Financial Markets & Management – Class XII

Securities Market has two interdependent and inseparable segments.

1. Primary Market
2. Secondary Market

Primary Market -
• In Primary Market both government and private companies can raise money to meet their requirement of
investment.
• Securities in form of equity or debt, can be issued in domestic/international markets at face value, discount or
premium.
• In this market issue is done either through public issues or private placements. Under The Companies Act,
1956, Public Issue refers to that issue which gets allotment of securities to 50 investors or more. Private
Placement refers to that issue which get allotment to persons not exceeding 49.

Secondary Market –
• Secondary Market refers to a market where securities are traded after being offered to the public in the
primary market or listed on stock exchange.
• Secondary Market is made up of equity, derivatives and the debt markets.
• Secondary Market is operated through two mediums
1. Over the counter (OTC)
2. Exchange Traded Market (ET)
• The over-the-counter market—commonly known as the OTC market—is where securities that aren't listed on
the major exchanges are traded. Stocks and bonds that trade on the OTC market is typically from smaller
companies that don't meet the requirements to be listed on a major exchange.
• OTC (Over-the-Counter) and Exchange refer to two different methods of buying and selling securities. OTC
refers to a transaction conducted directly between two parties, without the supervision of an exchange.
Exchange-traded refers to a transaction executed on a centralized exchange, with the exchange acting as a
middleman.
• (OTC) This type of trading often occurs in the market for derivatives, currencies, and other financial
instruments

Key Indicators of Securities Market

1. Index
• Index is used to give information about change in prices in financial, commodities or any other market.
• Stock market indices are used to capture overall behaviour of equity markets.
• The stock market index is created by selecting a group of stocks that are representative of the whole
market.
• The blue-chip index of NSE is CNX Nifty.

The C in CNX stands for Credit Rating Information Services of India (CRISIL) and NX stands for the National
Stock Exchange. These two agencies have come together to form a joint venture for managing the NSE index.
This joint venture, India Index Products and Services Limited (IISL), owns and operates the CNX Nifty 50.

• The Nifty 50 is a benchmark index that tracks 50 of the largest stocks traded on India's National Stock
Exchange.
• The Nifty 50 is calculated on a real-time daily basis using a free-float market capitalization method.
• The top three sectors represented are financials, information technology, and oil and gas.
• The Nifty 50 and the Bombay Stock Exchange's Sensex are popular benchmark indexes.
• India's stock market became the fourth-largest in the world in January 2024.

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 Financial Markets & Management – Class XII

2. Market Capitalization
• Market Capitalization is defined as value of all listed shares on the country’s exchange.
• It is calculated on a daily basis
• Market Capitalization of a particular company can be calculated as:
Market Capitalisation = Closing Price of Share x Number of Outstanding Shares
For example, if a company has 5 million shares outstanding and its current stock price is $20, it has a market
capitalization of $100 million.
20 x 5 = $100 Million
Similarly, to calculate market capitalisation of all companies listed on an exchange we add (+) the market
capitalisation of all companies traded on Exchange.

3. Market Capitalisation Ratio –

• It is defined as Market Capitalisation of Stocks divided by GDP. It is used to measure size of stock market.

4. Turnover
Turnover for a share is calculated by multiplying the no. of shares traded with price.
Number of Shares x Price

Similarly, to calculate turnover of all companies listed on an exchange we add (+) the market capitalisation of
all companies traded on Exchange.

5. Turnover Ratio
• It is defined as Turnover at Exchange divided by Market Capitalisation at Exchange. It is used as a
measure of liquidity in stock markets.

Products and Participants

Product -
1. Financial Markets facilitate reallocation oof saving from savers to entrepreneurs. This is done by intermediaries
through financial products called “Securities”
2. According to Securities Contract Act, 1956 “securities” include
(i) Shares, bonds, stocks, scrips, stocks or other marketable securities
(ii) Government securities
(iii) Derivatives of Securities
(iv) Units of Collective Investment Scheme
(v) Interest and rights in securities

Participants
1. Stock market participants refer to the various entities involved in buying, and selling financial securities within the
stock market.
For example, an individual investor in India might purchase shares of Infosys through a brokerage platform, thus
participating in the stock market.

