SECURITIES MARKET QUIZ

REFERRAL GUIDEBOOK

COMPILED BY

BSE-INVESTORS’ PROTECTION FUND

FOR

QUIZ ON SECURITIES MARKET AWARENESS

14.10.2024 TO 20.10.2024

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 PAGE
S.No. INDEX NUMBER

1. Title 1-1

2. Index 2-2

2. Regulatory framework of Securities Market 3-3

3. Securities and Securities Market 4-5

4. Primary Market 6-8

5. Secondary Market 9-12

7. Power of Attorney 13-14

7. Margin , Pledge & Re-pledge 15-16

8. Trading & Settlement Cycle 17-17

9. Contract note, SMS Email alerts, Running account 18-20

etc.

10. Mutual Fund 21-27

11. Grievance/claim settlement mechanisms for 28-30

investors

12. Investor Protection Fund 31-31

13. Regulatory changes impacting investors taken place 32-38

in last 3 years.

13. Do’s & Dont’s to be observed by investors 39-40

14. Rights and Obligations on part of investors 41-41

15. Abbreviations 42-42

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Disclaimer - This is only a guide to provide basic information that may help to answer the questions
posed in the Quiz and neither holds out nor asserts that every question of the quiz is covered herein.
Information is provided as a guide or learning only, and all errors and omissions are accepted. This
booklet is compiled by BSE Investors Protection Fund on a best-efforts basis.

Regulatory Framework for Securities Market.

The regulation of buying, selling and dealing in securities such as Equity shares of a
company, units of mutual funds, derivatives, etc. and stock exchanges comes within
the purview of Securities and Exchange Board of India (SEBI) in terms of SEBI Act,
1992 and various SEBI regulations/ circulars/ guidelines/ directives.

SEBI was established in the year 1992 in accordance with the provisions of the SEBI
Act., an Act of Parliament. The mandate of SEBI is to protect the interests of investors
in securities and to promote the development of, and to regulate the securities market
and for matters connected therewith or incidental thereto. Earlier, the Commodity
Derivatives market was regulated by Forward Market Commission (FMC), however
since September 2015 the Commodity Derivatives Market is also being regulated by
SEBI due to merging of FMC with SEBI.

At present, the four main legislations governing “the securities market” are:

a) SEBI Act, 1992, which empowers SEBI with statutory powers for (i) protecting
the interests of investors in securities, (ii) promoting development of the
securities market, and (iii) regulating the securities market.

b) Companies Act, 2013, which provides regulations for issuance, allotment and
transfer of securities, and related matters in public issues of securities;

c) Securities Contracts (Regulation) Act, 1956, which provides for recognition

and regulation of transactions in securities in a Stock Exchange.

d) Depositories Act, 1996, which provides for electronic maintenance and

transfer of ownership of dematerialized securities.

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Securities and Securities Market

About BSE - BSE Limited, formerly known as the Bombay Stock Exchange Ltd., is
located at Dalal Street, Mumbai and is one of the prominent Market Infrastructure
Intermediaries of the Securities Market that offers nationwide trading in a plethora of
capital market products. Established in 1875, it is Asia's oldest stock exchange, having
completed 145 years of its glorious existence in June 2020. BSE is one of the world's
fastest stock exchanges and presently offers various financial products on its trading
platforms such as Equity, Equity Derivatives, Currency Derivatives, Commodity
Derivatives, BSE Start-up, BSE-SME, BSE-Star MF, BSE EBIX(insurance), etc. for the
investors in Securities market. BSE SENSEX which indicate the price movement in the
shares of 30 scrips, is the considered as the important parameter of the economic
barometer, worldwide.

Securities are financial instruments issued by companies, institutions, etc. and hold
monetary value. Securities are broadly categorized into:

❑ Equity Shares or commonly called as shares, represent a share of

ownership in a company. An investor who invests in shares of a company is
called a shareholder, and is entitled to receive all corporate benefits, like
dividends, out of the profits of the company. The investor is also entitled to
receive the right to cast a vote about the decision-making process of the
company at General meeting of the company.

❑ Preference Shares, more commonly referred to as preferred stock,

are shares of a company's stock with dividends that are paid out to
shareholders before common stock dividends are issued. If the company
enters bankruptcy, preferred stockholders are entitled to be paid from
company assets before common stockholders. As per SEBI guidelines,
companies can allot shares on preferential basis to maximum 200 persons.

❑ Debt Securities represent money that is borrowed by the company /

institution from an investor and must be repaid to the investor. Debt securities
are also called as debentures or bonds. An investor who invests in debt
securities is entitled to receive payment of interest and repayment of principal
(i.e. the money invested). Debt Securities are issued for a fixed term, at the

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 end of which the securities can be redeemed by the issuer of securities. Debt
securities can be secured (backed by collateral) or unsecured.

❑ Derivatives are financial instruments whose value depends upon the value
of another asset (referred to as ‘underlying’) such as shares, debt securities,
currencies, and commodities. Exchange traded derivatives presently allowed
are futures and options on shares, interest rates, commodities, and
currencies.

❑ Mutual Funds are type of financial instruments made up of a pool of

money collected from many investors. These funds/ mutual funds, then,
invest in securities such as shares, bonds, money market instruments and
other assets.

Securities Market is a place where companies can raise funds by issuing securities
such as equity shares, debt securities, etc. to the investors (public) and also is a
place where investors can buy or sell various securities (shares, bonds, etc.). Once
the shares (or securities) are issued to the public, the company is required to list the
shares (or securities) on the recognized stock exchanges. Securities Market is a
part of the Capital Market.

The primary function of the securities market is capital raising, to enable allocation
of savings from investors to those who need it. This is done when investors make
investments in securities of companies / entities that need funds. The investors are
entitled to get benefits like interest, dividend, capital appreciation, bonus, etc. Such
investments contribute to the economic development of the country.

Securities market has broadly two interdependent and inseparable segments i.e.
Primary Market and Secondary Market

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Primary Market:

This market is also called as the new issues market where company / institutions
raise funds (capital) from public by issuing new securities (shares, debentures,
bonds, etc.).

There are two major types of issuers of securities:

❑ Corporate Entities (companies) which mainly issue equity instruments

(shares) and debt instruments (bonds, debentures, etc.)

❑ Government (Central as well as State) which issues debt securities (dated

securities and treasury bills).

The types of issues made in Primary Market are:

❑ Public Issue: Securities are issued to all the people and anyone can
subscribe to them. Public issue of equity shares can be categorized as
follows:

❑ Initial Public Offer (IPO) where first public offer of shares is made by a
company. An IPO can be in the following forms:

❑ Fresh Issue of shares where new shares are issued by the company to the
public investors. In this kind of an issue, the funds of investors will go to the
company to be used for the purpose for which the issue is made.

❑ Offer for Sale where existing shareholders such as promoters or financial

institutions or any other person offer their holding to the public. In this kind of
an issue, the funds of the investors will go to such sellers of the shares and
not to the company. Basically, shares are exchanged between sellers and
buyers and no fresh shares are issued by the company.

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 ❑ Follow on Public Offer (FPO): It is made by an issuer/ company that has
already made an IPO in the past and is making a fresh issue of securities to
the public.

❑ Preferential Issue: In this mode of issue, securities are issued to an identified

set of investors like promoters, strategic investors, employees, etc.

❑ Rights Issue: When the Company gives its existing shareholders the right to
subscribe to newly issued shares, in proportion to their existing shareholding,
it is called as a rights issue.

❑ Right Entitlement: Right Entitlement represents the number of securities that

a shareholder is entitled to in a Rights Issue. Right Entitlement is typically in
proportion to the number of equity shares held by the eligible shareholder on
the Record Date; This is disclosed to the Stock Exchanges and is provided
on the LOF/ Application Form

❑ Bonus Issue: When the existing shareholders of a company are issued

additional free shares, in proportion to their existing shareholding and without
any additional cost, then it is called a bonus issue.

