CONSOLIDATED POLICY ON RISK MANAGEMENT SYSTEM
It is for the information of all the Clients/Sub brokers/Authorized Persons/Employees of M/s. BgSE Financials Limited (hereinafter referred as “BFSL”) that a Master Policy on Risk Management is reproduced as below for the smooth functioning of the operational activities of the Company.
1. CAPITAL ADEQUACY DEPOSIT
A. Cash Segment:
1. Minimum BMC of Rs. 50,000/- (Rupees Fifty Thousand) (in cash only) need to be kept with BFSL by Sub-broker for each Exchange for Cash Segment.
2. Additional Capital is collected in the form of Cash/FDR, but in the ratio of 25:75
3. For DBT member, deposit of Rs.2,00,000/- (Rupees Two Lakhs only) in cash as minimum balance required for Sub broker and in addition to that, Rs.1,00,000/- (Rupees One Lakh only) per Exchange is also required to be deposited.
4. Additional deposit, where given, can be in ratio of 25:75 where 25 % in cash and 75% in form of FDRs.
5. However, shares are not accepted for “CM” segment.
6. BMC deposit with Parent Exchange cannot be transferred to BFSL
B. F & O Segment:
1. Minimum BMC of Rs. 1,00,000/- (Rupees One Lakh) (cash only) need to be kept with BFSL by Authorised Person for F & O Segment.
2. Client need to maintain minimum capital of Rs.20,000/- (Rupees Twenty Thousand) (cash only) in F&O segment.
3. Additional Capital is collected in the form of Cash/FDR/Securities.
C. Currency Derivatives Segment:
1. Minimum BMC of Rs. 25,000/- (Rupees Twenty Five Thousand only) (cash only) need to be kept with BFSL by Authorised Person for F & O Segment.
2. Additional Capital is collected in the form of Cash/FDR/Securities.
2. TURNOVER LIMIT:
No restriction on Turnover Limit.
3. EXPOSURE LIMIT
A. Cash Segment:
1. Gross Exposure allowed to the Sub-broker across his/her Clients shall depend up on the capital adequacy deposit brought in by the Sub-broker / Client (in case of client specific arrangements) (Base Minimum Capital plus additional capital) and also depending upon market condition.
2. Exposure is given at Sub-broker level.
3. Sub-brokers may fix the exposure at their discretion to respective Client, subject to the total exposure permitted to them.
4. No margin shall be collected in cash market as pay-in of funds and securities itself is collected on T+1 day
B. F&O/Currency Derivatives Segment:
1. The Authorised Person and Clients will have to pay initial exposure margins, span margins and any other margin as specified by the relevant authority from time to time on real time basis. If at any point of time applicable margins in the account of any applicant reaches 100% of limit allowed in F&O/Currency Derivatives segments, system shall not accept fresh orders from those users and terminal shall be in ‘squaring off’ mode. Under these circumstances, APs/Clients will have to square off his/her positions or deposit additional margins. Margins in F&O/Currency Derivatives can be deposited in the form of cash, FDR or other approved securities and that deposit is to be made in the prescribed ratio of cash and non cash components. At present, it is 50:50 for APs/Clients i.e 50% cash and 50% non cash components. Here, FDR shall be considered as cash equivalent for calculating the above said ratio.
2. Any M2M margin will be collected from AP’s/Client’s bank account on T+1 day and BFSL may call it on T-day as well if the circumstances warrant for the same, i.e in the event of huge volatility.
4. RELEASE OF MARGIN/CAPITAL ADEQUACY IN F&O/CURRENCY DERIVATIVES AND CASH SEGMENT:
Free, i.e. unutilized margin available in cash of any Sub broker/AP/Client with the Company may be released only upon request on T+1 day if the amount is upto Rs.5,00,000/- (Rupees Five Lakhs Only) and on T+2 if the amount is more than Rs.5,00,000/-. It can be released by BFSL itself on T-day but in case of shortfall in pay- in only. FDR shall be released upon receipts from respective Exchange.
5. SECURITIES PAY IN
A. On ‘T ‘day:
1. Pay-in obligations of shares of Clients are lifted from ‘Client’s Beneficiary A/c’ (if holdings are available for respective Clients) NSE & BSE CM A/cs.
2. Further those clients, who have given POA, the shares are lifted from their respective DP beneficiary account maintained with BFSL DP.
3. For those clients who have given POA, but shares are not available in beneficiary A/c, BFSL uploads instruction for the settlement obligation for the respective Clients (the instruction status shall be shown as ‘OVER DUE ‘ ), if shares are available at any time before T+2 Pay in dead line, the above instruction shall be settled.
4. The Clients who have not given POA will transfer the shares from their DP account to company’s pool a/c or client Beneficiary a/c themselves against their obligations.