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 Financial Markets & Management – Class XII

Wholesale Debt Market Segment –

• This segment started its operations in June 1994.
• This is a formal trading platform for trading wide range of debt securities.
• This platform is a fully automated screen based system, which enables members across the country to trade
simulataneously.
• Trades are settled directly between participants
• Government Securities, Treasury Bills, State-owned companies bonds, floating rate bonds, zero coupon,
index bonds, commercial papers, certificates of deposit, corporate debentures, state government loans are
available on this platform.

Capital Market Segment –

• This segment started its operations in November 1994.
• This platform offers a fully automated screen-based trading system known as NEAT System
• Various types of securities, like equity shares, warrants, debentures etc. are traded on this system.
• Stock markets, bond markets, and currency markets (forex) are all types of capital markets.

Futures and Options Segment –

• This segment started its operations in June 2000.
• This segment provides trading in derivatives instruments like index futures, index options, stock options and
stock futures.

Currency Derivatives Segment (CDS) Segment –

• This segment started its operations on 29th August, 2008.
• It provides currency future trading in US Dollar-Indian Rupee (USD-INR)
• Trading in other currency pairs like EURO- INR, Pound Sterling-INR, Japanese Yen-INR was made available for
trading in February, 2010.

Stock Broker –
Stock brokers serve as intermediaries between markets (e.g., exchanges) and the investing public. Brokers take
customer orders and try to fill them at the best price possible. In return, they earn a fee known as a commission.
Today, many stockbrokers have transitioned to financial advisors or planners as online brokerage platforms allow
users to enter their own orders via the web or mobile app.
According to SEBI Regulations, 1992, a stock broker is member of a stock exchange and requires to hold a
registration certificate from SEBI in order to buy, sell or deal in securities.

SEBI grants certificate in conditions that the person:

• holds the membership of any stock exchange;
• should abide by the rules, regulations and bye-laws of the stock exchange or stock exchanges of which he is a
member;
• should obtain prior permission of SEBI to continue to buy, sell or deal in securities in any stock exchange in
case of any change in the status and constitution;
• should pay the amount of fees for registration in the prescribed manner; and
• should take adequate steps for redress of grievances of the investors within one month of the date of the
receipt of the complaint and keep SEBI informed about the number, nature and other particulars of the
complaints.

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 Financial Markets & Management – Class XII

While considering the application of an entity for the grant of registration as a stock broker, SEBI checks out if the
applicant:
• is eligible to be admitted as a member of a stock exchange;
• has the necessary infrastructure like adequate office space, equipment and manpower to effectively
discharge his activities;
• has any past experience in the business of buying, selling or dealing in securities;
• is subjected to any disciplinary proceedings under the rules, regulations and bye-laws of a stock exchange
with respect to his business as a stock-broker involving either himself or any of his partners, directors or
employees.

Who can become a Member of NSE?

• There are no entry/exit barriers to membership of NSE.
• Anybody can be a member by complying with the eligibility criteria and exit by surrendering membership
without any hidden cost.
• The members are admitted to different segments of the Exchange.

Persons or Institutions desirous of securing admission as members (stock brokers) on the Exchange may apply for
membership on any one of the following segment groups:
(a) Wholesale Debt Market (WDM) Segment
(b) Capital Market (CM) segment
(c) Capital Market (CM) and Wholesale Debt Market (WDM) segment
(d) Capital Market (CM) and Futures & Options (F&O) segment
(e) Capital Market (CM), Futures & Options (F&O) segment and Wholesale Debt Market (WDM) segment
(f) Currency Derivatives (CD) segment with or without the above-mentioned segments.
(g) Clearing Membership of National Securities Clearing Corporation Ltd. (NSCCL) as a Professional Clearing Member
(PCM). Professional Clearing Members do not trade but only clear and settle trades executed by other trading
members (TMs). Professional clearing membership is only applicable for the F&O and Currency Derivatives segments.