To raise funds from public, companies need to file an offer document with SEBI
which is called prospectus. The prospectus contains details like;

❑ history of the company,

❑ details of the promoters,
❑ business model,
❑ financial history of the company,
❑ risks in that business,
❑ purpose for which the money is being raised,
❑ terms of issue and
❑ Such other information that will help an investor to make an informed decision
on investment in that company.

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 Listing

Initial Public Offer (IPO) - A process by which companies offer its shares to the
public to raise capital and thereby gets listed for trading on stock exchanges. Offer
price is decided by company along with the Merchant Bankers appointed by them.
The minimum issue size shall be Rs. 10 crore. The minimum market capitalization
of the Company shall be Rs 25 Cr (market capitalization is arrived by multiplying the
post-issue paid-up number of equity shares with the price at which shares are
allotted to investors in IPO).

Benefits of listing:

❑ Capital mobilization for company.

❑ Exit route to the existing investors.
❑ Ready marketability of Security.
❑ Ability to raise further capital.
❑ Supervision and Control of Trading in Securities.
❑ Fair Price discovery for the shares.
❑ Timely disclosure of corporate information for investors.
❑ Collateral Value for shares.
❑ Company comes under well-regulated SEBI mechanism.
❑ Accountability towards shareholders.

Equity shares issued pursuant to Initial Public Offer. IPO are listed on a recognized
Stock Exchange within T + 3 (where T day stands for last day of the issue) working
days from the date of the closure of the issue. Post listing of the shares on the
Exchange, further trading of the shares takes place.

The shares allotted by the company are credited in the Demat account of the investor
which is maintained with a Depository through a SEBI registered Depository
Participant (DP). An investor can sell the shares on the stock exchanges through a
SEBI registered Stockbroker and receive the money.

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Secondary Market:

Once the securities are issued in the primary market, they get listed on the Stock
Exchanges and the investors can buy or sell these listed securities through those
Stock Exchanges. Trading at Stock Exchanges falls into broadly two main segments
- Cash Market and the Derivatives Market.

Basics of Investing

Before you start investing in securities market, you need to understand and identify
your investment goals, objectives and risk appetite (the extent up to which you are
willing to take risk). Every investment decision should reflect your needs and
requirements and should be as per your desired preferences. For example, whether
you are willing to invest in safe products which give steady returns or if you want to
take slightly higher risk and invest in products which may give you higher returns.
Every investment comes with the risk of change in the inherent value of that
investment. For example, investment in shares of automobile industry will attract the
risk attached with the automobile industry (sales may go up or down or one brand of
cars may be sold more than another brand, etc.). Once you have decided your goals
and identified your risk appetite, please decide the amount you want to invest and
the time period over which you want to invest. The ability to take risk differs from
investor to investor and could be dependent on the goals as well as the age of the
investor.

Dematerialisation :

Investors can dematerialize their physical shares by sending the same to DP for
dematerialization. DP has to either dematerialize the shares or send them back under
objection, within 30 days from receipt of the demat request form from the investors.
The shares which are dematerialized can be converted back into physical form, which
is called Rematerialization. However, it may be noted that as per SEBI guidelines,
physical shares are not allowed to be traded w.e.f. 01.04.2019. It means you can sell
only those shares on Stock Exchanges which are converted into Demat form.

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Depositories: Depositories are institutions that hold securities of investors in
dematerialized / electronic form and provide demat services to the investors through
their Depository Participants (DP). There are two depositories in our country namely,
National Securities Depository Limited (NSDL) and Central Securities Depository
Services (India) Limited (CDSL). Under each Depository, there are registered
Depository Participants (DPs) (like branches of banks), which provide various
services to the investors like opening and maintaining of a Demat account,
dematerialization of shares, etc. Depositories provides various facilities to the
investors to check their Demat statement on Depository website.

Dividend: Dividend means distribution of certain portion of its profits by the

Company to its shareholders. Dividend paid by the companies is taxable w.e.f.
01.04.2020 in the hands of shareholders. The issuer has to deduct TDS if the
dividend amount exceeds Rs. 5000/- to any person during F.Y.

Record Date: This date is proposed by the Board of Directors of a listed company to
determine the names of the shareholders who are eligible for any corporate benefits
including dividend, that are announced by the company. All shareholders whose
names appear in the list of shareholders at the end of day of the Record Date will be
eligible to receive the corporate benefits.

Measures to protect interest of investors doing trades on Exchanges:

Surveillance measures

❑ Continuous monitoring of price movement in scrips

❑ Circuit filters – wherein a limit on maximum and minimum price movement of

a scrip on a day is fixed by the Exchanges in coordination with each other.

❑ Position (risk) monitoring of members

❑ Stage wise Additional Surveillance Measures (ASM)

❑ Rumor verification

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Collateral Deposits from members

❑ Members to deposit collateral deposits before putting trades (called ‘upfront’

margins)

❑ Real time blocking of margins from collateral deposits of members

❑ Risk Reduction Mode applied on breaching 90% of deposits

❑ Facility to fix trading limits for every client separately by Trading Members

❑ T+1 trading cycle i.e. settlement of trades is done in next 1 working day

❑ Auction mechanism to protect against default on the part of selling member

to deliver shares.

❑ Trade Confirmation facility on BSEIndia website for 5 days.

❑ Counterparty guarantee by Clearing Corporations (CC) for settlement of

every trade.

❑ Settlement Guarantee Fund (SGF) established at every CC for each

Segment separately.

❑ Periodical monitoring of sufficiency of fund as per SEBI parameters.

❑ No settlement default has occurred at BSE in the past 18 years

Tax Provisions for investments in securities market:

Prior to 01.04.2019 all the gains made in securities market were exempted from
income tax. However, now the profit made on sale of securities is taxable as per
following.

Short Term Capital Gain (STCG) - Any securities sold within 12 months of purchase
of the same and profit made thereon is considered as STCG and is taxed @20% p.a.

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Long Term Capital Gain (LTCG) – Any securities sold after 12 months of purchase
and profit made thereon over and above Rs. 1.50 lakh, is considered as LTCG and
is taxable @12.50% p.a.

Securities Transaction Tax (STT) – This tax is collected by the Central Government
on every transaction which takes place in securities market.
How to Trade
In order to invest in equity shares, an investor needs to open three accounts namely:

a) Bank account.

b) Trading account or broking account with a SEBI registered stock broker of a

recognized Stock Exchange. This account is used to buy and sell securities on the
Stock Exchanges. To open a trading account, you have to fill account opening form
and submit the signed Know Your Client (KYC) documents.

c) Demat account provides the facility of holding of securities in dematerialized /

electronic form. The demat account can be opened with depository participant
(DP) of any of the Depositories. Nomination is a facility that enables an
individual investor to nominate a person, who can claim the securities held by
him/ her in their demat accounts or the redemption proceeds thereof (in respect
of mutual fund units) in the event of death of the investor. It is recommended
that all investors should utilize this nomination facility to safeguard their
investments, in case of any unfortunate event

Know Your Client (KYC) Form: To provide basic information of the new investor.
Presently KYV can be provided in two modes:

• Physical KYC

• E-KYC

Delivery Instruction Slip (DIS) Booklet:

It is like a cheque book for a demat account, issued by DP when you open a
demat account. Used for transferring shares from one account to another by
submitting duly filled hard copy of DIS to Branch of Stock broker and fulfilling all
trade obligations.

