Supplementary CODE OF CONDUCT for Branch ... Code.pdfKarvy Stock Broking Limited Code of Conduct _____ Confidential Page 1 of 20 Annexure 6 Supplementary CODE OF CONDUCT for Branch

Karvy Stock Broking Limited Code of Conduct

________________________________________________________________________

Confidential Page 1 of 20

Annexure 6

Supplementary

CODE OF CONDUCT

for

Branch Coordinators and Dealers (Applicable to Broking Functions of KSBL & KCTL)

VERSION 1.0

July 28, 2010

FOR INTERNAL USE ONLY

This is a confidential and proprietary document of Karvy Stock Broking Limited. Any unauthorized use or copying of this document is prohibited.


________________________________________________________________________


TABLE OF CONTENTS

Chapter

No. Contents

Page No.

I NNeeeedd ffoorr tthhee CCooddee ooff CCoonndduucctt 4

II

OObbjjeeccttiivvee ooff tthhee CCooddee ooff CCoonndduucctt 4

III KKAARRVVYY GGrroouupp PPoolliiccyy ooff CCoommpplliiaannccee 4

IV GGeenneerraall OObblliiggaattiioonnss aanndd DDuuttiieess ttoo tthhee

IInnvveessttoorrss 4

V BBrraanncchh SSeett--UUpp 7

VI CClliieenntt RReeggiissttrraattiioonn 8

VII CClliieenntt AAuutthhoorriizzaattiioonn iinn FFaavvoouurr ooff TThhiirrdd PPaarrttyy 10

VIII OOrrddeerr AAcccceeppttaannccee aanndd TTrraaddee CCoonnffiirrmmaattiioonn 11

IX VVooiiccee RReeccoorrddiinngg FFaacciilliittyy 12

X IIssssuuaannccee AAnndd DDeelliivveerryy ooff CCoonnttrraacctt NNootteess 13

XI RRiisskk MMaannaaggeemmeenntt 15

XII RReelleeaassee ooff AAddvveerrttiisseemmeennttss 16


________________________________________________________________________


XIII

RReeccoorrddss aanndd RReeggiisstteerrss ttoo bbee mmaaiinnttaaiinneedd aatt

tthhee BBrraanncchh

16

XIV

GGuuiiddeelliinneess oonn AAnnttii MMoonneeyy LLaauunnddeerriinngg

SSttaannddaarrddss

16

XV HHaannddlliinngg ooff CCoonnffiiddeennttiiaall IInnffoorrmmaattiioonn 18

XVI OOtthheerr CCoommpplliiaannccee RReeqquuiirreemmeennttss 19


________________________________________________________________________


II.. NNEEEEDD FFOORR TTHHEE CCOODDEE OOFF CCOONNDDUUCCTT

To provide a reference framework for the employees of KSBL in respect of conduct of Broking business

IIII.. OOBBJJEECCTTIIVVEE OOFF TTHHEE CCOODDEE OOFF CCOONNDDUUCCTT

The Code of Conduct will serve as guidelines on the regulatory framework of the stock broking operations that should be followed during the course of business and conduct with the clients, to ensure Compliance in the letter and spirit of all laws, codes, rules and regulations governing the Stock Broking business of KSBL. This code of conduct is applicable to and should be adhered by all the employees of KSBL. Any non-compliance to the requirements listed in this document due to an act of omission or commission by any employee of KSBL shall be subject to disciplinary action to be taken by the Company.