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 Financial Markets & Management – Class XII

Types of membership
Trading Member
This member can trade on his own account as well as on his client’s account, but to clearing and settlement of trades
would have been done by Trading-cum Clearing Member or Professional Clearing Member of the Exchange.

Trading Cum Self Clearing Member

This member can trade on his own account as well as on his client’s account and can clear and settle the trades on its
own.

Trading Cum Clearing Member

This member can trade on his own account as well as on his client’s account and can clear and settle the trades on its
own and for the other trading member too.

Professional Clearing Members

This member can’t execute trades for anyone but they clear and settle trades for another member who choose them
to do.

Eligibility Criteria for Membership at NSE

Admission of members in the exchange can be in the terms of
1. Corporate Structure
2. Capital Adequacy
3. Net Worth
4. Interest Free Security Deposit
5. Collateral Security Deposit
6. Track Record
7. Education
8. Experience etc.
This is done only to ensure quality broking services and to build confidence among investors in Exchange.

Corporate Structure
• Securities Markets are volatile (sudden change) and risky.
• So, to ensure that there is minimum risk, they use some methods to reduce risks.
• One such method is called “Dominant Promoter/Shareholder Group”.
• The shareholders holding the majority of shares have a dominant role in affairs of the company. In case of
any default by the broker, the Exchange should be able to identify and take action against the persons who
are behind the company.
• So, during the admission process, the dominant shareholders are called for an interview with Membership
Recommendation Committee (MRC).

Admission Procedure for New Membership

• It is a two-stage process.
o 1. NCFM Examination
o 2. Interview with Membership Recommendation Committee
• Firstly, applicant is required to submit application form to the exchange.
• That application is then forwarded to Membership Recommendation Committee. The MRC conducts
interview of applicants for trading membership.
✓ Corporates – Dominant Shareholder & Designated Directors
✓ Individual – Himself
✓ Partnership – Two designated partners

• The purpose of interview is to acquire information about their capability & commitment to carry on stock
broking activities.
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 Financial Markets & Management – Class XII

• The MRC recommends the name of trading members to Membership Selection Committee (MSC)/Board of
Directors of Exchange.
• After checking all the details, MSC either approves or rejects the application.
• On getting approval from MSC, admission is provided to applicant with submission of relevant fees/deposits
and documents.
• The documents of the member are then forwarded to SEBI for registration.
• After satisfying itself, SEBI grants a Registration Certificate in the name of the applicant.
• The applicant then has to submit the prescribed deposit within the given timeframe given in the offer letter.
• Following examinations are required –
1. CM Segment – Capital Market (Dealers) Module
2. Future & Options Segment – Derivatives Market (Dealers) Module
3. Currency Derivatives Segments – National Institute of Securities Market – I

• After ensuring that all the formalities and requirements with Exchange are complied, The Trading Member is
enabled to trade on the NEAT System.

Surrendering of Trading Membership

• Trading members can apply to surrender their trading membership once admitted to the Exchange.
• Exchange will permit surrender of membership after fulfilling certain conditions:
1. Clearing off all the dues towards Exchange.
2. Notifying all other Trading Members of approval of surrender
3. Issuance of a public notification in a newspaper etc.
• A trading member who wants to surrender its membership of exchange is required to send its request in
writing in the prescribed format.
• And before submission of application, the trading member is required to cover the following aspects in
application for surrender of membership from a trading member,
• Who has been suspended or any disciplinary action taken by Exchange.
• In respect of whom any investigation or action has been started by Exchange.
• Who is falling within the category of “associates” as defined by SEBI
• Who owes dues to the Exchange.
• Against whom claims by investors of value of Rs. 10 lakh or more are pending or any claim for any
amount is pending for a period more than 6 months.

The Exchange is free to accept or reject such applications and if it decides to accept the application, it may
impose additional terms and conditions.

a) After surrendering the membership from exchange, no member can’t be admitted again within the
period of 1 year from the date of approval.
b) This application of surrender of trading membership is done after submission of original SEBI registration
certificates on all segments on which the trading member is registered so that they can be forwarded to
SEBI for cancellation.
c) Trading member should request Exchange to dismantle and recover all the leased lines/VSAT and all
other equipment given to them.
d) A letter is also sent to SEBI to check pending dues, if any, from member.
e) If there is any claim or due of investor towards member, the total amount payable by the member should
be adjusted by trading member’s deposit available with the exchange. In case the amount payable
exceeds the deposits, the trading member is required to bring the amount within 21 days of information.
f) Upon failure of the amount payable within 21 days, the case shall be referred to relevant authorities for
action.