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POWER OF ATTORNEY (POA)

Power of Attorney is a document with high importance as it is capable of giving your

rights and access over your accounts and money to somebody else. In securities
market, a client may execute the power of attorney (PoA) in favour of the stock broker/
stock broker and depository participant to authorize them to operate his demat and
bank account to facilitate the delivery of shares and pay-in/ pay-out of funds. A specific
Power of Attorney (PoA), as per the guidelines of SEBI, may be executed by the client
in favour of the stock broker / depository participant.

3-in-1 account- PoA :

➢ Authorization to debit shares from Demat account
➢ Sell Trades : Authorization to debit shares from Demat account
➢ Buy Trade : Authorization to debit linked Bank account (when investor adds
funds to his trading account i.e for payment of margin / payout of funds of
purchase of shares)
A valid PoA must be 'franked' (i.e stamped). Hence, investor must send the hard copy
of the filled PoA form to the Stock Broker. Alternatively, investor may give his consent
a temporary PoA at time of login to his trading account which is valid only during that
login session.
Alternative Mode:
➢ Transfer funds to Designated Account of Stock broker via Cheque / Online
Fund transfer
➢ Place delivery sell instructions by using the physical DIS slip / TPIN E-DIS
(CDSL) / SPEED-e (NSDL)
As per SEBI guidelines, it is not mandatory to sign and issue a power of attorney.
Signing of Power of Attorney is purely optional and voluntary – if you find that signing
power of attorney is useful for you, you may sign it. You can also revoke the Power of
Attorney at any point of time.

Important Points about POA:

i. PoA is optional and should not be insisted upon by the stock broker / stock broker
depository participant for opening of the client account.

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 ii. For transfer of securities held in the beneficial owner accounts of the client
towards Stock Exchange related deliveries / settlement obligations arising out of
trades executed by clients on the Stock Exchange through the same stock broker.
iii. For pledging / re-pledging of securities in favour of trading member (TM) / clearing
member (CM) for the purpose of meeting margin requirements of the clients in
connection with the trades executed by the clients on the Stock Exchange.
iv. For off-market transfer of securities by the Depositories will be only through
execution of Physical Delivery Instruction Slip (DIS) duly signed by the client
himself or by way of electronic DIS. The Depositories shall also put in place a
system of obtaining client’s consent through OTP.

Stock Brokers shall not use POA to ;

i. Transfer of securities for off market trades (physical DIS to be mandatorily used).
ii. Transfer of funds from the bank account(s) of the Clients for trades executed by
the clients through another stock broker.
iii. Open a broking / trading facility with any stock broker or for opening a Beneficial
Owner account with any Depository Participant.
iv. Execute trades in the name of the client(s) without the client(s) consent.
v. Prohibit issue of Delivery Instruction Slips (DIS) to beneficial owner (client).
vi. Prohibit client(s) from operating the account.
vii. Merging of balances (dues) under various accounts to nullify debit in any other
account.
viii. Open an email ID/ email account on behalf of the client(s) for receiving statement
of transactions, bills, contract notes etc. from stock broker / depository participant.
ix. Renounce liability for any loss or claim that may arise due to any blocking of funds
that may be erroneously instructed by the stock broker to the design

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Margin money

The margin money is prescribed by exchanges / Clearing Corporations and collected

from investors by brokers before executing a trade on their behalf. The margin money
is collected to mitigate the risk of non- payment of funds or non-delivery of securities
by an investor. Payment of margin money by clients to stock brokers and stock brokers
to Stock Exchanges is a part of risk management measures implemented by SEBI
through Stock Exchanges.

When an investor buys a stock, he has two options, i.e.

I. to pay the entire price of the stock upfront, called early pay in or
II. to pay only a certain percentage of the price of the stock and borrow money from
the broker to finance the rest. The percentage of the price of the stock paid
upfront is called margin. The payment of the remaining amount can be made by
the designated payout time.
Similarly, when an investor desires to sell his stocks he has to option to either pay in
the shares to be sold or can give a margin upfront. Margin can be provided in the form
or cash or cash equivalent i.e. fixed deposits, bank guarantee, securities, units of
mutual funds, government securities, and treasury bills in demat form.
Margin is provided in the form of securities also, in favour of the broker only in the form
of pledge. A pledge is a deposit of some personal property as collateral for a debt.
Stock Brokers can accept securities (viz shares) as collateral only in form of margin
pledge created on the securities held in clients demat account. Investor (client) needs
to give instruction to create margin pledge on securities. This instruction can be in
physical form or electronically through “SPEED-e” (for NSDL) and “Easiest” (for CDSL).

Pledge & Re-Pledge of Shares -

SEBI vide its circular SEBI/HO/MIRSD/DOP/CIR/P/2020/28 dated February 25, 2020
regarding Margin obligations to be given by way of Pledge/ Re-pledge in the Depository
System
i. As per new guidelines, investors do not need to transfer their securities off
market to their broker’s accounts for trading. Broker/ clearing member shall
accept collateral from clients in the form of securities, only by way of margin
pledge created in the Depository system.

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 ii. For the purpose of providing collateral in form of securities as margin, a client
shall pledge securities with their broker, and broker shall re-pledge the same
with its clearing member, and clearing member in turn shall re-pledge the same
to Clearing Corporation.
iii. Complete trail of pledge and re-pledge shall be reflected in the demat account
of the investor.
iv. Client’s securities re-pledged to the Clearing Corporation shall be available to
give exposure limit to respective client only.
v. Client /Broker having Power of attorney will make margin pledge request to
depositary participant (DP) and DP will sent OTP to Client for confirmation
vi. With effect from September 01, 2020, TM / CM shall accept collateral from
clients in the form of securities, only by way of margin pledge created in the
Depository system.
vii. Transfer of securities to the demat account of the TM / CM for margin
purposes is prohibited.
viii. Providing a POA in favour of a TM / CM by client shall not be considered as
equivalent to the collection of margin by the TM / CM in respect of securities
held in the demat account of the client

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Trading days and Trading & Settlement Cycle

Trading on the Stock Exchanges takes place on all days of the week (except Saturdays,
Sundays and holidays declared by the Stock Exchanges).

In case of purchase of shares, you are required to make payment to the bank account
of your stock broker prior to the pay-in day for the relevant settlement (preferably
immediately after receiving confirmation from the broker that your purchase order is
successfully executed). Similarly, in case of sale of shares, you are required to deliver
the shares to the demat account of broker prior to the pay-in day for the relevant
settlement.
Settlement Process

• Trades done in the securities under various groups in the Equity Cash Segment
would continue to be settled on a T+1 basis i.e. the settlement of transactions
done on T day i.e., trade day takes place on second business day (excluding
Saturdays, Sundays and bank holidays) after the trade day.
• W.e.f. January 2023, Exchanges can settle trades executed in specified 25
scrips on T+0 basis, which is optional for the Exchanges.
• Settlement of Funds & Securities will be at Clearing Member (CM) level as per
the present timelines for settlement related activities.
• In case of Trading Member (TM)/CM scenario, the positions would be netted at
Client/Trading Member/Clearing Member level for normal scrips (i.e. netting of
buy and sell positions in the same scrip for the same settlement) as at present
for settlement purposes.
• For scrips traded on Trade-to-Trade (T to T) basis, the delivery positions would
be settled on a gross basis (no netting of buy and sell positions) as at present.
For this, the position would be grossed at Client/Trading Member/Clearing
Member level for T to T transactions. Settlement would be at Clearing Member
(CM) level.

