While Selecting the Broker / Sub-broker

Deal with only SEBI registered Broker / Sub-broker after due diligence. Details of List of Brokers’ can be procured from the Members’ List published by the Exchanges and from their websites.
 

Enter into an Agreement

Each and every prospective client should read and understand the Risk Disclosure Document specified by the Exchange and before entering into trading in the Equities (Cash) or the Derivatives Segment. The Trading Member should obtain a signed copy of the same from all the clients.

Enter into Broker / Sub-broker-Client Agreement. This agreement is mandatory for all investors for registering as a client of a Trading Member. The Client should ensure the following before entering into and agreement:-

Carefully read and understand the terms and conditions of the agreement, before executing the same on a valid stamp paper of the requisite value.

Agreement has to be signed on all the pages by the client and the Member or their representative who has the authority to sign the agreement. Agreement has also to be signed by the witnesses by giving their names an addresses.
 

While Transacting

Specify to the Broker / Sub-broker, the Exchange through which your trade is to be executed and maintain separate account per Exchange.

Obtain a valid Contract Note issued by Trading Member of the Exchange within 24 hours of the execution of the trade.

Contract note is a confirmation of trade(s) done on a particular day for and on behalf of a client in a format prescribed by the Exchange. It establishes a legally enforceable relationship between the Trading Member and Client in respect of settlement of trades executed on the Exchange as stated in the Contract note.

Contract notes are made in duplicate, and the Trading Member and Client both keep one copy each. The Client/s are expected to sign on the duplicate copy of the contract note for having received the original.

Contract Note-cum-Bill - Form ‘A’ & “AA” - Contract Note issued where Trading Member is acting for constituents as broker and agent.

Contract Note - Form ‘B’ - Contract note issued by Trading Member dealing with constituents as Principals.
 

Ensure that the Contract Note contains:
 
SEBI registration number of the Trading Member

Details of trade such as order no., trade no., trade time, quantity, price, brokerage, settlement number, details of other levies.

The trade price should be shown separately from the brokerage charged. The maximum brokerage that can be charged is Rs.0.25 per share/ debenture or 2.5% of the contract price per share/debenture whichever is higher. Any additional charges that the Trading Member can charge are Securities Transaction tax, Service tax on brokerage, Stamp duty, etc. as may be applicable from time to time.
The brokerage and service tax are required to be indicated separately in the contract note.

Signature of authorised representative.

Arbitration clause stating that the trade is subject to the jurisdiction of Mumbai must be present on the face of the Contract note.
 

Sub-brokers

‘Sub-broker’means any person not being a Trading Member of the Stock Exchange who acts on behalf of a stock broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock brokers. No sub-broker can buy, sell, deal in securities unless he holds a certificate granted by SEBI under the Regulations. SEBI has stated that the Trading Member of the Exchange is responsible for the acts, deeds and things of the sub brokers affiliated to it.
 

Ensuring Settlement

Ensure delivery of securities /payment of money to the Trading Member immediately upon getting the contract note for sale / purchase but in any case, before the prescribed pay-in-day.
 

The Trading Member should pay the money or securities to the Investor within 24 hours of the payout.
 

For delivery of shares from Demat a/c, give the Depository Participant (DP) ‘Delivery out’ instructions to transfer the same from the beneficiary account to the pool account of Trading Member through whom shares and securities have been sold.
 

The following details to be given to the DP: Details of the pool a/c of Trading Member to whom the shares are to be transferred, details of scrip, quantity etc. As per the requirements of depositories the Delivery out Instruction should be given atleast 48 hours prior to the cut-off time for the prescribed securities pay-in.
 

For receiving shares in your Demat a/c, give the Depository Participant (DP) ‘Delivery in’ instructions to accept shares in beneficiary account from the pool account of Trading Member through whom shares have been purchased.
 

If physical deliveries are received - check the deliveries received as per Good/Bad delivery guidelines issued by SEBI.
 

Bad delivery cases should be sorted out through Exchange machinery immediately.
 

The investor should tally the account with the Trading Member atleast once in 6 months.
 

The Investors may verify their trades done on Exchange through Trade Confirmation System at the Exchanges websites if they have a Contract note for the concerned trade.
 

All registration of shares for ownership of physical shares should be executed by a valid, duly completed and stamped transfer deed.
 

Rights of Investors
 

To receive all benefits/ material information declared for the Investors by the Company.

Prompt Services from the Company such as transfers, Sub-divisions and consolidation of holdings in the Company.

Equity holders have a right to subscribe to further issue of Capital by the Company.

Receipt of the Contract note from the broker in the specified format showing transaction price and brokerage separately.

Investors can expect delivery of shares purchased/value of shares sold within one working day (excluding Saturday, Sunday and Bank Holidays) after the Pay-out of the settlement, unless a client has requested otherwise.

Access to the Exchange arbitration facilities in case of dispute with Trading Members :-

For complaint against listed Companies / Trading Members contact the Exchange.
 

General Do’s and Don’ts for Investors

Do’s
 

Always keep copies of all investment documentation (e.g. application forms, acknowledgment slips, contract notes).

Follow up diligently and promptly e.g. if you do not receive the required documentation within a reasonable time contact the concerned person i.e. the Trading Member, company etc. immediately.

Investors should take informed investment decisions without being influenced by misleading recommendations given in the public media such as newspapers, electronic media, websites etc. Verify the tall claims made in such advertisements.

Don’ts
 

Don’t forgo taking due documents of transactions, in good faith even from people whom you know.

Don’t get misled by companies showing approvals/registrations from Government agencies as the approvals could be for certain other purposes and not for the securities you are buying.

Don’t get misled by guarantees of repayment of your investments through post-dated cheques.

Don’t hesitate to approach concerned persons and then the appropriate Authorities.