Suspension and Expulsion of Membership

The exchange can suspend any membership rights of a trading member if it is found guilty of contravention,
non-compliance, disobedience of any rule or regulation of Exchange.

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 Financial Markets & Management – Class XII

Following is some ground basis on which there can be suspension of membership.

i) Misconduct: A trading member can be found guilty of misconduct for the following.
a. Fraud or if he is convicted of a criminal offence.
b. Violation of provision of any activity, business and operations of the Exchange.
c. Improper conduct
d. Failure to submit to or abide by arbitration.
e. Failure to give information sought by Exchange or any committee.
f. Failure to submit audited accounts.
g. Failure to compare or submit accounts with defaulter.
h. Make vexatious, malicious or frivolous complaints.
i. Failure to pay subscription fee, arbitration charges etc.

ii) Un-business-like conduct: A trading member can be found guilty of un-business-like conduct for the
following.
a. Transaction or business dealings in fictitious names.
b. Circulation of rumours.
c. Any unfair dealing in securities which doesn’t reflect the true market values.
d. Market manipulation and rigging.
e. If a trading member accepts less than a full money payment in settlement of a debt due by another
trading member arising out of a transaction in securities.
f. Dishonoured cheque
g. Failure to carry out transactions with constituents

iii) Unprofessional conduct: A trading member can be found guilty of unprofessional conduct for the
following.
a. Business in securities in which dealings not permitted.
b. Business for defaulting constituent who failed to carry out engagements relating to securities and is
in default to another trading member.
c. Transacts in business with an insolvent
d. Carrying out business during his suspension period.
e. Business with suspended, expelled and defaulter trading members.

iv) Trading Member’s responsibility for partners, agents and employees:

A trading member is fully responsible for the acts of its partners, authorized officials, representatives
and employees. If any act against the rules is done by them then the trading member is liable to the
same penalty to same extent has that act been done by itself.

v) Suspension on failure to provide margin deposit or capital adequacy requirements:

The exchange can suspend the business of a trading member when it fails to provide the margin
deposit as per rules of Exchange.
The trading member shall remain suspended until he furnishes the necessary margin deposit.

Suspension of Business:
a) Prejudicial business: When the relevant authority finds that trading member is doing business by making
purchases or sales of securities for the purpose of upsetting equilibrium of the market.

b) Unwarrantable Business: When the relevant authority finds that trading member engages in
unwarrantable business.

c) Unsatisfactory financial condition: When the relevant authority finds that trading member is in a bad
financial condition and it cannot be permitted to do business safely to Exchange.

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 Financial Markets & Management – Class XII

Consequences of Suspension and Expulsion

The suspension of a trading member has the following consequences:

(a) Suspension of membership rights: The suspended trading member shall during the terms of its suspension be
deprived of and excluded from all the rights and privileges of membership. It shall also include the right to attend or
vote at any meeting of the general body of trading members of the relevant segment.
(b) Rights of creditors unimpaired: The suspension should not affect the rights of the trading members who are
creditors of the suspended trading member.
(c) Fulfilment of contracts: The suspended trading members are bound to fulfil contracts outstanding at the time of
its suspension.
(d) Further business prohibited: The suspended trading member should not during the terms of its suspension make
any trade or transact any business with or through a trading member. With the permission of the relevant authority,
however it can close the transactions outstanding at the time of its suspension.
(e) Trading members not to deal with suspended/expelled trading member: No trading member is allowed to
transact in business with a suspended trading member during the terms of its suspension except with the prior
permission of the relevant authority.
(f) Trading membership rights forfeited: The expelled trading member shall forfeit to the Exchange its right
of trading membership and all rights and privileges as a trading member of the Exchange including any right to the
use of or any claim upon or any interest in any property or funds of the Exchange but any liability of any such trading
member to the Exchange or to any trading member of the Exchange shall continue and remain unaffected by its
expulsion.
(g) Office vacated: The expulsion would create a vacancy in any office or position held by the expelled trading
member.
(h) Consequences of declaration of defaulter to follow: The provisions of pertaining to default and Protection Fund
mentioned in the byelaws become applicable to the trading member expelled from the Exchange as if such trading
member has been declared a defaulter.

