Date: 2020-03-11Category: Not ApplicableState: Union GovernmentCountry: India
Amendment in ‘Rights and Obligations of Members, Authorized Persons and Clients’ of FMC Circular No. FMC/COMPL/IV/KRA-05/11/14 dated February 26, 2015.
Executive Summary:
This circular, issued by SEBI on March 11, 2020, amends the process for clients to receive electronic contract notes. It standardizes email ID submission across all segments by replacing Clause 42 of Annexure 3 of the FMC circular dated February 26, 2015, with Clause 37 of Annexure 4 of the SEBI circular dated August 22, 2011. Clause 48 of Annexure 3 of the FMC circular dated February 26, 2015 is rescinded. Stock Exchanges must amend bylaws, inform members, and report implementation status to SEBI.
Key Points / Main Content:
* **Amendment of Email ID Submission for Electronic Contract Notes:**
* Clause 42 of Annexure 3 of FMC circular No. FMCCOMPLIVKRA051114 dated February 26, 2015, is replaced.
* Replaced by Clause 37 of Annexure 4 of SEBI circular no. CIRMIRSD162011 dated August 22, 2011.
* Clients now provide an appropriate email ID to the stock broker to receive electronic contract notes.
* Physical letter requirement for email ID changes is maintained; secured access allowed for internet trading clients.
* **Rescission of Declaration Form Requirement:**
* Clause 48 of Annexure 3 of the FMC circular dated February 26, 2015, which required an Electronic Contract Note (ECN) declaration form, is rescinded.
* **Stock Exchange Directives:**
* Amend relevant bylaws, rules, and regulations to implement the changes.
* Inform members of the provisions of this circular and disseminate on their websites.
* Report implementation status to SEBI in their monthly report.
Impact Analysis:
Stock Exchanges:
* Impact: Required to update internal rules and regulations to align with the new guidelines for electronic contract notes.
* Action Required: Amend bylaws, inform members, disseminate information on websites, and report implementation status to SEBI.
Stock Brokers:
* Impact: Need to adjust their procedures for obtaining and managing client email IDs for electronic contract notes.
* Action Required: Update internal processes to reflect the new standardized email ID submission method.
Clients:
* Impact: Simplified process for providing email IDs to receive electronic contract notes; no longer required to submit a physical ECN declaration form.
* Action Required: Provide an appropriate email ID to the stock broker to receive electronic contract notes and communicate any changes through a physical letter or secured online access.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): The regulatory body issuing the circular and exercising powers under the Securities and Exchange Board of India Act, 1992.
FMC circular No. FMCCOMPLIVKRA051114 dated February 26, 2015: A circular issued by the Forward Markets Commission (FMC) regarding Rights and Obligations of Members, Authorized Persons and Clients, which is being amended and partially rescinded by this SEBI circular.
SEBI circular no. CIRMIRSD162011 dated August 22, 2011: A SEBI circular regarding Rights and Obligations of Stock Brokers and Clients, Clause 37 of which is being adopted to replace Clause 42 of the FMC circular.
All Recognised Stock Exchanges: Addressees of the circular, responsible for implementing the changes and informing their members.
Stock Brokers: Entities that are being informed through Recognised Stock Exchanges about the amendment to the circulars.
Rights and Obligations of Members, Authorized Persons and Clients: Subject of the mentioned FMC circular No. FMCCOMPLIVKRA051114 dated February 26, 2015
Commodity Derivatives Exchanges: Exchanges to which the provisions of the FMC circular were extended, and which are affected by this amendment.
Securities and Exchange Board of India Act, 1992: The act under which SEBI derives its power to issue the circular and regulate the securities markets.
CIRCULAR
SEBI/HO/MIRSD/DOP/CIR/P/2020/33 March 11, 2020
To,
All Recognised Stock Exchanges
Stock Brokers through Recognised Stock Exchanges
Madam / Sir,
Subject: Amendment in ‘Rights and Obligations of Members, Authorized Persons
and Clients’ of FMC circular No. FMC/COMPL/IV/KRA-05/11/14 dated February 26,
2015.
1. SEBI, vide circular no. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/92 dated September
23, 2016, inter-alia, specified that provisions of FMC circular No.
FMC/COMPL/IV/KRA-05/11/14 dated February 26, 2015 shall be applicable to all
commodity derivatives exchanges including regional commodity derivatives
exchanges for compliance by their members.
2. Clause 42 of Annexure-3: ‘Rights and Obligations of Members, Authorized Persons
and Clients’ of FMC circular No. FMC/COMPL/IV/KRA-05/11/14 dated February 26,
2015, specifies the following:
In case, client opts to receive the contract note in electronic form, he shall provide an
appropriate email id (created by the client) to the member (Kindly refer Appendix A of
Annexure 3). Member shall ensure that all the Rules / Business Rules / Bye-Laws /
Circulars issued from time to time in this regard are complied with. The client shall
communicate to the member any change in e-mail id through a physical letter. If the
client has opted for internet trading, the request for change of email id may be made
through the secured access by way of client specific user id and password.
The Appendix A specified in the above clause is the ECN (Electronic Contract Note)
Declaration Form in which e-mail id is required to be written in own handwriting of the
client.
3. Clause 48 of Annexure-3: ‘Rights and Obligations of Members, Authorized persons
and Clients’ of FMC circular dated February 26, 2015, specifies the following:
The Electronic Contract Note (ECN) declaration form will be obtained from the client who
opts to receive the contract note in electronic form. This declaration will remain valid till it
is revoked by the client.
Page 1 of 24. Clause 37 of Annexure-4: ‘Rights and Obligations of Stock Brokers and Clients’ of
SEBI circular no. CIR/MIRSD/16/2011 dated August 22, 2011 specifies the following:
In case, client opts to receive the contract note in electronic form, he shall provide an
appropriate e-mail id to the stock broker. The client shall communicate to the stock
broker any change in the email-id through a physical letter. If the client has opted for
internet trading, the request for change of email id may be made through the secured
access by way of client specific user id and password.
5. As per the aforementioned clauses, clients in commodity derivatives segment are
required to submit a physical form for providing e-mail id, if they wish to receive
contracts notes in electronic form. Whereas, clients in segments other than commodity
derivatives segment are required to provide an appropriate email id to the stock broker.
6. For ease of investors with regard to receiving electronic contract notes, it has been
decided to replace the Clause 42 of Annexure-3: ‘Rights and Obligations of Members,
Authorized Persons and Clients’ of FMC circular No. FMC/COMPL/IV/KRA-05/11/14
dated February 26, 2015, with Clause 37 of Annexure-4: ‘Rights and Obligations of
Stock Brokers and Clients’ of SEBI circular no. CIR/MIRSD/16/2011 dated August 22,
2011. Further, Clause 48 of Annexure-3: ‘Rights and Obligations of Members,
Authorized Persons and Clients’ of FMC circular No. FMC/COMPL/IV/KRA-05/11/14
dated February 26, 2015, shall stand rescinded.
7. Stock Exchanges are directed to
7.1. make necessary amendments to the relevant Bye-laws, Rules and Regulations
for the implementation of the above decision;
7.2. bring the provisions of this circular to the notice of their members and also
disseminate the same on their websites; and
7.3. communicate to SEBI, the status of implementation of the provisions of this
circular in their monthly report.
8. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992 to protect the interests of investors
in securities and to promote the development of, and to regulate the securities markets.
Yours faithfully
D Rajesh Kumar
General Manager
Market Intermediaries Regulation and Supervision Department
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