IIIIII.. KKAARRVVYY GGRROOUUPP PPOOLLIICCYY OOFF CCOOMMPPLLIIAANNCCEE

It is the policy of the KARVY Group to observe high standards of integrity and fair dealing in the conduct of its business and to act with due skill, care and diligence. To those ends, all employees should:

– Comply with both the letter and spirit of all relevant laws, codes, rules, regulations, and

standards of good market practice and – Ensure that any irregularities which arise are promptly resolved in a manner which

minimises financial loss and protects the good name and reputation of the KARVY Group

IIVV.. GGEENNEERRAALL OOBBLLIIGGAATTIIOONNSS AANNDD DDUUTTIIEESS TTOO TTHHEE IINNVVEESSTTOORRSS

A. General Obligations:

1. Integrity: Branch employees/ dealers of KSBL shall maintain high standards of integrity

and fairness in the conduct of business. 2. Exercise of Due Skill and Care: Branch Employees / dealers shall act with due skill,

care and diligence in the conduct of all business under their authority. 3. Manipulation: Branch employees / dealers shall not indulge in manipulative,

fraudulent or deceptive transactions or schemes or spread rumours with a view to distort facts and make personal gains.


________________________________________________________________________


4. Malpractices: Branch employees / dealers shall not create false market either singly or in concert with others or indulge in any act detrimental to the clients’ interest or which leads to interference with the fair and smooth functioning of the business.

5. Compliance with Statutory requirements: Branch employees shall abide by the

requirements stated in the Compliance Manual and the Exchange/SEBI guidelines/ circulars, bye-laws, rules and regulations and corporate policies communicated/issued and updated from time to time.

6. Timely Updation: Any request received from the client for change of address/ bank

details, DP details, be verified with prescribed supporting documents and be immediately forwarded, along with supporting documents, to HO without any delay.

B. Duties towards Customers:

1. Execution of Orders: Branch employees/ dealers of KSBL:

• While dealing with clients, should execute the orders for buying and selling of

securities at the best available market price. • Promptly inform client about the execution or non-execution of an order.

2. Breach of Trust: Branch employees/ dealers of KSBL shall not disclose or discuss with

any other person or make improper use of the details of personal investments and other information of a confidential nature of the client, which he comes to know in his business relationship.

3. Business and Commission: Branch employees/ dealers of KSBL shall:

• Not encourage sales or purchases of securities with any ulterior motive. • Not furnish false or misleading quotations

4. Business of Defaulting Clients: Branch employees/ dealers of KSBL shall not deal or

transact business knowingly or execute an order for a client who has failed to carry out his earlier commitments in relation to trading in securities with KSBL or another stock-broker.

5. Fairness To Clients: Branch employees/ dealers of KSBL shall:

• When dealing with a client, ensure that no conflict of interest arises between him

and the client.


________________________________________________________________________


• In the event of a conflict of interest, inform the client accordingly and shall not seek to gain a direct or indirect personal advantage from the situation and shall not consider client’s interest inferior to his own.

6. Investment Advice: Branch employees/ dealers of KSBL shall not make a

recommendation to any client who might rely on it to acquire, dispose, retain any securities unless he has reasonable grounds for believing that the recommendation is suitable for such a client upon the basis of the facts, if disclosed by such a client like portfolio, financial net worth and objectives of investment of the client. The employee should seek such information from clients, wherever he feels it is appropriate to do so.

7. Trade Calls: Branch employees/ dealers shall circulate only the recommendations

made by Karvy Research team as in-house recommendations to the customers and shall not make any recommendation contrary to the in-house recommendations.

8. Fictitious Accounts: Branch employees/ dealers of KSBL shall not allow establishment

of fictitious accounts in order to execute transactions which otherwise would be prohibited or to disguise such transactions.

9. Unauthorized Transactions: Branch employees/ dealers of KSBL shall not execute

transactions which are not explicitly authorized by the client concerned. 10. Front Running: Branch employees/ dealers of KSBL shall not execute transactions in

their personal account in securities ahead of making recommendations to their clients in such securities.

11. Fraudulent Activities: Branch employees/ dealers of KSBL shall not indulge in any

fraudulent activities, such as forgery, non-disclosure or misstatement of material facts. 12. Guarantees to Clients: Branch employees/ dealers of KSBL shall not guarantee against

market losses by clients in any transaction or agree to provide any reimbursement of such losses or any assured return.