Authorized Persons –
• Trading members of Exchange can appoint persons in the Capital Market, Future & Options and Currency
Derivative Segments as “Authorized Persons”.
• Authorised Person is "Any person- individual, partnership firm, Limited Liability Partnership (LLP) or body
corporate who is appointed by a stock broker and who provides access to trading platform of a stock
exchange as an agent of the stock broker."
• Authorised Person can receive remuneration - fees, charges, commission, salary, etc. for his services only
from the stock broker and shall not charge any amount from the clients.
• Authorized person is not allowed to have any trading relationship with the client of trading member.
• The trading member should issue or deliver contact notes as well securities directly to the client without
using authorized person as intermediary.

Sub Broker
• Sub-broker is an important intermediary between stock broker and client in capital market segment.
• The trading members of the Exchange may appoint sub-brokers to act as agents of the concerned trading
member for assisting the investors in buying, selling or dealing in securities.
• The sub-brokers are affiliated to the trading members and are required to be registered with SEBI.
• A sub-broker is allowed to be associated with only one trading member of the Exchange.

Eligibility
A sub-broker may be an individual, a partnership firm or a corporate. In case of corporate or partnership firm,
the directors or partners and in the case of an individual sub-broker applicant should comply with the
following requirements:
(a) They should not be less than 21 years of age;
(b) They should not have been convicted of any offence involving fraud or dishonesty;

By Mohit Tarkar
 Financial Markets & Management – Class XII
(c) They should have either passed 12th standard equivalent examination from an institution recognized by
the Government or 10th standard with 2 years of work experience in securities market.
(d) They should not have been rejected by SEBI

Registration Process
• No sub-broker is allowed to buy, sell or deal in securities, unless he or she holds a certificate of registration
granted by SEBI.
• Sub-brokers are required to obtain certificate of registration from SEBI in accordance with SEBI and
Regulations, 1992, without which they are not permitted to buy, sell or deal in securities.
• SEBI may grant a certificate to a sub-broker, subject to the conditions that:
(a) he should pay the fees in the prescribed manner;
(b) he should take adequate steps for redress of grievances of the investors within one month of the
date of the receipt of the complaint and keep SEBI informed about the number, nature and other
particulars of the complaints received;
(c) in case of any change in the status and constitution, the sub-broker should obtain prior
permission of SEBI to continue to buy, sell or deal in securities in any stock exchange; and
(d) He should be authorised in writing, by a stock-broker being a member of a stock exchange for
affiliating himself in buying, selling or dealing in securities.
• The applicant sub-broker should submit the required documents to the stock exchange with the
recommendation of a trading member.
• After verifying the documents, the stock exchange may forward the documents of the applicant sub-broker
to SEBI for registration.
• A sub-broker can trade after getting himself registered with SEBI.
• The Exchange may not forward the application of the sub-broker to SEBI for registration if the applicant dealt
with fake, forged, stolen, counterfeit etc. shares and securities in the market.

Process of Cancelling Registration -

In case a trading member/sub-broker intend to cancel the registration as a sub-broker, the sub-broker is required
to the following documents:
1. Request letter of the Trading member for surrender of sub-broker registration (on the letter head of TM);
2. Undertaking from the Trading Member (on the letter head of TM).
3. Copy of public notification intimating the investors/general public of the surrender of registration of sub broker
and not to deal with such sub broker, issued in the local newspaper with wide circulation where the subroker’s
place of work is situated.
4. Registration certificate of the Sub-Broker in original.
5.In case the original certificate is lost, FIR copy along with the affidavit must be submitted to SEBI in this regard
by the concerned Trading Member and the Sub-Broker separately on stamp paper of Rs.100/- or of appropriate
value as defined in the stamp act, duly notarized.
6. An undertaking from the member that SEBI has not taken/ initiated any action like enquiry proceedings /
cancellation / suspension of registration/debarred / administrative warning or prohibited from dealing in
securities market / imposed penalty after enquiry/ Adjudication/prosecution etc. against the sub- broker
7. PAN card of the sub-broker truly certified by the trading member.

