of any Bye-Law, Regulation or of any resolution, order, notice or direction thereunder of the Exchange;
e) Failure to comply with Resolutions: If it contravenes or refuses or fails to comply with or abide by any resolution, order, notice, direction, decision or ruling of the Exchange under the Bye-Laws and Regulations;
f) Failure to submit to or abide by dispute resolution mechanism: If it neglects or fails or refuses to submit to dispute resolution mechanism or to abide by or carry out any award, decision or order of the Exchange or the arbitrators or the arbitral tribunal made in connection with a reference under the Bye-Laws and Regulations;
g) Failure to testify or give information: If it neglects or fails or refuses to submit to the Exchange or to a Committee or an officer of the Exchange authorised in that behalf, such books, correspondence, documents and papers or any part thereof, as may be required to be produced or to appeal and testify before or cause any of its partners, attorneys, agents, authorised representatives or employees to appear and testify before the relevant authority or such Committee or officer of the Exchange or other person authorised on that behalf;
h) Failure to submit Audited Accounts: If it neglects or fails or refuses to submit its audited accounts to the Exchange within such time as may be prescribed by the Exchange from time to time.
i) False or misleading Returns: If it neglects or fails or refuses to submit or makes/ files any false, fabricated or misleading statement in its forms or returns required to be submitted to the Exchange under the Bye-Laws and Regulations;
j) Vexatious complaints: If it or any of its authorized person/legal representative/employee brings before the relevant authority or a
committee, complaint or suit which in the opinion of the Exchange is frivolous, vexatious or malicious;
k) Failure to pay dues and fees: If it fails to pay its subscription, fees, charges towards dispute resolution mechanism or any other money which may be due by it or any fine or penalty imposed on it.
Unbusinesslike Conduct
4) An Enlisted Intermediary shall be deemed guilty of unbusinesslike conduct for any of the following or similar acts or omissions namely:
a) Fictitious Name: If it transacts its own business or the business of its clients in fictitious names;
b) Circulation of rumours: If it, in any manner, circulates or causes to be circulated, any rumours upsetting the market.
c) Prejudicial Business: If it makes or assists in making or with such knowledge is a party to or assists in carrying out any plan or scheme for the making of any purchases or sales or offers of purchase or sale of securities or making buy/sell/hold recommendation of any security or giving price target or offering an opinion concerning public offer for the purpose of upsetting the equilibrium of the market or bringing about a condition in which prices will not fairly reflect market values;
Enlisted Intermediary’s responsibility towards Partners, Agents and Employees
5) An Enlisted Intermediary shall be fully responsible for the acts and omissions of its officials, attorneys, agents, authorized representatives and employees and if any such act or omission be held by the relevant authority to be one which if committed or omitted by the Enlisted Intermediary would subject it to any of the penalties as provided in the Bye-Laws of the Exchange then such Enlisted Intermediary shall be liable therefore to the same extent as if such act or omission had been done or omitted by itself.
Suspension of Business
6) The Enlisted Intermediary may be suspend, if the Enlisted Intermediary indulges into prejudicial business, unwarrantable business, unsatisfactory financial condition or failure to maintain deposit, networth and/or Capital Adequacy requirements.
Removal of Suspension
7) The suspension of business under clause (6) above shall continue until the Enlisted Intermediary has complied with requirements specified by the Exchange.
Penalty for Contravention
8) An Enlisted Intermediary who is required to suspend its business shall be expelled if he acts in contravention of this provision.
Enlisted Intermediary and others to testify and give information
9) An Enlisted Intermediary shall appear and testify before and cause its partners, attorneys, agents, authorized representatives and employees to appear and testify before the relevant authority or before other committee(s) or an officer of the Exchange authorized in that behalf and shall produce before the relevant authority or before other Committee(s) or an officer of the Exchange authorized in that behalf, such books, correspondence, documents, papers and records or any part thereof which may be in its possession and which may be deemed relevant or material to any matter under inquiry or investigation.
Permission necessary for Legal Representation
10) No person shall have the right to be represented by professional counsel, attorney, advocate or any other representative in any investigation or hearing before the relevant authority or any other Committee unless the relevant authority or other Committee so permits.
Explanation before suspension or expulsion
11) An Enlisted Intermediary shall be entitled to be summoned before the relevant authority and accorded an opportunity for explanation before being suspended or expelled but in all cases the findings of the relevant authority shall be final and conclusive.
12) Temporary Suspension
(a) Notwithstanding what is contained in clause (11) herein above if in the opinion of the Managing Director/relevant authority, it is necessary to do so, he/it may, for reasons to be recorded in writing, temporarily suspend an Enlisted Intermediary, pending completion of the proceedings for
suspension under this chapter by the relevant authority, and no notice of
hearing shall be required for such temporary suspension and such temporary suspension shall have the same consequences of suspension under this chapter.