13. Personal/ Private Dealing: Branch employees/ dealers of KSBL shall not deal with

clients in their private and personal capacity by signing undertakings/ agreements/ letter of comforts on plain/ stamp paper or should accept or issue cheques/ drafts from their personal account or accounts of their known persons or undertake trading on their behalf in their own names or in the names of their known persons.


________________________________________________________________________


VV.. BBRRAANNCCHH SSEETT--UUPP

A. Trading Terminals & Dealer Certification:

1. As per Exchange guidelines the trading terminals can be located only at the Main

Office, Branch office and Office of the registered Sub-Broker/Authorized Person of the Trading Member

2. Trading terminals are to be operated by the respective Approved Users only 3. Only the following persons can become Approved Users of trading terminals

(CTCL/IML/NEAT/TWS):

• Employee of KSBL • Employee of registered Sub-Broker • Employee of registered Authorized Person • Approved person of registered Sub-Broker • Approved person of registered Authorized Person

4. Such Users should be NCFM/BCFM/BCDE certified as prescribed by Exchange

guidelines 5. NEAT /BOLT/CTCL/IML trading terminals should not be extended to another location

even within the same premises, without express written permission of the H.O. since KSBL has to upload the details of location of the terminals to the Exchange.

6. The Branch Head/ Co-ordinator shall ensure that no trading terminals are allotted to

any unauthorized person, either directly or through CTCL arrangement. 7. The Branch Head/ Co-ordinator shall not allow any client to sit in the dealer’s seat and

execute trades or orders of other clients. 8. Ensure that secrecy of terminal-wise log-in ID and password is maintained.

B. Display of Notice Boards/SEBI Certificates:

1. Notice board as prescribed by the Exchange should be displayed at a prominent place

in the Branch Office and Registered Sub-Brokers’ office where trading terminal(s) of the Trading Member are located.


________________________________________________________________________


2. SEBI Registration Certificate should be displayed at Branch office and Sub Broker outlet. In case of Sub-Broker’s office both KSBL’s and the Sub-Broker’s SEBI registration certificates are to be displayed.

3. Board containing list of “DOs and DO-NOTs” should be prominently displayed at the

Branch Office and Sub Broker outlets

VVII.. CCLLIIEENNTT RREEGGIISSTTRRAATTIIOONN

A. Client Documentation:

1. Member Client agreements, Tripartite Agreements, Client Registration Forms, Risk

Disclosure Documents should be in the latest formats as prescribed by the H.O. 2. The KYC kit for each new customer sent to the H.O. should be complete in all respects

with all the mandatory fields/documents duly filled in and signed and after in-person verification.

B. In Person Verification (IPV):

1. Resident Clients:

• The employee authorized for In Person Verification (IPV) of the client should either

visit the client or invite the client to KSBL office and verify all the copies of documents obtained under SEBI Uniform Documentary Requirements with the originals. A List of all the documents that are acceptable for various categories of clients is given in the Client Registration Kit.

• Branch employee/ dealer should ensure to obtain prescribed form from the client in

case the client signs and comprehends language other than English, as specified in the KYC

• The employees at the Branch office authorized for the purpose shall conduct IPV of the KYC documents and shall maintain audit trail of the same by incorporating their name, signature and stamp of KSBL on the client registration forms. Further, the documents pertaining to client registration and other client related information should be kept in a secured and confidential manner.


________________________________________________________________________


• The employee conducting the IPV must:

Verify the customer’s identity using reliable, independent source (original) documents, collect and verify data and information as per the guidelines circulated by the HO from time to time;

Ensure that no account is opened in a fictitious / benami name or on an anonymous basis.

Note: In cases where the employee conducting the IPV is unable to apply appropriate

due diligence measures to ascertain the identity of the client or suspects that

information provided by the client may not be genuine, the employee shall not open

the account for that client and also escalate the case to Head of Operations or Client

Registration Department (CRD).

