SEBI (Intermediaries) Regulations 2008 - India

The regulations were notified in May 2008.

They can be downloaded from

www.sebi.gov.in/acts/internotification.pdf

SCHEDULE III

of

SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES)
REGULATIONS, 2008


CODE OF CONDUCT


I. INVESTOR PROTECTION

1.1 Investors/Clients
Every intermediary shall make all efforts to protect the interests of investors and shall render the best possible advice to its clients having regard to the client’s needs and the environments and his own professional skills.

1.2 High Standards of Service

An intermediary shall ensure that it and its key management personnel, employees,
contractors and agents, shall in the conduct of their business, observe high standards of integrity, dignity, fairness, ethics and professionalism and all professional dealings shall be affected in a prompt, effective and efficient manner.
An intermediary shall be responsible for the acts or omissions of its employees and
agents in respect to the conduct of its business.

1.3 Exercise of Due Diligence and no Collusion

An intermediary shall at all times render high standards of service, exercise due skill and diligence over persons employed or appointed by it, ensure proper care and
exercise independent professional judgment and shall not at any time act in collusion
with other intermediaries in a manner that is detrimental to the investor(s).

1.4 Fees

An intermediary shall not increase charges/ fees for the services rendered without
proper advance notice to its clients/investors.

II. DISBURSAL OF AMOUNTS

2.1 Disbursal of Amounts

An intermediary shall be prompt in disbursing dividends, interests or any such accrual income received or collected by it on behalf of its clients/investors.

III. DISBURSAL OF INFORMATION

3.1 An intermediary shall ensure that adequate disclosures are made to the
clients/investors in a comprehensible and timely manner so as to enable them to make
a balanced and informed decision.

3.2 An intermediary shall not make any misrepresentation and ensure that the information provided to the clients/investors is not misleading.

3.3 An intermediary shall not make any exaggerated statement whether oral or written to the client/investor, either about its qualification or capability to render certain services or its achievements in regard to services rendered to other clients/investors.

3.4 An intermediary shall not divulge to anybody, either orally or in writing, directly or indirectly, any confidential information about its clients/investors, which has come to its knowledge, without taking prior permission of its clients/investors except where such disclosures are required to be made in compliance with any law for the time being in force.

IV. CONFLICT OF INTEREST

4.1 An intermediary shall avoid conflict of interest and make adequate disclosure of his interest and shall put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, shall take reasonable steps to resolve the same in an equitable manner. An intermediary shall make appropriate disclosure to the client/investor of its possible source or potential areas of conflict of duties and interest while acting as an intermediary which would impair its ability to render fair, objective and unbiased services.

4.2 An Intermediary or any of its directors, or employee having the management of the
whole or substantially the whole of affairs of the business, or an associate of the
intermediary shall not, either through its account or their respective accounts or
through their family members, relatives or friends indulge in any insider trading.

V. COMPLIANCE AND CORPORATE GOVERNANCE

5.1 An Intermediary shall ensure that good corporate policies and corporate governance is in place. It shall not engage in fraudulent and manipulative transactions in the securities listed on any stock exchange in India and shall not indulge in any unfair competition (including resorting to unfair means for inducing another intermediaries’clients) which is likely to harm the interests of other intermediaries or investors or is likely to place such other intermediaries in a disadvantageous position while competing for or executing any assignment.

5.2 An Intermediary shall take adequate and necessary steps to ensure that continuity in data and record keeping is maintained and that the data or records are not lost or destroyed. It shall also ensure that for electronic records and data, up-to-date back up is always available with it.

5.3 An Intermediary shall not be a party to or instrumental in or indulge in—
a) creation of false market for securities listed or proposed to be listed on any
stock exchange in India;
b) price rigging or manipulation of prices of securities listed or proposed to be
listed on any stock exchange in India; or
c) passing of unpublished price sensitive information in respect of securities
which are listed or proposed to be listed on any stock exchange to any person
or intermediary, or
d) any activity for distorting market equilibrium or which may affect the smooth
functioning of the market or for personal gain.

5.4 An Intermediary shall co-operate with the Board, or any authority designated by the Board, as and when required and shall not make any untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Board or neglect or fail or refuse to submit to the Board or other agencies with which it is registered, such books, documents, correspondence and papers or any part thereof as may be demanded/requested from time to time.

5.5 An Intermediary shall ensure that any change in registration status /any penal action taken by Board or any material change in financials which may adversely affect the interests of clients/investors is promptly informed to the clients/investors and any business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients/investors or as per the instructions of the Board and the provisions of the relevant regulations.

5.6 An Intermediary shall maintain an appropriate level of knowledge and competency
and abide by the provisions of any act, regulations, circulars and guidelines of the
Central Government, the Reserve Bank of India, the Board, the stock exchange or any
other applicable statutory or self regulatory or other body, as the case may be, and as may be applicable to the Intermediary in respect of the business carried on by such Intermediary. An Intermediary shall also comply with the award of the Ombudsman
passed under the Securities and Exchange Board of India (Ombudsman) Regulations,
2003.

5.7 An Intermediary shall ensure that the Board is promptly informed about any action,legal proceedings, etc., initiated against it in respect of any material breach or noncompliance by it, of any law, rules, regulations, and directions of the Board or of any other regulatory body.

VI. INTERMEDIARY INFRASTRUCTURE REQUIREMENTS

6.1 An Intermediary shall have internal control procedures and financial and operational capabilities which can be reasonably expected to protect its operations, its clients,investors and other registered entities from financial loss arising from theft, fraud, and other dishonest acts, professional misconduct or omissions.

6.2 An Intermediary also registered with the Board in any other capacity/ category shall endeavour to ensure that arms length relationship is maintained in terms of both manpower and infrastructure between the activities carried out as an Intermediary and other permitted activities.

6.3 An Intermediary shall establish and maintain adequate infrastructural facility to be able to discharge its services as such intermediary to the satisfaction of
clients/investors, and the operating procedures and systems of the intermediaries shall be well documented and backed by operations manuals.

6.4 An Intermediary shall create and maintain the records of all documents and data in their in custody in such manner that the tracing of such document or data is facilitated in the event of loss of original records or documents for any reason.