(b) A notice to show cause shall be issued to the Enlisted Intermediary within seven working days of such temporary suspension.
(c) Any such temporary suspension may be revoked at the discretion of the relevant authority, for reasons to be recorded in writing, if the relevant authority is satisfied that the circumstances leading to the formations of opinion of the relevant authority to effect temporary suspension, have ceased to exist or are satisfactorily resolved.
(d) An Enlisted Intermediary aggrieved by the temporary suspension may appeal to such authority as may be specified, provided that such appeal shall not automatically suspend the temporary suspension unless otherwise directed by the relevant authority.
Effect of suspension of registration by SEBI
13) Notwithstanding anything contained in the Bye-Laws of the Exchange, the enlistment of an Investment Adviser / Research Analyst shall automatically stand suspended upon suspension of registration granted by SEBI and shall continue till such suspension is revoked.
Imposition of Penalties
14) The penalty of suspension, withdrawal of all or any of the enlistment, fine, censure or warning or caution may be inflicted or issued singly or conjointly by the relevant authority.
Pre-determination of Penalties
15) The relevant authority shall have the power to pre-determine the penalties, the period of any suspension, the withdrawal of enlistment and the amount of any fine that would be imposed on contravention, non -compliance, disobedience, disregard or evasion of any Bye-Laws or Regulations or of any resolution, order, notice, direction, standard operating procedures, decision or ruling thereunder of the Exchange, the relevant authority or of any other Committee or officer of the Exchange authorized in that behalf.
Commutation
16) Subject to the provision of the SEBI (Investment Advisers) Regulations, 2013 and the SEBI (Research Analysts) Regulations, 2014, the relevant authority in its discretion may in any case suspend an Investment Adviser / Research Analyst in lieu of the penalty of expulsion or may withdraw all or any of the enlistment right or impose a fine in lieu of the penalty of suspension or expulsion and may direct that the guilty Enlisted Intermediary be censured or warned or may reduce or remit any such penalty on such terms and conditions as it deems fair and equitable.
Reconsideration/Review
17) Subject to the provisions of the SEBI (Investment Advisers) Regulations, 2013 and the SEBI (Research Analysts) Regulations, 2014, the relevant authority, on an appeal filed by the Enlisted Intermediary concerned within period of 90 days from the date of communication of decision of the relevant authority to the Enlisted Intermediary, may reconsider and may rescind, revoke or modify its decision withdrawing all or any of the enlistment right or fining, censuring or warning any Enlisted Intermediary. In a like manner the relevant authority may rescind, revoke or modify its decision expelling or suspending any Enlisted Intermediary within the said period.
Failure to pay fines and penalties
18) If an Enlisted Intermediary fails to pay any fine or penalty imposed on it within such period as prescribed from time to time by the relevant authority after notice in writing has been served on it, such Enlisted Intermediary may be suspended by the relevant authority until it makes payment. If such suspended Enlisted Intermediary fails to make the payment within such further period as prescribed from time to time, then it may be expelled by the relevant authority.
Consequence of Suspension
19) During the period of suspension, the Enlisted Intermediary shall cease to carry on the activity of investment advice / Research Analysis .
Consequences of Expulsion
20) The expulsion of an Enlisted Intermediary shall have the following consequences namely:
Enlistment Right forfeited: The expelled Enlisted Intermediary shall forfeit
to the Exchange its right of enlistment and all rights and privileges as an Enlisted Intermediary of the Exchange shall automatically vest in the Exchange. However, any liability of any such Enlisted Intermediary to the Exchange or to any Enlisted Intermediary or under the Bye-Laws and Regulations shall continue and remain unaffected by its expulsion; b) Liable for dues/liabilities: The expelled Enlisted Intermediary shall be liable for all dues/liabilities to the Exchange, SEBI or client in the order of priority mentioned above;
Expulsion Bye-Laws to Apply
21) When an Enlisted Intermediary ceases to be an Enlisted Intermediary under the provisions of the Bye-Laws or Regulations otherwise than by death or resignation, he shall be treated as expelled by the relevant authority and in that event all the provisions relating to expulsion contained in the Bye-Laws shall apply to such Enlisted Intermediary in all respects.
22) Forfeited or Lapsed Right of Enlistment
When a right of enlistment is forfeited to or vest in the Exchange under any Bye-Law or Regulation of the Exchange for the time being in force, it shall belong absolutely to the Exchange free of all rights, claims or interest of such Enlisted Intermediary or any person claiming through such Enlisted Intermediary and the relevant authority shall be entitled to deal with or dispose of such right of enlistment as it may think fit.