2. NRI Clients:

In case of NRI clients under mentioned steps should be followed:

• If the NRI is in India at the time of account opening, he may be invited to visit any of

KSBL offices for completion of IPV formalities. Alternatively, the employee should visit the NRI at his/her residence/office.

• If the NRI customer is not in India at the time of Account Opening then KYC

documents of such clients should be attested by any one of the following entities:–

Indian Embassy / Consulate General in the country where the client resides, Notary Public, Court, Magistrate, Judge or Local Banker

The signature and photograph of the customer on the Account Opening Form (AOF)

should also be attested as “verified” by the same agency that certifies the

supplementary documents.

• If the forms are sent directly to the branch then the Branch Manager should sign the

AOFs. Under no circumstances Central Registration Department shall process these

till the sign off by Branch Manager on the AOF is sighted.


________________________________________________________________________


C. Other Precautions:

• Branch employee/ Dealer should also scan through the Defaulter Entities / Debarred

entities list from the websites of Stock Exchanges/SEBI/RBI for each new client and report the adverse findings, if any, to CRD at HO.

• Name of the client should be checked on the Watchout Investor’s website for a

possible default, if any, on part of the account holder. • If the name of the account holder appears in the website

www.watchoutinvestors.com then the reasons for the same should be investigated. Decision on whether to open an account of such an account holder will have to be taken on a case to case basis depending upon the nature of offence/default, regulator involved, intensity of the offence, frequency and number of such offences/defaults cited in the watchout list.

In such cases matters should be escalated to Zonal Business Head and Head of Operations for necessary opinion.

• Branch Coordinator/ Dealer should ensure net worth certificates and updated/ latest

Annual Reports are obtained on an yearly basis (Financial Information) of the High Networth/ Corporate clients at the time of registration and on a continuous basis (annually) thereafter. The Relationship Managers/Dealers should constantly follow up with the clients who have not submitted the financial information till such time. The list of such clients will be provided by RMS Team, H.O.

VVIIII.. CCLLIIEENNTT AAUUTTHHOORRIIZZAATTIIOONN IINN FFAAVVOORR OOFF TTHHIIRRDD PPAARRTTYY

A. Where a client gives any authority to a third person of “operation” of his account then the

Letter of Authorization/ POA should be taken in the relevant mandate form as prescribed in KYC.

B. Branch employee/ dealer should obtain proof of identify and proof of address from the

Mandate/ POA holder at the time of registering the client C. Branch employee/ dealer should retain copies of “Letter”/ “POA” to be verified at the

time of order placement by authorized person.

http://www.watchoutinvestors.com/


________________________________________________________________________


VVIIIIII.. OORRDDEERR AACCCCEEPPTTAANNCCEE AANNDD TTRRAADDEE CCOONNFFIIRRMMAATTIIOONN

A. No Discretionary Trading:

1. Employees shall execute any trades/orders for and on behalf of a client only after receipt of proper prior instructions from the clients or their authorized agents through voice recorded lines or through written instructions and after conducting the client authorization/validation process as communicated by H.O. from time to time.

All orders which get matched into trades are required to be confirmed to the client at the day end by the Dealer at the Branch through the Voice recorded lines only*.

* P.S.: Mandatory for branches having voice loggers:

2. No employee of KSBL shall exercise any discretion while trading on behalf of the client. No trades should be executed arbitrarily by any of the employee under any implied or express authority received from the client in this regard even if it is given by way of any Power of Attorney (POA) or Letter of Authority (LOA) in favor of such employee. Please note that any such verbal or written authority, POA or LOA is not recognized by KSBL. Dealer shall be personally accountable for any loss to the client for any discretionary/ unauthorized trade in addition to inviting disciplinary action for misconduct.