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Contract Note

- A Contract Note is an evidence of the trade done by the stock broker. It is a legal
document which contains details of the transaction such as securities bought/ sold,
traded price, time of trade, brokerage, etc. Contract Notes can be issued in physical
form or in electronic form. In case you opt for an electronic contract note, a specific
authorization needs to be given to the stock broker along with the details of your
email id. Such electronic contract notes shall be digitally signed, encrypted and can’t
be tampered. Such contract notes should be preserved by the investor for future
references. These have huge importance, especially if any dispute arises later.
Contract note shall be issued by the stock broker within 24 hours of the execution of
the trade. In case of any discrepancy in the contract note, investor should
immediately take up the matter with the stock broker. Always cross check the records
maintained by you, while placing orders in the market, with the details mentioned in
the Contract Note. In case of any discrepancy, contact your broker immediately.

Record of client order:

Stock brokers are required to execute trades of clients only after keeping evidence of
the client placing such order, which could be, inter alia, in the form of: a. Physical record
written and signed by client, b. Telephone recording, c. Email from authorized email id,
d. Log for internet transactions, e. Record of messages through mobile phones, f. Any
other legally verifiable record.

SMS and Email alerts to investors

Investors can opt for SMS and email alerts facility through which they shall receive free
of cost, SMS and email alerts for any trading/ transaction activity that would happen in
their trading and demat account. In order to avail this facility, investors should ensure
that their mobile numbers and email ids are shared and regularly updated with their
stock brokers and depository participants.

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Running Account Authorization

In normal course, settlement of a transaction (buy/sell) by a broker has to be done

within 24 hours of pay-out of funds / securities. However, if you regularly trade in
shares on the stock exchange, you may specifically authorize the stock broker to
maintain a Running Account whereby your shares or funds, as the case may be, would
be kept in a separate account with the stock broker. Running Account facilitates ease
of carrying out transactions in securities whereby the shares or funds kept in the
running account with the stock broker are adjusted towards the settlement obligations
of the future transactions. Two options are available for investors to select periodicity
of settlement of running account i.e. 30 days/90 days.

Statement of Account from Stockbroker and Depository Participants

You are entitled to receive reports such as monthly report, quarterly report, etc., free of
cost, on a regular basis from brokers and depositories regarding the transactions done
by you. Depositories and Stock Exchanges will inform you on your registered mobile
number or email id regarding the transactions in your accounts. If you do not
understand the message, clarify the matter with the Bank, Depository, Depository
Participant, your Stock Exchange, broker, or call SEBI’s toll-free helpline for guidance.
Always keep your contact details updated with the intermediaries so that you receive
alerts and account statements on a timely basis. In case you do not receive such a
report, you must raise the matter with relevant entities.

Consolidated Account Statement (CAS)

Consolidated Account Statement (CAS) is a single/ combined account statement sent

by the Depositories to all investors holding demat accounts, at least once every year,
which shows the details of transactions made by an investor during a month across all
Mutual Funds and also other securities held in the demat account(s). In order to get
your CAS, you should update your PAN with your stockbroker/ depository participant.

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Derivatives Market

Derivatives refers to the financial instruments which derive their value from an
underlying security or financial instrument. The underlying products can be equity,
commodity, currency, etc.

Derivatives are primarily used for hedging position and minimizing the price risk.
Hedging is basically a risk management strategy in which the investors invest in the
instruments strategically to offset the risk of any adverse price movements.

The players in derivatives may be hedgers, speculators and arbitrageurs and different
roles may be played in different situations.

Futures and Options, or commonly called as F&O segment, are an essential part of
the derivatives segment of the securities market. Futures and options are two different
types of derivatives.

A futures contract is a standardized exchange traded contract to buy or sell an

underlying product at a predetermined price on a future date.

An options contract refers to the financial instrument which gives the buyer of the option
the right but not the obligation to exercise the option at a pre-determined date and price.
A call option gives one the right to buy the underlying security and a put option gives
one the right to sell the underlying security. Investors are charged a premium when
they buy an options contract.

Futures and Options are also available in selected currencies in Currency Derivatives
Segment.

Lastly, since Stock Exchange became Universal Exchanges, they also offer
Commodity Derivatives trading in selected and niche products.

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Mutual Funds

Unit Trust of India was the first mutual fund set up in India in the year 1963. In late
1980s, Government allowed public sector banks and institutions to set up mutual funds.

A mutual fund pools in money from many investors and invests the money in stocks,
bonds, short-term money-market instruments, other securities or assets, or some
combination of these investments. All mutual funds are required to be registered with
SEBI before they launch any scheme.

BSE StAR MF platform - BSE launched its BSE StAR MF platform on December 4,
2009. BSE Ltd offers its platform to Mutual Fund Distributors (MFDs) to purchase and
redeem mutual fund units on behalf of their clients.

For the aforesaid purpose, only a Mutual Fund Distributor registered with Association
of Mutual Funds in India (AMFI) and who has been permitted by the concerned
recognized stock exchange, shall be eligible to use recognized stock exchanges'
infrastructure to purchase and redeem mutual fund units directly from Mutual Fund /
Assets Management Companies.

Such MF Distributors shall not handle pay-out and pay in of funds as well as units on
behalf of investors. The pay in will be directly received by Indian Clearing Corporation
Ltd (ICCL), Clearing Corporation of BSE and pay-out will be directly made to investor's
account. In the same manner, units shall be credited and debited directly from the
demat account of the investors by the ICCL.
The platform is feature-rich and highly flexible - it has link-ups with both depositories
CDSL and NSDL, facility for one-time registration of client to avoid extra key strokes
for repeated buy/sell requests, detailed easy-to-use information on various schemes
being offered through the platform and report management features.

BSE StAR MF is configured to accept both physical applications and those in Demat
form. Brokers of BSE who are registered ARN (AMFI registration No.) holders are
eligible to participate on this platform as Mutual fund Intermediaries (MFIs). MFIs who
enter applications for investors who have chosen the Demat Option need not send any
physical documents to the RTA and will retain the applications in their office along with
all necessary annexures. However, where investors have opted for Physical Route, the

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MFIs would be required to send the physical applications along with annexures to the
nearest offices of the RTA as per mutually agreed timelines.

Direct plan is what you buy directly from the mutual fund company (usually from their
own website). Whereas a Regular plan is what you buy through an advisor, broker, or
distributor (intermediary). In a regular plan, the mutual fund company pays a
commission to the intermediary. In Direct Plans, no commission is paid by the mutual
funds to any agents and hence the NAV in a Direct Plan will always be higher than the
NAV in a Regular Plan.

Mutual funds can also be segregated in different categories based on the objectives of
the mutual fund scheme. The schemes are designed to keep in mind the needs of
various types of investors, risk averse investors (basically a conservative Investor who
does not want to take high risk), moderate investors (investors who can take some
amount of risk) and aggressive investors (investors who are willing to take higher risk
in search of higher returns). The performance of a particular scheme of a mutual fund
is denoted by Net Asset Value (NAV).

Categorization of mutual funds: Mutual funds are now broadly categorized into five
schemes mentioned as below: What are the different types of mutual fund
schemes?

Schemes according to Maturity Period:

A mutual fund scheme can be classified into open-ended scheme or close-ended

scheme depending on its maturity period.

Open-ended Fund/Scheme

An open-ended fund or scheme is one that is available for subscription and repurchase
on a continuous basis. These schemes do not have a fixed maturity period. Investors
can conveniently buy and sell units at Net Asset Value (NAV) per unit which is declared
daily. The key feature of open-end schemes is liquidity.

Close-ended Fund/Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 3-5 years. The fund
is open for subscription only during a specified period at the time of launch of the
scheme. Investors can invest in the scheme at the time of the new fund offer and

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thereafter they can buy or sell the units of the scheme on the stock exchanges where
the units are listed. There is no change in no. of units and fund value in the Close-
ended Schemes since the no. of units remains same and only the unit holders are
changed.