B. On T +1 day:
All the above ‘T’ day’s process continues
6. EARLY PAY-IN OF SECURITIES
A. On ‘T’ day:
The shares received in BFSL CM pool a/cs on ‘T’ day, towards clients settlement obligations for NSE & BSE, are uploaded to NSCCL and BOISL as early pay in.
B. On T +1 day:
The shares received in BFSL CM pool a/cs on ‘T+1’day, towards clients settlement obligations for NSE & BSE, are uploaded to NSCCL and BOISL as early pay in.
7. FUNDS PAY IN - CASH SEGMENT
For Cash Segment:
- Each Sub broker is treated as a particular ‘Branch’.
- BFSL opens separate bank account for each Sub broker (branch) concerned, in the name and style of ‘BgSE Financials Ltd’ (with Sub broker code) and account is operated by authorized BFSL officials only.
- The branch Bank A/cs are opened either in Canara Bank, HDFC Bank or ING Vysya bank.
- The Client’s pay-in cheques are deposited in their respective branch A/c.
On ‘T+1’ day
1. Exchange wise/ Settlement No. wise * pay in obligation of a branch is collected from the respective bank (branch) accounts on net basis.
2. BFSL sent debit advises to respective banks towards pay-in obligation of branches. (Canara bank by soft copy, ING VYSYA bank by hard copy of pay-in statement, and HDFC bank, pay in is collected from BFSL HO online).
On T+2 days
Any shortfall of pay-in obligation on T+1 Day from any branch shall be collected on T+2 day.
8. FUNDS PAY-IN FOR F & O/Currency Derivatives SEGMENT
F & O/Currency Derivatives Segment:
In F&O/Currency Derivatives segment, Clients are of 2 categories, such as:-
1. Clients having bank account with any of the three designated banks (CANARA Bank/HDFC Bank/ ING VYSYA Bank).
2. Clients who do not have bank account with any of the designated banks and such Clients’ F&O/Currency Derivatives trading accounts are treated as “F& O/Currency Derivatives Running Account”
On ‘T’ Day:
F&O/Currency Derivatives Bills are posted to clients’ F&O/Currency Derivatives ledger a/c on a daily basis.
On T+1 Day:
A. For the Clients who have opened bank account with CANARA Bank/HDFC Bank/ ING Vysya Bank:
1. Settlement pay-in amounts are collected from clients’ respective bank accounts.
2. Receipt entries are posted to clients’ F&O/Currency Derivatives ledger a/c.
B. For ‘F&O/Currency Derivatives – Running Account’.
1. BFSL is having CA-2911 with Canara Bank for maintaining settlement funds of those clients who have opted for ‘F&O/Currency Derivatives Running Account’.
2. Clients need to maintain credit balance in their F&O/Currency Derivatives Settlement Ledger accounts.
3. F&O/Currency Derivatives bills are posted to clients’ F&O/Currency Derivatives Settlement Ledger account daily.
4. If Client’s F&O/Currency Derivatives Settlement a/c is having debit balance:
a) The amount is transferred from F&O/Currency Derivatives Capital/Credit balance, if any available, in cash segment to F&O/Currency Derivatives settlement a/c.
b) Further shortfall, if any, Authorized Person is informed to make arrangement to collect the funds from clients on an immediate basis.
c) Payment cheques received from Clients are deposited to CA-2911-‘F&O/Currency Derivatives Running A/c’ by giving credit to respective Clients’ F&O/Currency Derivatives settlement ledger A/c.
d) The sum total of all the clients debit balances for the bill date are transferred from CA-2911 to F&O/Currency Derivatives settlement A/c of BFSL on a daily basis.
9. ACTIONS FOR DEFAULT IN PAY IN ACCOUNTS:
The pay-in accounts must be collected from branch bank account of the respective Sub broker in cash segment and from Clients/APs’ bank account in F&O/Currency Derivatives segment on T+1 day. If there is any default in pay-in amount, then warning shall be issued to make pay-in immediately followed by suspension of trading in the respective segment on all the terminals of Sub brokers. The trading is restored only upon the realization of pay-in amount along with penalties. At the second level where the debts outstanding cross a threshold of T+5 days, the respective client’s account with debit balance for more than T+5 days is suspended for further buying. However, in certain cases and on written request of Sub broker, BFSL may allow buying where sufficient margin is there and Sub broker has made the pay-in at Branch Level but this is not permitted beyond 25 days under any circumstances.
In addition to the above, following penal action for default/delay in pay-in shall be there as enumerated in the following table:
Particulars : Action
If delay/delay in pay in is upto two times : : Nil
during the last two months :
If delay/delay in pay in is upto three times : Exposure will be reduced by 20%
during the last two months : at Branch level/Authorized person level.
If delay/delay in pay in is upto four times : Exposure will be reduced by 30% at
during the last two months : Branch level/Authorized person level.
If delay/delay in pay in is upto five times or : Exposure will be reduced by 40% at
more during the last two months : Branch level/Authorized person level.