B. Mandatory Use of Voice Recording Lines:

1. As a general rule, Branch employees/ dealers working in branches having voice loggers

shall accept orders from clients only on Voice Recorded lines. 2. Under exceptional circumstances (due to technical problems like the Voice Logger is

not functioning), the employees may accept orders over non-voice recorded telephone. However, for such orders the confirmation of trades being executed/already executed should reach the clients at the earliest possible time through voice recorded lines. The Zonal/ Regional Business Head may grant approval only on exceptional basis for such order acceptance by dealers and should record reason for grant of such approval to keep an audit trail of the same.

3. Any modification/cancellation request of the initial order from the client should be

obtained only on telephones having “Voice” recording facility or in the form of written instructions/E-mails


________________________________________________________________________


4. No orders should be accepted through Mobile Phones. Only in exceptional situations

such as calls received from clients on mobile phones before commencement of trading hours outside the dealing room, the dealers shall counter call the clients and confirm the deals with them during the trading hours through voice recorded lines.

C. Clients Visiting Branches:

For clients visiting the branch location, dealer should get VISITOR REGISTER signed by the client and should maintain relevant deal slips signed by the client.

IIXX.. VVOOIICCEE RREECCOORRDDIINNGG FFAACCIILLIITTYY

All Branches having voice recording facility should ensure that;

A. Incoming/ Outgoing telephone lines to be connected to voice loggers:

All incoming/outgoing telephone lines used by Dealers, Relationship Managers, Operations/Back office staff for communication with the client like;

1. Acceptance/modification of an order, 2. Confirmation of trades, shortage of delivery, auctions 3. Communication of Margin/liquidation calls 4. Communication of Pay-in Obligation/Shortages from Exchange etc.,

should be connected to Automated Voice Recording system

B. Back-ups to be taken:

1. Branches are required to take daily backup to ensure that records of order

placement/modification and cancellation requests by the client, confirmation of trades and margin calls are maintained at least for 12 months.

2. Branches are also required to send a copy of back-up to HO – IT department as per the procedure and at the frequency, defined by HO - IT.

3. Branch-coordinator/ Dealer should also on a daily basis verify whether system is functioning properly and Back-ups being taken are audible and clear

4. Regional Business Heads are required to verify on a weekly basis that the Voice Recording system is functioning properly.


________________________________________________________________________


C. Prohibition of Mobile Phones (For Branches Having Voice Loggers):

1. Usage of Mobiles Phones inside the dealing rooms for accepting orders from the

clients is strictly prohibited. 2. In case client calls up on mobile phone the dealer should immediately reconfirm the

order to the client through Voice recorded lines. 3. Under exceptional circumstances (due to technical problems like Voice Recording

System not working) with the prior permission of Regional Business Head, the employees may accept orders over non-voice recorded telephone. However, for such orders the confirmations of trades being executed/already executed should reach the clients at the earliest possible time through voice recorded lines.

XX.. IISSSSUUAANNCCEE AANNDD DDEELLIIVVEERRYY OOFF CCOONNTTRRAACCTT NNOOTTEESS

A. Contract Notes:

1. Contract Notes should be issued to the clients within 24 hours of trade in the

prescribed format (in the pre printed stationery). Acknowledgement / proof of dispatch to be maintained in such a way that it is easily retrievable and traceable as and when required.

2. No employee of KSBL shall take into cognizance, any requests from clients for dispensing with the requirement of sending Contract Notes.

3. For all the Contract Notes sent through courier it is mandatory for the Branch to maintain Proof of Delivery / Dispatch.

4. No payment to the courier should be recommended made where the branch have not received proper POD from the courier.

5. In case the couriered physical contract notes are returned back from the addressee for any reason, adequate steps should be taken to confirm the postal address of the client and should be dispatched again. In case the courier is returned back for the second time, reasons should be investigated on top priority and the trading account suspension request should be made with immediate effect to the CRD Team at H.O.

B. Hand Delivery of Contract Notes:

1. Branch employees/ dealers should be ensured to obtain the full signatures of the

client as the acknowledgement of the receipt of the contract note and ensure that these signatures tally with the signature of the client given in KYC.