23) The Managing Director or the concerned committee / officials of the Exchange shall be empowered to take action against the Enlisted Intermediary as provided in these Bye-Laws including the following:
a) imposing monetary penalties, issuing warning or caution or advise on/to Enlisted Intermediary or other action, as specified by the Exchange through circulars issued to Enlisted Intermediary ;
b) taking penal action against Enlisted Intermediary including suspension or cancellation of enlistment arising out of directions issued by SEBI;
c) expulsion / withdrawal of enlistment.
CHAPTER VIII INSPECTION
1) Where it appears to the Exchange that it is expedient to do so, it may appoint one or more persons as inspecting authority to undertake inspection of books of accounts, other records and documents of the Enlisted Intermediary, branch office, etc.
2) The inspecting authority appointed by the Exchange may be either its own officials or professionals from outside the Exchange.
3) Whenever the Exchange appoints outside professionals as an inspecting authority, it shall notify the Investment Adviser / Research Analyst, the names and addresses of the professionals or firms so appointed as an inspecting authority.
4) When outside professionals are appointed as inspecting authority in respect of the Enlisted Intermediary and such professionals are already related in any other capacity with the Enlisted Intermediary then such Enlisted Intermediary shall forthwith inform the Exchange of his/its relationship with the inspecting authority.
5) The outside professional inspecting authority shall not, without the prior written consent of the Exchange act for the Enlisted Intermediary in any other capacity after being appointed to inspect the state of affairs of such Enlisted Intermediary.
6) The purposes for carrying out inspection shall be as follows, namely:-
(a) to ensure that the specified records, books of accounts and other books are being maintained in the manner required;
(b) to ensure that the provisions of the Securities and Exchange Board of India Act, 1992 and the Rules and Regulations made thereunder are being complied with;
(c) to ensure that the provisions of the SEBI (Investment Advisers) Regulations, 2013, the SEBI (Research Analysts) Regulations, 2014 and circulars/notices/directions issued by SEBI are complied with;
(d) to ensure that various provisions of the Bye-Laws and Regulations of the
Exchange and any directions, notices, circulars or instructions or standard operating procedures issued thereunder are being complied with;
(e) to ensure efficacy of the investor grievance redressal mechanism and verify discharge of various obligations towards Constituents;
(f) to investigate into the complaints received from investors/constituents, other Enlisted Intermediary of the Exchange or any other person on any matter having a bearing on the activities of the Investment Adviser / Research Analyst;
(g) to investigate suo-moto, for any reason where circumstances so warrant, inspection into the affairs of the Investment Adviser / Research Analyst;
(h) to examine whether any notices, circulars, instructions or orders issued by the Exchange/SEBI from time to time relating to activities of Investment Advisers/ Research Analysts are being complied with;
(i) to comply with any of the directives issued by any regulating authority including Government of India.
7) Before undertaking any inspection, the Exchange shall give a reasonable notice to the Enlisted Intermediary.
8) Notwithstanding anything contained in the Bye-Laws, the Exchange shall be empowered to direct that the inspection of the affairs of an Enlisted Intermediary be taken up without such notice in such facts and circumstances as it may deem fit.
9) It shall be the duty of every director, officer, employee, KMP and associate of the Enlisted Intermediary, who is being inspected, to produce to the inspecting authority such books, records and other documents in his custody or control or arrange to produce such books, records and other documents which are in any other person’s custody or control and furnish such statements and information within such time as the said inspection authority may require.
10) The Enlisted Intermediary shall allow the inspecting authority to have reasonable access to the premises occupied by him, both on-site and off-site, or by any other person on his behalf and extend reasonable facilities for examining any books, records, documents and computerized data in his possession or any other person and also provide copies of documents or other materials which in the opinion of the inspecting authority are relevant. Such copies or materials may be retained by the inspecting authority. Copies so retained shall be the property of the Exchange.
11) The inspecting authority, during inspection, shall be entitled to examine or record statements of any investment adviser, research analyst, director, officer, partner and employee, KMP of the Enlisted Intermediary or of any associate of such Enlisted Intermediary.
12) It shall be the duty of every director, officer, partner, KMP and employee of the Enlisted Intermediary or where an associate is examined, such associate, to provide all assistance to the inspecting authority.
13) The inspecting authority shall be entitled to examine the records relating to the Enlisted Intermediary’s financial affairs held with its bankers or any other agency which the inspecting authority may find relevant.
14) The inspecting authority shall have access to the accounts and other records relating to the Enlisted Intermediary or such access as authorized by the Exchange to the accounts and other records relating to any associate of the Enlisted Intermediary.
15) On completion of the inspection, the Exchange shall communicate the findings of the inspecting authority to the Enlisted Intermediary to give him an opportunity of making representation before any action is taken by the Exchange.