Schemes according to Investment Objective:

A scheme can also be classified as growth scheme, income scheme or balanced

scheme considering its investment objective. Such schemes may be open-ended or
close-ended schemes as described. Such schemes may be classified mainly as
follows:

Growth/Equity Oriented Scheme

The aim of growth funds is to provide capital appreciation over the medium to long-
term. Such schemes normally invest a major part of their corpus in equities. Such funds
have comparatively high risks. These schemes provide different options to the investors
like dividend option, growth, etc. and the investors may choose an option depending
on their preferences. The investors must indicate the option in the application form. The
mutual funds also allow the investors to change the options at a later date. Growth
schemes are good for investors having a long-term outlook seeking appreciation over
a period.

Income/Debt Oriented Scheme

The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such funds are
less risky compared to equity schemes. However, opportunities of capital appreciation
are also limited in such funds. The NAVs of such funds are affected because of change
in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to
increase in the short run and vice versa. However, long term investors may not bother
about these fluctuations.

Balanced/Hybrid Scheme

The aim of balanced schemes is to provide both growth and regular income as such
schemes invest both in equities and fixed income securities in the proportion indicated
in their offer documents. These are appropriate for investors looking for moderate
growth. They generally invest 40-60% in equity and debt instruments. These funds are

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also affected because of fluctuations in share prices in the stock markets. However,
NAVs of such funds are likely to be less volatile compared to pure equity funds.

Money Market or Liquid Schemes

These schemes are also income schemes and their aim is to provide easy liquidity,
preservation of capital and moderate income.

These schemes invest exclusively in short-term instruments such as treasury bills,

certificates of deposit, commercial paper and inter-bank call money, government
securities, etc. Returns on these schemes fluctuate much less compared with other
funds. These funds are appropriate for corporate and individual investors as a means
to park their surplus funds for short periods.

Gilt Funds

These funds invest exclusively in government securities. Government securities have

no default risk. NAVs of these schemes also fluctuate due to change in interest rates
and other economic factors as is the case with income or debt oriented schemes.

Index Funds

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index
(Sensex, NSE 50 index (Nifty), etc. These schemes invest in the securities in the same
weightage comprising of an index. NAVs of such schemes would rise or fall in
accordance with the rise or fall in the index, though not exactly by the same percentage
due to some factors known as “tracking error” in technical terms. Necessary disclosures
in this regard are made in the offer document of the mutual fund scheme.

Tax provisions for investments in Mutual Funds:

a. Equity Funds
Both tax-saver and regular equity funds are considered the same for taxation. LTCG
tax is applicable on equity funds at the rate of 12.50% if the capital gains exceed Rs
1.50 lakh a year, and there is no benefit of indexation. However, ELSS funds differ from
the regular funds when it comes to the lock-in period. While most regular equity funds
do not have a lock-in period, ELSS funds come with a lock-in period of three years.
Meaning, the redemption of ELSS mutual funds can be made only at the end of the
lock-in period.

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Note: The limit of 1.50 lakh is cumulative of capital gains on all equity
instruments such as stocks and equity mutual funds.

b. Debt Funds
Long-term capital gains on debt fund are taxable at the rate of 20% after indexation.
Indexation is a method of factoring inflation from the time of purchase to sale of units.
Indexation allows inflating the purchase price of debt funds to bring down the quantum
of capital gains. You are required to add short-term gains from debt funds to your
overall income. They are subject to short-term capital gains tax (SCGT) and is taxable
as per the income tax slab you fall under.

c. Balanced Funds
Balanced funds are taxable depending on their equity exposure. Hybrid equity-oriented
funds are taxed as any other equity fund while hybrid debt-oriented funds are taxed as
any other debt fund.
What are the tax implications of dividends on Mutual funds?
Dividends obtained from a mutual fund was tax-free for investors until 31 March 2020
(FY 2019-20). That was because the company declaring such dividend already paid
dividend distribution tax (DDT) before making payment. However, the Finance Act,
2020 changed the method of dividend taxation. Henceforth, all dividend received on or
after 1 April 2020 is taxable in the hands of the investor. The DDT liability on mutual
funds stands withdrawn.
What are Tax Saving Schemes?

These schemes offer tax rebates to the investors under specific provisions of the
Income Tax Act, 1961 as the Government offers tax incentives for investment in
specified avenues, for example, Equity Linked Savings Schemes (ELSS) under section
80C and Rajiv Gandhi Equity Saving Scheme (RGESS) under section 80CCG of the
Income Tax Act, 1961. Pension schemes launched by mutual funds also offer tax
benefits. These schemes are growth oriented and invest pre-dominantly in equities.
Their growth opportunities and risks associated are like any equity-oriented scheme.

What is a Fund of Funds (FoF) scheme?

A scheme that invests primarily in other schemes of the same mutual fund or other
mutual funds is known as a FoF scheme. A FoF scheme enables the investors to

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achieve greater diversification through one scheme. It spreads risks across a greater
universe.

What are Exchange Traded Funds (ETFs)?

ETFs are mutual fund units that investors can buy or sell at the stock exchange. This
is in contrast to a normal mutual fund unit that an investor buys or sells from the AMC
(directly or through a distributor). In the ETF structure, the AMC does not deal directly
with investors or distributors. Units are issued to a few designated large participants
called Authorised Participants (APs). The APs provide buy and sell quotes for the ETFs
on the stock exchange, which enable investors to buy and sell the ETFs at any given
point of time when the stock markets are open for trading. ETFs therefore trade like
stocks and experience price changes throughout the day as they are bought and sold.
Buying and selling ETFs requires the investor to have demat and trading accounts.

What is a capital protection-oriented scheme?

A capital protection-oriented scheme is typically a hybrid scheme that invests

significantly in fixed-income securities and part of it in equities.

Can non-resident Indians (NRIs) invest in mutual funds?

Yes, non-resident Indians can also invest in mutual funds. Necessary details in this
respect are given in the offer documents of the schemes.

How much should one invest in debt or equity-oriented schemes?

An investor should take into account his risk-taking capacity, age factor, financial
position, etc. As already mentioned, the schemes invest in different type of securities
as disclosed in the offer documents and offer different returns and risks. These are
close-ended schemes that come in tenors of fixed maturity e.g. three to five years.

Product labelling of mutual funds: As per SEBI guidelines, mutual fund schemes are
to be labelled according to the level of risk involved and the same is to be depicted on
the risk-o-meter. The risk-o-meter with different labels of risk is depicted as below:
a) Low: Principal at low risk
b) Moderately low: Principal at moderately low risk
c) Moderate: Principal at moderate risk
d) Moderately High: Principal at moderately high risk
e) High: Principal at high risk
f) Very High: Principal at very high risk

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Investors should not be carried away by commission/gifts given by agents/distributors
for investing in a particular scheme. On the other hand they must consider the track
record of the mutual fund and should take objective and informed decisions.

Exchange Traded Funds (ETF) - Unlike regular mutual funds, ETFs trade like a
common stock on the stock exchange and the price of an ETF changes as per the
trading in the market takes place. The trading value of an ETF depends on the net
asset value of the underlying stock that it represents. ETFs, generally, have higher
daily liquidity and lower fees than mutual fund schemes.

Demat of Mutual Fund units

Investors have an option to mention demat account details in the subscription form, in
case they desire to hold units in demat form while subscribing to any scheme (open
ended/close ended/Interval). Existing investors desirous of converting their existing
physical units (represented by statement of account) into dematerialized form, can also
do so.

Dispatch of Statement of Accounts

Mutual Funds/AMCs are advised to invariably provide Dispatch of Statement of

Accounts. AMCs shall allot the units to the applicant whose application has been
accepted and also send confirmation specifying the number of units allotted to the
applicant by way of email and/or SMS’s to the applicant’s registered email address
and/or mobile number as soon as possible but not later than five working days from the
date of closure of the initial subscription list and/or from the date of receipt of the
request from the unitholders.

