COMPLIANCE CHECKLIST FOR SUB-BROKERS
Please note that in case of any inconsistency between the Compliance Check List as it appears below and Rules, Bye Laws, Regulations, Circulars and Notices of the Exchange / Clearing Corporation / other regulatory authorities, the latter shall prevail.
Books of accounts
• Whether sub-broker maintains the following books of accounts, records and documents relating to its business for a period of five years as per Regulation 17 (1) of SEBI ( Stock Brokers & Sub-brokers ) Regulations, 1992.
1. Register of transactions (to be separately maintained for own and client transactions) providing for the following information.
a) name of security
b) value of security
c) rates both gross and net of brokerage
d) name of constituent
2. Clients' ledger
3. General Ledger
4. Journals
5. Cash book
6. Bank pass book
7. Documents register (client-wise, security-wise), providing for, inter alia, the following details
a. date of receipt / delivery
b. quantity received / delivered
c. party from / to whom received / delivered
d. purpose of receipt / delivery.
Every sub-broker shall also maintain a separate register or ledger in respect of its own securities
8. Counterfoils or duplicates or copies of sale / purchase notes issued to clients
9. Margin deposit book
10. Register of accounts of affiliated broker
11. Agreement with the affiliated trading member specifying the scope of authority and responsibilities of
the stock broker and the sub-broker
• Whether sub-broker maintains the following records also.
1. Contract notes received from affiliated trading member
2. Statements received from affiliated trading member
3. Records in respect of commission and brokerage collected from clients and brokerage paid to the affiliated trading member.
4. Sub-broker client agreement executed with each of the clients.
5. Client registration form taken from each of the clients
6. Register of complaints
• In case the sub-broker is registered with brokers of different stock exchanges, whether books of accounts are so maintained as to clearly provide the identity of the transactions with exchange-wise details
Banking operations
• Whether sub-broker keeps moneys of clients in a separate bank account (clients' bank account)
• Whether the clients' bank account is used for any transaction other than clients' dealings in securities
Dealings with clients
• Whether sub-broker makes full payment of funds and delivers securities to their clients within specified time.
• Whether sub-broker keeps such books of accounts to distinguish moneys received / paid on account of each of their clients and moneys received / paid on their own account.
• Whether sub-broker has misused clients' funds for own purpose or has transferred funds due to a
client to the account of another client
• Whether sub-broker keeps records and books of accounts, as may be necessary, to distinguish client's securities from sub-broker 's own securities
• Whether sub-broker has transferred securities due to a client to the beneficiary account of self / another client
• Whether sub-broker maintains unique client code for all the clients
• Whether sub-broker has sent half-yearly statement of accounts of funds / securities to all the clients in accordance with Regulation 6.1.5 (d) of Part A of the Capital Market Regulations of the Exchange.
Dealings with intermediaries
• Whether the sub-broker has dealt with any other trading member / sub-broker / unregistered intermediary on behalf of its clients.
Purchase / Sale Notes
• Whether sub-broker issues purchase / sale notes to the clients for trades executed in prescribed format with all relevant details filled in.
• Whether the purchase / sale notes are signed by sub-broker or its authorized signatory
• Whether sub-broker ensures that brokerage charged is indicated separately in the purchase / sale notes and its commission is always less than 1.5% of the purchase / sale price exclusive of statutory levies.
• Whether sub-broker ensures that there are no differences between the trade rates as per the Neat system and the rates charged to the clients.
• Whether sub-broker has transferred trades executed for one client to another client.
• Whether sub-broker has executed any off-market transactions
Margin requirements
• Whether sub-broker buys / sells securities on behalf of the clients only on receipt of up-front margin as prescribed by NSCCL from time to time.
• Whether sub-broker collects daily margin from its clients as prescribed by NSCCL from time to time.
Office Management
• Whether terminals given to sub-brokers arc operated by any persons other than approved users
• Whether trading terminals are located only in the registered sub-broker's office or has the sub-broker given / extended terminals to clients / unregistered intermediaries.
• Whether sub-broker has displayed notice boards / plates at prominently visible, painted / printed in a permanent manner in a font and colour which enables easy reading of the subject matter
• Whether sub-broker has displayed at his office a copy of the registration certificate issued by SEBI to the sub-broker.
Miscellaneous
• Whether sub-broker is involved in any fund based activities
• Whether sub-broker has advertised / represented himself as sub-broker of the Exchange . ( He may
represent himself only as a sub-broker of the respective trading member)31
• Whether sub-broker reconciles his accounts with the main broker as at the end of each quarter with respect to all settlements where payouts have been declared during the quarter.