2. Sending Contract Notes by personal delivery / hand delivery shall not be allowed. Only

under exceptional circumstances, the individual client only may be allowed to collect the contract notes by personal delivery/ hand delivery from Branches, subject to


________________________________________________________________________


the receipt of specific written instructions (as per prescribed format in Annexure) from the client for not dispatching the Contract Notes and requesting personal delivery/hand delivery from the Branch.

3. A separate Contract Notes Collection Register for the purpose shall be maintained

date wise at the Branch for maintaining a record of signatures of those clients who wish to collect the contract notes personally. In case of any likely dispute, the entry and signature in this register will be treated as evidence of collection of contract notes by the client.

4. The Visitor Register should be maintained at all outlets and signatures of all clients

visiting the branch for trade or contract note collection be obtained

C. Electronic Contract Notes:

1. ECNs can be issued only if specifically consented by client

2. In case of non-delivery of ECNs, contract note should be sent in physical form.

3. It shall be a constant endeavor of the Branch Coordinator/ Dealer to pursue the clients to sign up for receiving electronic contract notes, instead of physical form.

D. Trade Modifications:

i. Trade Modifications should be allowed in case of genuine punching errors. Such trade

modifications not only should be confirmed to the client who have placed the order but also be informed to the client on whose account the order has been wrongly punched, over voice recorded lines before day-end.

E. Escalation and Risk Containment of Errors:

In the event of any error in any punching or accepting of orders from the clients or

error in following instructions of the client, such error shall be immediately brought

to the notice of the concerned Regional Broking Head and steps would be taken to

rectify the error by taking appropriate measures/ position in the market to contain

the loss.


________________________________________________________________________


XXII.. RRIISSKK MMAANNAAGGEEMMEENNTT::

Every Branch employee/ dealer has risk management of the clients mapped to him as integral part of his Key Result Areas (KRAs).

A. Collection of Pay-in/ margins:

It is duty of the dealer/ branch co-coordinator to follow up with his clients and ensure timely collection of margins and pay-in funds and securities due from the clients.

B. Exposure to Client:

1. Dealer should ensure that no excessive exposure is given to the client beyond that

defined in the Risk Policy without specific approval of the Zonal/ Regional Business Head.

2. Dealer should ensure that, in case there is liquidation of “open” or unsettled positions of the client from Branch/ Head Office then no fresh purchases/ positions are allowed to the client without getting advance payment of margin or pay-in dues.

C. Customer Complaint/Grievance Handling:

1. All branches should maintain Investor Grievance Register 2. All complaints communicated by customers to branches orally or in writing should be

entered into the Investor Grievance Register and mailed immediately to Head Office with copy to the Regional and Zonal Business Head.

3. It shall be the responsibility of the Zonal/ Regional Business Head to analyse and resolve the complaint and provide necessary information/documents pertaining to the complaint, within 48 hours of receipt of complaint to HO, Compliance Department for sending response to the client and the concerned Regulator, where it has been received through a Regulator.


________________________________________________________________________


XXIIII.. RREELLEEAASSEE OOFF AADDVVEERRTTIISSEEMMEENNTTSS

Any advertisement released by KSBL /Sub-broker requires prior approval from the Stock Exchanges.

All advertisements should be forwarded to Ms Shabna Iyer, Marketing-H.O. for getting approval from the relevant Exchanges, accompanied by the following mandatory information.

1. Trading Member’s Name, 2. Registered Office Address of KSBL, 3. SEBI Registration No of KSBL, 4. Designated E-mail ID for Customer Grievances and 5. Adequate Disclaimers.

