The Hindu Business Line : CSE warns against violation of legal requirements

THE Calcutta Stock Exchange (CSE) has observed a number of violations of legal requirements that have edged their way into the operations of its members. An inspection of the books of CSE brokers has thrown up cases of infringement, which the exchange wants its members to comprehend.

CSE, in a recent advisory issued to members, has urged them not to indulge in such violations, adding that a "repetition of similar offences may call for severe action."

Sitting high on CSE's agenda is non-reporting of off-market deals. The exchange has advised members to be aware of the need to report off-market transactions in both listed and unlisted shares. The note has also underlined the inclination to act as unregistered sub broker for clients.

With regard to contract notes, the exchange has referred to non-issue of such notes and their issuance in a format other than what is prescribed or without the signature of an authorised signatory. Issuance of CSE contract notes for fictitious transactions has also been mentioned. Similar reference has been made to know your client (KYC) documents, especially to incomplete client registration forms and non-execution of client-broker agreements.

As for corporate brokers, CSE has underscored the non-appointment of at least one whole time director and a minimum two experienced directors. Non-submission of audit report (as well as late submission) has also been mentioned.

A further list of violations has been worked out. These include:

No client bank account non-segregation of funds, and use of clients' funds for own purpose,

Delays in payment to clients and in delivery of securities to clients,

Non-collection of margins from clients and charging of excess brokerage,

Non-maintenance of CSE reports and bank reconciliation statements,

Misuse of client securities and not entering correct/unique client codes.