Consolidated Account Statement

AMCs are mandated to issue consolidated account statement for each calendar month
to the investors in whose folios transaction(s) has/have taken place during that month.
If no transactions are there during the year, then they are required to send the CAS at
least once a year.

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Grievance/claims settlement Mechanisms for investors: SEBI SCORES:

In case of any complaint related to the securities market, you may first approach the
concerned intermediary or company. The concerned intermediary or company shall
facilitate your complaint redressal. In case the grievance remains unresolved, you may
approach the concerned Stock Exchange or Depository against your stock broker or
listed company.

If you are still not satisfied with the redressal, you may lodge a complaint with SEBI
through a web based centralized grievance redressal called SCORES (SEBI
Complaints Redress System).
▪ Complaints can be filed against entities like:

▪ Listed companies; Stock Brokers; Stock Exchanges; Depository /

Depository Participants; Registrars to an Issue / Share Transfer Agent;
Mutual Funds / Portfolio Managers; Bankers to an Issue; Collective
Investment Schemes; Credit Rating Agencies; Custodians of Securities;
Debenture Trustees; Merchant Bankers / Underwriters.

▪ www.scores.gov.in : SEBI COmplaints Redressal System (SCORES)

launched on 08.06.2011.
▪ Investor friendly, Centralized Web based complaints redress system.
▪ Online filing of complaints and status can be viewed online.
▪ SCORES Mobile App: available on both iOS and Android platforms.

Online Resolution of Disputes (ODR) in the Indian Securities Market

In furtherance of the interests of investors, the existing dispute resolution mechanism

in the Indian securities market is being streamlined under the aegis of Stock Exchanges
and Depositories (collectively referred to as Market Infrastructure Institutions (MIIs)),
by expanding their scope and by establishing a common Online Dispute Resolution
Portal (“https://smartodr.in”) which harnesses online conciliation and online arbitration
for resolution of disputes arising in the Indian Securities Market. Investors and Listed
Companies/Specified Intermediaries/Regulated entities under the ambit of ODR. This
system has been made operational w.e.f. August 16, 2023, for complaints against
trading members and w.e.f. September 16, 2023 for complaints against listed

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companies. There are two levels of redressal, first at Conciliation and second at
arbitration.

Investor Services Cell of Stock Exchange

Investor Services Cells (ISC) cater to the needs of investors by resolving the queries
of investors, resolution of investor complaints and by providing the Arbitration
mechanism for quasi-judicial settlement of disputes. At present there are total 50
common Investor Service Centers managed by BSE and NSE where investors having
any dispute/claim/query connected to BSE/NSE/SEBI can approach these ISCs and
get the same resolved at one common place.

The Stock Exchanges facilitate the redressal of the grievances of the investors through
Conciliation at first level. To facilitate the convenience to the investors in redressing
their grievances, these Exchanges have their Investor Service Centers at the various
regions spread across the country. The detailed lists of these centers are available on
the websites of the Exchanges.

Arbitration Mechanism

Arbitration refers to a quasi-judicial process of settlement of disputes between Stock

Broker and investor. When one of the parties feels that the complaint has not been
resolved satisfactorily either by the other party or through the complaint resolution
process of the Exchange, the parties may choose the route of arbitration process
available with Stock Exchange. B1

➢ Arbitration is the mechanism to settle disputes between parties to a contract,

determined in a quasi-judicial manner.
➢ Arbitration framework at the Exchange is governed by Rules, Byelaws,
Regulations & Circulars issued by the Exchange and SEBI, from time to time.
➢ The limitation period for filing an arbitration application shall be governed by the
law of limitation i.e. The Limitation Act, 1963 which is 3 years from the date of
arising of claim.

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Implementation of Award

i. In case the arbitral / appellate arbitral award is in favour of the client, the
Exchange shall debit the amount of the award from the security deposit or any
other monies of the member and keep it in a separate escrow account.
ii. The Stock Exchange shall implement the arbitral award, by making payment to
the client, along with interest earned on the amount that has been set aside, as
soon as.
▪The time for making an application to a Court to set aside such appellate
arbitral award has expired, and no application has been made, or
▪ when an application to the Court to set aside such arbitral award, having been
made, it has been refused by such Court, or
▪an application to a Court to set aside such arbitral award, having been made,
but where no stay has been granted by such Court within a period of three
months from the date on which the party making that application had received
the arbitral award.

Under ODR mechanism, the entire process of conciliation and arbitration is online and
there is no requirement on the part of parties to the dispute to travel physically, which
provides them the convenience and result into time bond conclusion of the matter.

Information about Unclaimed Shares/ Unpaid Dividend Amount - IEPF

Investor Education and Protection Fund (IEPF) has been established under Section
125 of Companies Act, 2013 and for promotion of investors’ awareness and protection
of the interests of investors.

All dividends and Shares which remain unpaid or unclaimed for seven consecutive
years, are transferred by respective companies to Investor Education and Protection
Fund Authority (IEPF). Investor or his representatives need to submit their claim to
IEPF Authority to receive unpaid dividend and/or unclaimed shares.

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Investor Protection Fund (IPF) of BSE

BSE has set up an Investor Protection Fund (IPF) on July 10, 1986 to meet the claims
of investors against defaulter Members, in accordance with the Guidelines issued by
the Ministry of Finance, Government of India. BSE Investor Protection Fund is
responsible for creating Capital markets related awareness among the investor
community in India.

Objectives of the Investors’ Protection Fund (IPF)

It is a Public Trust for the protection and benefit of the members of public who invest
and deal in securities through members of BSE.

1. Compensating these members of public in respect of their claims against

Defaulter members of BSE.
2. To do all such activities for spreading and for promoting education and creating
awareness amongst general investors about various aspects of investing in
securities market and to make them informed investors.

BSE presently compensate the clients of defaulter members to the extent of their claim
value or Rs.16 lakhs whichever is lower from IPF. This serves as a relief to these
investors who suffer financial loss due to their trading member being declared as
defaulter by the Exchange.

This initiative enforce confidence and work as a risk protection measure for the
investors while participating in the secondary market.

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Following are the important investor related regulatory changes/reforms made
by SEBI in the last 3 years.

➢ Reduced timelines for refund of money in case of non-subscription of IPO or

rejection of trading permission by Stock Exchanges.

SEBI vide Circular No. SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated March 16,

2021, decided that upon non/partial allotment of shares in the IPO process to the
investors, unblocking of funds in their accounts will happen on T+4 basis. This is
the most beneficial change for investors who can deploy their funds in other
opportunities.

➢ Alignment of interest of Key Employees of Asset Management Companies

(AMCs) with the Unitholders of the Mutual Fund Schemes.

In the interest of investors SEBI has recently taken steps to standardize the
scheme categories and characteristics of each category, the management of risk
return profile of the schemes rests with the AMCs and the Key Employees.

In order to align the interest of the Key Employees of the AMCs with the unitholders
of the mutual fund schemes, SEBI vide its circular dated April 28, 2021 has decided
that a part of compensation of the Key Employees of the AMCs shall be paid in the
form of units of the scheme(s), as under:

i. A minimum of 20% of the salary/ perks/ bonus/ non-cash compensation (gross

annual CTC) net of income tax and any statutory contributions (i.e. PF and NPS)
of the Key Employees of the AMCs shall be paid in the form of units of Mutual Fund
schemes in which they have a role/ oversight.

ii. The compensation paid in the form of units, as mentioned above, shall be
proportionate to the AUM of the schemes in which the Key Employee has a
role/oversight. For this purpose, Exchange Traded Funds (ETFs), Index Funds,
Overnight Funds and existing close ended schemes shall be excluded.

iii. No redemptions of the said units shall be allowed during the lock-in period.

v. However, in case of retirement on attaining the superannuation age, such units

shall be released from the lock-in and the Key Employee shall be free to redeem

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 the units, except for the units in close ended schemes where the units shall remain
locked in till the tenure of the scheme is over.