XXIIIIII.. RREECCOORRDDSS AANNDD RREEGGIISSTTEERRSS TTOO BBEE MMAAIINNTTAAIINNEEDD AATT TTHHEE BBRRAANNCCHH

Following Registers are mandatorily required to be maintained at the Branch Outlets:

1. Cheque Inward Register showing date wise receipt of Pay-in cheques from clients. 2. Cheque Outward register showing delivery of Pay-out cheques to clients. 3. In case Pay-out cheques are collected personally by the clients, acknowledgment

should be taken on the Cheque Outward register 4. In case Pay-out cheques are sent by courier, the proof of dispatch/delivery for each of

these cheques should be maintained. 5. Contract Note Collection Register 6. Investor Grievance Register 7. Visitors Register

XXIIVV.. GGUUIIDDEELLIINNEESS OONN AANNTTII MMOONNEEYY LLAAUUNNDDEERRIINNGG SSTTAANNDDAARRDDSS

A. The Prevention of Money Laundering Act, 2002 (PMLA) and rules notified there under

came into force w.e.f July 1, 2005. Government of India has set up Financial Intelligence Unit-India (FIU-IND) to monitor activities and incident of Money laundering at the national level.

B. SEBI and Exchange circulars require Stock Brokers to report cash and suspicious transactions to FIU-IND.

C. The PMLA regulations and guidelines are applicable to KSBL, its Branches and Sub-brokers/Franchisees

D. The Branch employees should follow the guidelines provided by the HO with respect to identifying suspicious transactions. Following can be circumstances which can lead to


________________________________________________________________________


suspicious transactions which need to be forthwith informed to Mr. S Gopichand, Principal Officer for reporting to FIU-IND:

1. Clients whose identity verification seems difficult or clients appears not to cooperate; 2. Substantial increases in business without apparent cause; 3. Buying and selling of securities with no discernible purpose or in unusual

circumstances 4. Transactions where the nature, size or frequency appears unusual 5. Transactions not in keeping with normal practice in the market to which it relates, i.e.

with reference to market size and frequency, or at deviating from the market prices

Any suspicion on a transaction should be immediately notified to the Principal Officer for the purpose of Money Laundering. However, it should be ensured that there is continuity in dealing with the client as normal until told otherwise and the client should not be tipped of the report/suspicion. The HO will communicate if that particular client account needs to be suspended pending investigation. The branches shall establish and enforce procedures to supervise its business and the activities of its employees that are reasonably designed to achieve compliance with all the relevant regulatory / group requirements.

E. Mandatory reporting to be done:

1. All cash transactions summing up to Rs.10 lakh or more in a calendar month by client are to be reported to the Principal Officer, with all relevant details immediately on occurrence of such transaction. Cash Transactions in KSBL will mean to include Demand Draft/Pay-orders deposited by a client, which have been purchased by him against cash deposit.

2. All suspicious transactions as defined in the preceding paras are also to be reported to the Principal with all relevant details immediately on the occurrence of such transaction.

F. Circular/ Regulation references which should be referred by all the Branch

Employees:

1. SEBI Circular no ISD/CIR/RR/AML/1/06 dated January 18, 2006 Guidelines on Anti

Money Laundering Standards 2. Circular No NSE/INVG/2006/09 dated January 25, 2006 NSE/INVG/7102 3. SEBI Circular No ISD/CIR/RR/AML/2/06 dated March 20, 2006 Guidelines on Anti

Money Laundering Standards 4. Circular No NSE/INVG/2006/33 dated March 24, 2006NSE/INVG/7307 5. PMLA guidelines hosted with corporate website

http://www.sebi.gov.in/circulars/2006/isdcir0106.html

http://www.sebi.gov.in/circulars/2006/isdcir0106.html

http://nseindia.com/content/circulars/invg7102.htm

http://www.sebi.gov.in/circulars/2006/cirisd2006.html

http://www.sebi.gov.in/circulars/2006/cirisd2006.html

http://nseindia.com/content/circulars/invg7307.htm


________________________________________________________________________


XXVV.. HHAANNDDLLIINNGG OOFF CCOONNFFIIDDEENNTTIIAALL IINNFFOORRMMAATTIIOONN

Information about clients, trades placed by clients should not be shared except on a “need to know” basis; even within the same Branch.