The abovementioned reduction in exposure shall remain for three months in case of first time delay/ default and for six months in case of repetitive instances. The exercise shall be undertaken on the first trading day of each month.
10. PAY OUT OF SECURITIES:
A. For those clients who have not opted for ‘Running Account’
1. On T+2 day, pay-out of securities are transferred to the Clients’ own beneficiary Id, provided Clients’ account does not have any debit balance.
2. For clients having debit balance, the shares are transferred to ‘Running a/c.’
B. For those Clients who have opted for ‘Running a/c’.
On T+2 day, the shares are transferred to Clients’ ‘Running a/c.’
C. Pay out of securities from ‘Running a/c”:
1. Based on Sub-broker Request.
The pay-out requests received through Sub brokers are processed on a daily basis and the shares are transferred from ‘Running a/c’ to Clients’ ‘Beneficiary a/c’ (of those clients who have cleared the debit balances).
2. Transfer of shares from Running A/c to Client beneficiary account for those clients who are not opted for Running A/c. (those shares moved to Running A/c. due to debit balance on T+2 day).
Every Wednesday and Friday, BFSL, at its own volition, transfers the shares from ‘Running a/c’ to respective Clients’ ‘Beneficiary a/c’. (For those Clients who have cleared the debit balances as on the time of transfer.)
3. Quarterly settlement of shares (Pay-out)
The shares which were kept in ‘Running A/c’ are transferred by BFSL to respective Clients’ ‘Beneficiary a/c’ on the last day of every calendar quarters, provided clients do not have any debit balance.
11. PAY OUT OF FUNDS TO BRANCH A/C. (FOR CASH SEGMENT)
Cash segment: on t+2 day:
Settlement wise, payout of funds are transferred to the respective branch accounts, provided the particular branch is having pay-out for the settlement on net basis.
12. PAY OUT OF FUNDS: F & O/Currency Derivatives SEGMENT:
A. For those clients who have opened Bank account with CANARA Bank/HDFC Bank/ ING Vysya Bank:
On T+1 Day:
1. Settlement pay-out amounts are transferred to Clients’ respective bank accounts.
2. Payment entries are posted to clients F&O/Currency Derivatives ledger a/c.
Note: F&O/Currency Derivatives Settlement ledger a/c becomes ‘Zero balance’ on T+1 day. However, F&O/Currency Derivatives Capital Ledger credit balance continues till Authorized Person gives request for the release. However, the same is to be settled on quarterly/monthly basis (as per the choice of the clients).
B. For ‘F&O/Currency Derivatives – Running Account’.
1. Daily F&O/Currency Derivatives bills are posted to Clients’ F&O/Currency Derivatives Settlement Ledger account on ‘T’ day.
On T+1 day:
The sum total of the entire Clients’ credit balances for the bill date is transferred from F&O/Currency Derivatives settlement a/c of BFSL to CA-2911 (Running a/c) on a daily basis.
Note: Both, F&O/Currency Derivatives Settlement ledger credit balance and Capital ledger credit balances, if any, are continuing till Clients/AP give request for the release of funds and they are settled once in quarter/month.
13. SURVEILLANCE OBLIGATIONS:
In order to facilitate effective surveillance mechanism system, BFSL shall investigate the alerts generated by the Exchange. The procedure for the same is as provided below:
A. Alerts to be downloaded provided by the Exchange: -
Exchange shall be providing the transaction alerts, which can be of following types:
1. Significant increased in client activity
2. Sudden trading activity in dormant accounts
3. Client(s)/group of clients dealings in common scrips
4. Client(s)/group of clients concentrating in a few illiquid scrips
5. Circular trading
6. Reversal of trades
7. Wash sales
8. Orders away from market rates
The above mentioned transactions are an indicative list. There may be more alerts in addition to the above said type of alerts
Alert generated on the above mentioned basis shall be analyzed by Surveillance Department and C &S Department, which may include:
1. To seek clarification from such client(s)/group of clients for entering into such transactions
2. To seek documentary evidence, such as, Demat transaction statement/or any other documents related to such transactions and the statement shall be at least +/- 15 days from the date of transaction. Financial details, post trading pattern of client(s)/group of clients and publically available information should also be used to analyze the generated alerts.
3. After analyzing the documentary evidence and explanation furnished by the client(s)/group of clients, Surveillance Department and C &S Department shall record its observations for such transactions of client(s)/group of clients within maximum of 30 days of date of alert generation.
4. If there is any adverse observation, the same shall be reported to the respective exchange within maximum of 45 days of alert generation.
KYC department is to carry out the due diligence of clients of the Company on a continuous basis. It is to be made sure that the KYC parameters are updated on periodic basis, i.e, address proof, telephone numbers, E-mail Ids PAN details, and financials. Similarly, KYC department, on the basis of information, can establish groups/associations amongst clients, to identify multiple accounts, common accounts/group accounts of clients
The above said process will be directly under the control of the Compliance Officer and the Chief Executive Officer of BFSL.