Clawback:
Units allotted to the Key Employees shall be subject to clawback in the event of
violation of Code of Conduct, fraud, gross negligence by them, as determined by
SEBI. Upon clawback, the units shall be redeemed and amount shall be credited
to the scheme

The aforesaid measures are applicable from July 1, 2021 and will ensure more
accountability on the part of key employees of the fund houses which may finally
result into benefits for the general investors.

➢ Nomination for Eligible Trading and Demat Accounts

SEBI vide its circular dated July 23, 2021 has decided that Investors opening new
trading and or demat account(s) on or after October 01, 2021, shall have the choice
of providing nomination or opting out nomination.

➢ Investor Charter for investors – both for Primary & Secondary Market
Issuances

With a view to provide investors an idea about the various activities pertaining to
primary market issuances as well as exit options like Takeovers, Buybacks or
Delisting, SEBI has now issued a detailed Investor Charter vide their circular No.
SEBI/HO/CFD/DCR2/P/CIR/2021/0661 dated November 23, 2021.

This charter is a document in an easy-to-understand language and contains different

services to the investors at one single place for ease of reference. All the registered
Merchant Bankers / RTAs have been advised to disclose the Charter in respect of
the following categories on their website.
1. Initial Public Offer (IPO) and Further Public Offer (FPO)including Offer for Sale
(OFS)
2. Rights Issue
3. Qualified Institutions Placement (QIP)
4. Preferential Issue
5. SME IPO and FPO including OFS
6. Buyback of Securities
7. Delisting of Equity Shares
8. Substantial Acquisitions of Shares and Takeovers.

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➢ Investor Charters for Stock brokers, Mutual Funds and Investment Advisors.

While dealing with the Stock Brokers, the investors come across various activities
such as opening of account, KYC and in person verification, complaint resolution,
issuance of contract notes and various statements, process for dematerialization
/ rematerialization etc.. In order to spread awareness amongst the investors, SEBI
vide its circular no. SEBI/HO/MIRSD/DOP/P/CIR/2021 dated December 2, 2021,
has issued an Investor Charter for Stock Brokers inter-alia detailing the various
services provided to Investors, Rights of Investors, various activities of Stock
Brokers with timelines, Dos and Don’ts for Investors and Grievance Redressal
Mechanism. The detailed charter is available as Annexure A to the aforesaid SEBI
circular.

SEBI has also issued another circular no. SEBI/HO/IMD-II/IMD-

II_DOF10/P/CIR/2021/00677 dated December 10, 2021 whereby similar Investor
Charter has been issued for Mutual Funds, which is available as Annexure B to the
circular.

Further, SEBI has also issued a circular no. SEBI/HO/IMD/IMD-II CIS/P/CIR/202

dated December 13, 2021 whereby similar Investor Charter has been issued for
Investment Advisors, available at Annexure A to the said circular.

➢ Issuance of Securities in dematerialized form in case of Investor Service

Requests

As an on-going measure to enhance ease of dealing in securities markets by

investors, SEBI has decided that listed companies shall henceforth issue the
securities in dematerialized form only, after processing the following service
requests.

i. Issue of duplicate securities certificate.

ii. Claim from Unclaimed Suspense Account.
iii. Renewal / Exchange of securities certificate.
iv. Endorsement
iv. Sub-division / Splitting of securities certificate.
v. Consolidation of securities certificates/folios.
vi. Transmission
vii. Transposition

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➢ Execution of ‘Demat Debit and Pledge Instruction’ (DDPI) for 1) transfer of
securities towards deliveries / settlement obligations and 2) pledging / re-
pledging of securities

SEBI vide its circular dated April 4, 2022 has stated that the two conditions as
specified above shall be made part of a separate document viz. ‘Demat Debit and
Pledge Instruction’(DDPI), in the format attached with the circular under which ;

1) The clients shall explicitly agree to authorize the stock broker/stock broker
and depository participant to access their BO account for the limited purpose of
meeting pay-in obligations for settlement of trades executed by them.

2) It is further stated that the DDPI shall serve the same purpose of PoA and
significantly mitigate the misuse of PoA. The use of DDPI shall be limited only for
the two purposes as mentioned in paragraph.

3) The client may use the DDPI or opt to complete the settlement by issuing physical
Delivery Instruction Slip (DIS) or electronic Delivery Instruction Slip (eDIS)
themselves.

Hence, with the implementation of this circular, PoA shall no longer be executed for
the conditions specified above. The DDPI shall be provided to clients as part of the
Voluntary Documents and shall be executed only if the client provides his/her explicit
consent for the same, including internet-based trading. The existing PoAs shall
continue to remain valid till the time client revokes the same.

Thus, the stock broker/stock broker and depository participant shall not directly /
indirectly compel the clients to execute the DDPI or deny services to the client if the
client refuses to execute the DDPI.

➢ Standard Operating Procedures (SOP) for dispute resolution available

under the stock exchange arbitration mechanism for disputes between a listed
company and its shareholder(s)/ investor(s)

Regulation 40 of SEBI (Listing Obligations and Disclosure Requirements)

Regulations, 2015, and bye-laws, listing agreement & regulations of the stock
exchanges provide for dispute resolution under the stock exchange arbitration
mechanism for disputes between a listed company and its shareholder(s)/ investor(s).

In this regard, SEBI vide its circular dated April 8, 2022 has advised all the stock
exchanges to put in place by June 01, 2022, Standard Operating Procedures (SOP)
for operationalizing the resolution of all disputes pertaining to or emanating from

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investor services such as transfer/transmission of shares, demat/remat, issue of
duplicate shares, transposition of holders, etc. and investor entitlements like
corporate benefits, dividend, bonus shares, rights entitlements, credit of securities in
public issue, interest /coupon payments on securities, etc.

Further, in respect of disputes in above matters where Registrar and Share Transfer
Agents (RTA) are offering services to shareholder(s)/ investor(s) on behalf of listed
companies, the RTAs shall continue to be subjected to the stock exchange arbitration
mechanism.

➢ Processing of ASBA applications in Public Issue of Equity Shares and

Convertibles.

SEBI has now reviewed the processing of Applications Supported by Blocked

Amounts (ASBA) applications in the Public Issues by market intermediaries and
Self Certified Syndicate Banks (SCSBs). As a part of continuing efforts to further
streamline the bidding process, SEBI vide its circular dated May 30, 2022 decided
that ASBA applications in Public Issues shall be processed only after the
application monies are blocked in the investor’s bank accounts.

Accordingly, Stock Exchanges will accept the ASBA applications in their electronic
book building platform only with a mandatory confirmation on the application monies
being blocked. The circular shall be applicable w.e.f. September 1, 2022 for all
categories of investors viz. Retail, QIB, NII and other reserved categories and also
for all modes through which the applications are processed.

➢ Investor Grievance Redressal Mechanism

In order to further strengthen the Investor Grievance Redressal Mechanism, SEBI

vide its circular dated June 3, 2022 has decided that for any dispute between the
member and the client relating to or arising out of the transactions in Stock
Exchange, which is of civil nature, the complainant/ member shall first refer the
complaint to the IGRC and/ or to arbitration mechanism provided by the Stock
Exchange before resorting to other remedies available under any other law.

A complainant/member, who is not satisfied with the recommendation of the IGRC

shall avail the arbitration mechanism of the Stock Exchange for settlement of
complaints within three months from the date of IGRC recommendation. The time
period of three months mentioned in the previous sub-clause for filing arbitration
shall be applicable only for the cases where the IGRC recommendation is being

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challenged. For any arbitration application received without going through IGRC
mechanism, the above time period of three months shall not apply, and for such
cases the limitation period for filing arbitration shall be governed by the law of
limitation, i.e., The Limitation Act, 1963.”