How do you describe the Client-Broker relationship?

• The trading member is required to enter into an agreement in the specified format provided by NSE with
the client before accepting orders on client’s behalf.
• The agreement is executed on non-judicial stamp paper of duly signed by both the parties on all the
pages.
• Copy of the agreement has to be kept with the TM permanently.
• The agreement should contain all the clauses mentioned in Uniform Documentary Requirement (UDR).
Stock broker may incorporate any additional clauses in these documents provided
• There should be segregation of mandatory documents/clauses pertaining to client registration in
separate docket in case of internet trading, in addition to clauses mentioned in UDR, the client has to
mention clauses pertaining to internet trading.
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 Financial Markets & Management – Class XII

• Under "Know Your Client (KYC)" requirements, the TM should seek information such as: investor risk
profile, financial profile, investor identification details, address details, income, PAN number,
employment, age, investments experience, trading preference.
• The TM has to obtain recent passport size photograph photographs of clients.
• The TM should also take proof of identification and address of the client. In-person verification should be
done by the trading member's staff, name & signature of the person doing the in-person verification
together with the stamp of trading member should be there on the KYC form.

Unique Client Code:

• Unique Client Code is an identification number for clients which the brokers have to mandatorily
maintain.
• A broker needs to maintain privacy in record keeping for its clients and thus each client is issued a
separate alphanumeric/numeric number called Unique Client Code (UCC).

Margin from the client:

• The collateral that an investor has to deposit with their broker or exchange to cover the credit risk the holder poses
for the broker or the exchange.
• Members should have a system of risk management to protect themselves from client default.
• Margins are an important element of such a system.
• It should be well documented and be made accessible to the clients and the stock exchanges. In capital market
segment, however, amount of these margins, the form and the mode of collection are left to the discretion of the
members.
• The margin so collected is kept separately in the client bank account/client beneficiary account.
• In case of default, they are utilized for making payment to the clearing corporation for settlement with respect to
that client.

Execution of Orders:
• When a client wants to place or modify his order, the trading member may obtain order placement/modification
details in writing from the client.
• The trading member should also provide the order confirmation/modification slip if so asked by the client.
• Similarly, if the client wants to cancel any of his order, the trading member may obtain order cancellation details in
writing from the client.
• But all the above clauses are only applicable when order is entered into system and not has been traded, if order
have been executed in meantime, then the requests for modification or cancellation should get rejected.

Contact Note
• The contract note is the legal record of any trade made by a stockbroker on a stock exchange.
• It confirms the trade conducted on a specific day, on the client's behalf, performed on a stock exchange (BSE / NSE).
• You receive this document from your broker stating the details of shares that were bought or sold through him. The
document may also be available in electronic format with a digital signature.

Every trading member should make payments to his clients or deliver securities purchased within one
working day of payout.

What is brokerage?

• The maximum brokerage chargeable by TM in respect of trade on is fixed at 2.5% of the contact price,
exclusive of statutory levies.
• This maximum brokerage is inclusive of sub-brokerage.
• The brokerage should be indicated separately from the price in the contact note.
• The Trading Member may not share brokerage with a person who is a trading member or in employment
of another trading member.

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 Financial Markets & Management – Class XII

For example: If a client has sold 10000 shares of a company @ Rs. 50, what is the maximum brokerage that the client
can be charged?

In this case, the maximum brokerage = Brokerage rate*value of the transaction

2.5%* (10,000 shares * Rs. 50) = Rs. 12,500

Why is a separate bank account needed for Clients and Brokers?