16) Without prejudice to the powers vested with the Exchange to take action(s) under the Bye-Laws and Regulations of the Exchange, the Exchange may call upon the Enlisted Intermediary to take such measures as the Exchange may deem fit on receipt of the explanation, if any, from the Enlisted Intermediary.
17) The Exchange may call upon the Enlisted Intermediary to furnish such information and / or explanation with regards to any constituent, dealings, accounts and/or other related matters regarding the investment advice, research and services thereof.
18) The Exchange shall initiate disciplinary proceedings against the Enlisted Intermediary if the Enlisted Intermediary fails to comply with the Bye-Laws of the Exchange and circulars, notices, norms, guidelines, standard operating procedures as specified by SEBI/the Exchange and shall also refer the same to SEBI for appropriate action to be initiated by SEBI against such Enlisted Intermediary.
19) The Exchange may, at its discretion, disseminate to SEBI or any other regulatory authorities or to the general public, any information, including but not limited to information relating to any trades, dealings, accounting, investment advice provided, research reports issued, research analysis conducted, disciplinary action initiated/taken against the Enlisted Intermediary.
CHAPTER IX MISCELLANEOUS
(a) Bye-Laws made under the SEBI (Investment Advisers) Regulations, 2013 and SEBI (Research Analysts) Regulations, 2014
The Bye-Laws made thereunder, are made under the provisions of the SEBI (Investment Advisers) Regulations, 2013 and the SEBI (Research Analysts) Regulations, 2014.
(b) Jurisdiction
Save and except as specifically provided otherwise, the Bye-Laws shall be subject to the exclusive jurisdiction of the Courts of Mumbai irrespective of the location of the place of business of the Enlisted Intermediary and clients in India or the place where the concerned agreement / contract may have taken place.
(c) Other Laws and Regulations to Supplement
The Bye-Laws and Regulations shall be in addition to, and shall not prejudice the application of the provisions of the Securities Contracts (Regulation) Act, 1956 (SCRA), the Securities Contracts (Regulation) Rules, 1957 (SCRR), the Securities and Exchange Board of India Act, 1992 and the Rules and Regulations made there under and the directions and/or circulars issued by SEBI or any other regulatory authority from time to time.
(d) Any failure to observe or comply with any requirement of any Bye-Laws or Regulations or directions/orders/requirements/circulars/standard operating procedures/notice of the relevant authority, may be dealt with by the relevant authority as a violation of such Bye-Laws or Regulations.
(e) The Enlisted Intermediary have an obligation to inform the relevant authority and SEBI about insider trading, information on takeover and other such information/practices as may be construed as being detrimental to the efficient operations of the Exchange and as may be required under any applicable law.
(f) Save as otherwise specifically provided in the regulations prescribed by the relevant authority, in administrating and supervising the Enlisted Intermediary, the Exchange should not be deemed to have incurred any liability, and accordingly no claim or recourse, in respect of/ in relation to, any investment advice given, any research report issued, any recommendation or opinion provided or any matter connected therewith shall lie
against the Exchange or any authorized person(s) acting for the Exchange.
(g) No claim, suit, prosecution or other legal proceedings shall lie against the Exchange or any authorized person(s) acting for the Exchange or relevant authority, in respect of anything which is in good faith done or intended to be done in pursuance of any order or other binding directive issued to the Exchange under any law or delegated legislation for the time being in force.
(h) All the records, correspondence, data, information, proceedings, minutes, decisions of the Exchange shall be confidential, and the Exchange shall not be required to disclose the same to any party or person, save and except when called upon to do so by SEBI or by an order of any competent court, tribunal or any other competent authority.
(i) Interpretation
Unless otherwise warranted by the context or meaning thereof, the words and expressions used in the Bye-Laws, but not defined herein, shall have the meanings assigned to them under any of the following:
(a) The Securities Contracts (Regulation) Act, 1956 and the rules and regulations made thereunder;
(b) The Securities and Exchange Board of India Act, 1992 and the regulations made thereunder;
(c) The Companies Act, 1956 or Companies Act, 2013 and the rules made thereunder;
(d) The SEBI (Investment Advisers) Regulations, 2013
(e) The SEBI (Research Analysts) Regulations, 2014
(f) The Regulations specified by SEBI.
(g) Bye-Laws of the Exchange;
(h) Regulations referred in the Definitions clause above;
(i) Memorandum and Articles of Association of the Exchange.
j) If any word or expression is used but not defined herein, but is defined in more than one of the above enactments/instruments mentioned in Bye-Law (i) above, it shall have the meaning given in the enactment or instrument that precedes the other(s) in the order given in the said Bye-Law.