➢ Display of details of Bank Accounts of Stockbrokers from where clients’ money

is received and paid, on Website

With a view to bring more transparency in the dealings between the clients and the
Stockbrokers and for the purpose of investor awareness, the Exchanges have
advised the members to display details of their bank accounts in which they collect
funds from their clients and from which they make payments to them, on their
websites. Additionally based on the information submitted by the brokers and as an
investor friendly measure, the Exchange will also display this information on its
website under “Know/ Locate your Stockbroker.

➢ Nomination for eligible Trading, Demat Accounts and Mutual Fund

Schemes–Extension of timelines for existing account holders.

SEBI vide its earlier circular dated February 24, 2022, extended the timeline for mandatory
submission of 'choice of nomination' for existing trading and demat accounts which ended
on September 30, 2023.

Similarly, SEBI vide circular dated March 28, 2023 extended time for Mutual Fund Unit
holders also to submit the choice of nomination which also ended on September 30, 2023.

➢ Introduction of Beta version of T+0 rolling settlement cycle on optional

basis in addition to the existing T+1 settlement cycle in Equity Cash Markets

In the year 2021, all Stock Exchanges, Clearing Corporations and Depositories
jointly decided to shift to T+1 settlement cycle in a phased manner, which was fully
implemented w.e.f. January 27, 2023. The significant evolution of technology,
architecture and capacity of these entities, presents opportunities for further
advancing clearing and settlement timelines. Further, India’s depository ecosystem
has visibility of individual client level holdings in digital form and so has the
ability to effect immediate transfer of securities. India’s banking ecosystem has
long allowed the real time transfer of funds.

Considering the above factors, it was felt that a shortened settlement cycle will bring
cost and time efficiency, transparency in charges to investors and strengthen
risk management at Clearing Corporations and in the overall securities market.

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 Accordingly, after deliberation on the various aspects involved, SEBI has decided
to put in place a framework for introduction of the Beta version of T+0
settlement cycle on optional basis in addition to the existing T+1 settlement cycle
in equity cash market, for a limited set of 25 scrips and with a limited number of
brokers.

The broad operational guidelines in this regard are as under:

Eligible Investors: All investors are eligible to participate in the segment for
T+0 settlement cycle, if they are able to meet the timelines, process and risk
requirements as prescribed

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Do's and Don'ts which investors need to observe while dealing in securities
market are given below. Investors are required to take utmost precautions by
followings these guidelines very strictly.

Do’s:
• You may consult with a SEBI registered Investment Adviser for your investment
needs in securities market
• Invest in a scheme/product depending upon your investment objective and risk
appetite.
• Insist on a valid contract note/ confirmation memo for trades done within 24
hours of the transaction. Keep track of your portfolio in your demat account on
a regular basis.
• Read all the documents carefully before signing them.
• You should carefully note all the charges/ fees/ brokerage that are applicable on
your accounts and keep a record of the same.
• Keep a record of documents signed, account statements, contract notes
received and payments made.
• Periodically review your financial needs / goals and review the portfolio to ensure
that the same are possible to achieve.
• Always pay for your transactions using banking channel, i.e. no dealing in cash.
• Always keep your information updated. Inform your stock broker / depository
participant whenever there is change in your address or bank details or email ID
or mobile number. Since SIM cards now have the feature of getting ported to
different service providers, investors may keep single mobile numbers attached
with their respective accounts. (Mobile number is the key to all important
transactions.)
• Avail nomination facility for all your investments. Multiple nominations are
allowed in demat account.
• Get your running accounts settled periodically (once in 30 / 90 days, as opted
by you).
• Regular checking of daily SMS and email from Exchange regarding trades done
on that day.
• Regular checking of Monthly SMS and email from Exchange regarding funds
and securities balances of the investors maintained with the Trading Member.

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• Do use the facility of e-voting made available to you as shareholder of the
company through depository mechanism to participate in important decision
making of the company.

Don’ts:

• Don’t borrow money for investment.

• Don't deal with unregistered brokers / other unregistered intermediaries.
• Don’t pay more than the agreed brokerage/charges to the intermediary.
• Don't execute any document with any intermediary without fully understanding
its terms and conditions.
• Don’t sign any blank form or Delivery Instruction Slips.
• Don’t issue general power of attorney (PoA) in favour of the Stock Broker/
Depository Participant. Exercise due diligence by issuing a very specific one, if
you want to issue a PoA.
• In case of disputes, file written complaint to intermediary/ Stock Exchange/SEBI
within a reasonable time.
• Dabba Trading is illegal. Even if it appears that you are saving on costs, do not
indulge in Dabba Trading as it offers no benefits of safe and guaranteed trades
done on Stock Exchanges.
• Do not rely on making your investment decisions on hot tips as a person who
wants to offload securities which may not be marketable may be indulging in it.
Disseminating hot tips is also an illegal activity which should be reported to
SEBI.
• Never share your password for online account with anyone. Do change the
passwords frequently.
• Don’t fall prey to Ponzi schemes, unregistered chit funds, unregistered collective
investment, or unregistered deposit schemes.
• Don't forget to strike off blank spaces in your KYC documents.
• Don't opt for digital contracts if you're not familiar with computers. You can ask
for physical contract notes from your broker.
• Don’t use the unregulated apps offering Algo Trading. You may face heavy
financial losses.

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Every investor dealing in Securities Market have some Rights and Obligations
of Investors on their part, which are enumerated below.

Rights of Investors
• Get Unique Client Code (UCC) allotted from broker.
• Get a copy of KYC and other documents executed from intermediary.
• Get trades executed in only your UCC.
• Place order on meeting the norms agreed to with the Member.
• Get best price.
• Get the contract note for trades executed.
• Ask the details of charges levied.
• Receive funds and securities on time.
• Receive statement of accounts from trading member.
• Ask for settlement of accounts.
• Get statements as per agreed schedule.

Obligations of Investors
• Execute Know Your Client (KYC) documents and provide supporting
documents.
• Understand the voluntary conditions being agreed with the trading member.
• Understand the rights given to the Trading Members.
• Read Risk Disclosure Document.
• Understand the product and operational framework and deadlines.
• Pay margins in time.
• Pay funds and securities for settlement in time.
• Verify details of trades.
• Verify bank account and DP account for funds and securities movement.
• Review contract notes and statement of account.

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Following are full forms of some important abbreviations regularly used in the
Securities market parlance.

S.No Abbreviation Full Form

1. AMC Annual Maintenance Charges - ALSO Asset Management
Company
2. ASBA Application Supported by Blocked Amount
3. BSDA Basic Services Demat Account
4. CAS Consolidated Account Statement
5. CDSL Central Depository Services (India) Limited
6. Demat Dematerialized
7. DP Depository Participant
8. IA Investment Advisers
9. IGRC Investor Grievance Redressal Committee
10. IGRP Investor Grievance Resolution Panel
11. IPO Initial Public Offering
12. KIN KYC Identification Number
13. KYC Know Your Client
14. MII Market Infrastructure Intermediaries
15. MSE Metropolitan Stock Exchange of India Limited
16. NSDL National Securities Depository Limited
17. NSE National Stock Exchange of India Limited
18. PAN Permanent Account Number
19. PoA Power of Attorney
20. SCORES SEBI Complaints Redress System
21. SEBI Securities and Exchange Board of India
22. SMS Short Message Service
23. UCC Unique Client Code
24. UID Unique Identification

INVEST RIGHT TOH FUTURE BRIGHT !!!

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