• The TM should maintain separate bank accounts for client's funds and own funds.
• It is compulsory for all TMs to keep the money of the clients in a separate account and their own money in a
separate account.
• Funds should be transferred from the client account to the clearing account for the purpose of funds pay-in
obligations on behalf of the clients and vice-versa in case of funds pay-out.
• Any payment for transaction of trading member itself is not allowed to be made from the client's account.

What is Segregation of Demat (Beneficiary) Accounts?

• The trading members should keep the dematerialised securities of clients in a separate beneficiary account
distinct from the beneficiary account maintained for holding their own dematerialised securities.
• No delivery towards the own transactions of the trading members is allowed to be made from the account
meant for clients.
• For this purpose, every trading member is required to open a beneficiary account in the name of the trading
member exclusively for the securities of the clients (to be referred to as "constituents' beneficiary account").
• A trading member may keep one consolidated clients' beneficiary account for all its clients or different
accounts for each of its clients as it may deem fit.

Investor Service Cell

• Investor complaints received against the trading members / companies in respect of claims/ disputes for
transactions executed on the Exchange are handled by the Investor Service Cell (ISC).
• The complaints are forwarded to the trading members for resolution and seeking clarifications.
• The ISC follows-up with the trading members and makes efforts to resolve the complaint as soon as possible
In certain cases, on account of conflicting claims made by the investor and the trading member, when it is
not possible to administratively resolve the complaint, investors are advised to take recourse to the
arbitration mechanism prescribed by the Exchange.
• Arbitration, which is a quasi-judicial process, is an alternate dispute resolution mechanism prescribed under
the Arbitration and Conciliation Act, 1996.

Code of Advertising

• Trading Members of the Exchange while issuing advertisements in the media have to comply with the Code
of Advertisement prescribed by the Exchange.
• A copy of an advertisement has to be submitted to the Exchange to get a prior approval before its issue in
publication/media.
• The trading members may apply for approval of advertisement as per the application format. Trading
Members not complying with the Code of Advertisement may have to face disciplinary proceedings.
• The Code of Advertisement is as follows:
o Advertisement shall include all forms of communications
o Forms of communications shall include, form of document, pamphlets, circulars, brochures, notice or
any research reports or any other literature or information, material published, or designed for use in
a newspaper, magazine, SMS or other periodical, radio, television, telephone or tape recording, video

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 Financial Markets & Management – Class XII
o
o tape display, signs or bill boards, motion pictures, telephone directories (other than routine listings)
or other public media including websites or emails, whether in print or audio visual form or used in
workshop/seminar or public speaking or in any other manner.
• Advetisement shall contain:
o Stock broker ID and Logo
o Name of stock broker, registered office address, SEBI Registration No.
o Information in advertisement should be accurate, true, fair clear and complete.
o Link of official website has to provide when mode of advertisement in SMS/Message etc.
• Advertisement shall not contain:
o Prohibit superlative terms, such as best, No.1, one of the best etc. unless such terms is provided by
an entity.
o Avoid promise or guarantee of assured return to general investors.
o Statements that can be misunderstood or which are false and misleading.
o Exploitive statements designed to exploit of the investors due to lack of knowledge.

• Compliance and other requirements

o Prior approval for the advertisement/material to be obtained from the Stock Exchange before issue.
o No celebrities shall form part of the advertisement/material.
o Statistical information, charts, graphs, etc. when used should be supported by their source, if any
o In the event of suspension of any Stock Broker by the Exchange, the Stock Broker so suspended shall
not issue any advertisement either singly or jointly with any other Stock Broker, during the period of
suspension.
o In the event of any proceeding/action initiated against a Stock Broker by a regulatory body other
than the Exchange, the Exchange reserves the right to direct the Stock Broker to refrain from issuing
any advertisement for such a period as it may deem fit.
o The Stock Broker shall not involve/engage in games/leagues/schemes/competitions etc. which may
involve distribution of prize monies/medals/gifts, etc.
o These norms shall be applicable to any other investment/consultancy agencies associated with the
Stock Broker concerned and issuing advertisement wherein the Stock Broker has been named in the
advertisement.
o Copy of the advertisement shall be submitted to the Exchange at least seven days in advance before
its issue.

By Mohit Tarkar