A. Conflict of interest:

Inherent to the financial services industry, conflicts cannot be avoided completely, but they can be identified and managed appropriately:

1. Seek HR approval in order to serve as a director, trustee or officer of any other organization

2. Never use information gathered from Company-related business for your own financial gain

B. Compliance Disclosure Line:

An employee, who becomes aware of any of the following matters, may make a disclosure to M.S.Manohar, Head, HRD, on a confidential basis without fear of reprisal or retaliation:

1. Breaches of legal and regulatory requirements by any employee

2. Manipulation, Pilferage, embezzlement of Company or Client funds and Securities and other assets by any employee

3. Fraud or deliberate error in the preparation, recording, evaluation, review or audit of any financial statement of the Company

4. This disclosure line should not be used to settle personal scores

XXVVII.. OOTTHHEERR CCOOMMPPLLIIAANNCCEE RREEQQUUIIRREEMMEENNTTSS

A. Prohibition on Cash Dealings/Third Party Cheques:

Branches/Franchisees should not accept cash from the client whether against funds pay-in obligations or as margin for purchase of securities and / or give cash against sale of securities to the clients. The Branches shall collect cheques from clients only if it pertains to the account already mapped in the back office system. No third party cheque can be accepted by branch either as security or as pay-in or for any other purpose. Any addition to the client bank


________________________________________________________________________


details (because of operation of more than one account by clients) shall be in back office with necessary request letter and supporting documents and should be communicated to H.O. before accepting any cheques from the clients.

B. Acceptance of Demand Drafts:

Acceptance of Bank Drafts/ Pay-Order/ Demand Drafts/ Banker Cheques can be done only with a letter from the issuing bank confirming that such instrument was purchased by the client from his account maintained with the Bank or against Cash, provided where the name of the purchaser appears in the body of the instrument itself, requirement of letter from issuing bank is waived off. It is reiterated that no employee at the Branch shall accept cash from the client whether against obligations or as margin for purchase of securities and / or give cash against sale of securities to the clients.

C. Ledger Balance Confirmation (LBC):

Branch Manager/ Dealer is to obtain quarterly ledger confirmation from

1. Top 20 clients with highest turn-over in cash during preceding quarter 2. Top 20 clients with highest turnover in “F&O” during the preceding quarter 3. Top 20 clients with highest loss during preceding quarter 4. Top 20 clients whose shares have been liquidated due to delay in meeting pay-in

obligations or shortfall in margins. 5. All clients who personally frequent the branch to place orders 6. Any other set of clients as per guidelines given by H.O.

Further, Branch Manager/ Dealer is required to verify signatures obtained from client on LBC by tallying the same with specimen signature on KYC or PAN card/ Driving License/ Passport of Employer Identity Card issued to the client. LBC should be maintained in a secured environment in such a manner to facilitate easy retrieval and production of the same to any competent authority when required.

D. Employees Code of Conduct and Business Ethics:

i. All employees and their spouse, dependant children and parents are required to open and

maintain trading and DP accounts, unless there is a specific permission otherwise, only with KSBL and should seek prior permission of HR before undertaking any purchase or sale transaction in compliance to existing ETP Policy.


________________________________________________________________________


ii. At the time of appointment, branch employee/ dealer is required to give written undertakings from two of his relatives/ friends vouching his character and conduct and undertaking to produce the employee whenever required by the KSBL even after resignation/ termination from the services of KSBL.

iii. At the time of resignation/ termination from the services, branch employee/ dealer would

be under obligation to obtain latest LBC from all the clients serviced by the concerned branch employee/ dealer. Any dispute/ claims against KSBL attributable to the conduct/ actions/ omissions of the branch employee/ dealer shall be required to be settled by the

branch employees/ dealers; and would also be liable for civil/ criminal action.

E. Disciplinary Action:

Please Note that if any employee of KSBL is found to be violating CODE of CONDUCT, the same is liable to be viewed with utmost seriousness by the management of KSBL and strict disciplinary action shall be taken against the employee by the Company.